eSports: From development to consolidation

The eSports industry is booming and this growth is going to continue, according to Nicolo Laurent, CEO of Riot Games, at the Webinar of the ESSEC Sports Chair Knowledge Series entitled “eSports: Key trends and insights into a booming industry”. Nicolas Maurer, CEO at Team Vitality, counts, for his part, on new growth levers that will rise this promising sector to the rank of traditional sports.

Before presenting the economic state of play of e-sport and its growth prospects, let's take a look at what each of the main stakeholders of its ecosystem. This is a different model from those of traditional sports. A key difference is the absence of an international federation regulating eSports. For game publishers there is little incentive to transfer control over their game to an external governing body.

Growth in revenues and audience

Global e-sport revenues will grow to €899,8 million in 2021, a year-on-year growth of +14.5%. This bullish dynamic is confirmed by mid-term forecasts: Global revenues are expected to reach €1342 million by 2024. With €249.9 million in 2021, China is the largest market in terms of revenues. North America (€198.5 million) and Western Europe (€168.1 million) are second and third, respectively.

Figure 1: E-sports Revenue Growth Global | 2019 to 2024

The majority of revenues come from sponsorship and advertising (59%), with a more marginal portion coming from media rights, publishing fees, ticket merchandising, digital, and streaming. About this very unbalanced business model, Nicolas Maurer affirms that “sponsorship is the first income source for e-sport, but it cannot increase indefinitely”. The eSports ecosystem will need to look for other growth levers. Media rights could be one, especially in China where “there is great competition between several streaming platforms since none of them have a monopoly”, Nicolo Laurent underlines. On the contrary, “Twitch has a dominant position in Europe and United States, which prevents rights holders from driving up their product prices”, he adds.

Figure 2: Revenue streams in the e-sport industry

According to Newzoo’s report[2], the global games live-streaming audience will hit 728.8 million in 2021 (+10.0% in comparison with 2020) and will continue to grow to 920.3 million by 2024. Newzoo attributes much of this increase to growth markets because of their ongoing infrastructure developments but also expects more growth in North America and Western Europe. Mobile is see as another key driver of audience growth, particularly in in markets like India and Brazil.

eSports fans

The 2020 eSports Barometer [3] estimates that there are 7.8 million people in France who either watch eSports or play competitively. Of the 1.2 million people who play competitively themselves, 95% are between 15 and 34 years old, and only 6% are women. While eSports fans are somewhat more diverse that players, women are very much in the minority, making up only between 30% and 11% of League of Legends fans. While eSports has in theory great potential for diversity and inclusion, it has a long way to go.

Figure 3: League of Legends fans

Source: Nielsen E-sport Fan Insights [4]

Towards profitability

Today, no top eSports team in the world is profitable. “eSports is new and risky”, says Nicolo Laurent whose biggest worry is that investors will become impatient and withdraw before the industry has had time to mature. For now, the appetite for invest only seems to grow. “PWC Digital Trend Outlook 2020: Esports” [5] underlines that “professional players and teams, whom millions of enthusiastic gamers cheer on, present a huge opportunity for strategic investors to commercialize brands and positively affect their bottom line.” But how this sector will evolve will depend on participants in the ecosystem establishing sustainable business models and professionalizing the industry.

References:

[1] Scholz, T.M., Deciphering the World of eSports. International Journal Media Management. 2020, 22, 1–12.

[2] Newzoo’s Global Esports & Live Streaming Market Report 2021

[3] France eSports Barometer 2020

[4] Nielsen E-sport Fan Insights, in Nielsen eSports Playbook for Brands, 2019

[5] PWC Digital Trend Outlook 2020: Esports