While the esports market may have started as a small subsector of the sports industry, it has now grown into a major industry and is scoring some major wins as it expands. In the past decade, esports has evolved from a primarily underground culture to a mainstream industry with a League of Legends Championships that became as large in viewership as the Superbowl.
A global phenomenon, the industry has attracted noted investors like Alexis Ohanian and Mark Cuban. It’s even drawing in capital from traditional sports stars like Steph Curry, David Beckham and Shaq, while other celebrities like Drake and Steve Aoki have invested in the action, too. The industry offers vast opportunities for today’s sports infrastructure, pro athletes and teams as it continues to evolve.
Professional Esports Teams and Leagues
As esports becomes a global phenomenon, investment opportunities lie in the creation of teams and leagues. Professional players will join teams or play individually to compete for cash prizes. Teams that compete have millions of followers watching online while thousands have watched at in-person tournaments.
Esports teams, representing their organizations, compete in their video game’s respective league where regular seasons with playoffs and world championships are held. Esports organizations own several teams compete across various games. ESports teams owned under a single organization are located in different countries. The Toronto-based esports organization, OverActive Media, owns the Toronto teams in Call of Duty League (CDL) and Overwatch League (OWL). They also own the MAD Lions, a Spain-based team that competes in League of Legends.
Esports teams (typically under an organization) may also compete in video game leagues. League tournaments are established by companies like Major League Gaming (MLG) or the Electronic Sports League (ESL). Today’s Leagues include North America’s popular League of Legends Championships Series and the Call of Duty World League (organized by MLG).
Today’s largest esports tournaments are almost as popular as traditional sporting events. In 2016, The League of Legends Championship sold 15,000-seat Los Angeles’ Staples Center in an hour. Tickets also sold out for the 40,000-seat World Cup Stadium while gaining an online audience of 27 million.
While traditional sports have struggled to expand overseas, the CDL and OWL already have teams located in London, England, Paris, France, Seoul, South Korea, Shanghai and Guangzhou, China.
IT Infrastructure and Merchandising
Among the largest potential revenue streams in esports, investment opportunities abound for IT infrastructure and merchandising.
Due to the virtual nature of video games, IT infrastructure is an essential component of esports. As 5G technology launches over the next few years, the video game industry will see a significant boost. Even if live, in-person competitions are held at arenas, powerful IT infrastructure is an essential factor to support balanced competitions, as connectivity issues cause even milliseconds of delays that can unfairly impact the outcome of a game.
Several game publishers and other companies are racing to establish streaming-based video game platforms as 5G technologies become more widespread. While users may wait for a YouTube video or Netflix show to buffer, video game competition demands that connectivity issues are non-existent.
Merchandising also offers investment opportunities in both physical and virtual gaming markets. Teams and esports-related brands can sell jerseys, clothes and other accessories with their logos. Teams often hold launches where they sell a limited supply of unique merchandise. Collaboration between major brands includes FaZe Clan with the NFL and Manchester City Football Club.
In-game merchandise, separately, allows users to purchase “skins, visual graphics that change the appearance of in-game avatars, that incorporate brand or team logos. As such, a team can create an in-game uniform or theme for their avatar that players can buy. The creativity that brands bring to merchandising is boundless, given the virtual medium.
The esports sector also has the momentum to start developing its already growing monetization strategies. On top of the revenue streams that ticketing generates, the industry has many monetization options. Gaming companies are starting to create similar revenue streams to media companies, including advertising, ticket sales, shares of TV rights and more.
When it comes to advertising, ads shown during live streams, esports TV, or during on-demand matches are primed to generate robust revenues. Brands that advertise include Coca-Cola, Redbull and more. Currently, advertising across esports platforms remains cheaper than for more traditional sports.
Another way to monetize is in media rights, where the payment to industry stakeholders secures the rights to broadcast esports content. This includes payments from online streaming platforms to broadcasters and includes foreign networks securing rights to showcase copyrighted video content or photos of esports competitions in their country. Media rights will likely be the fastest-growing revenue stream and the first companies that enter the mainstream gaming content arena will likely unlock a massive market.
Esports will likely rival the largest traditional sports teams and leagues. Between advertising, ticketing, media and more, there is amazing potential for lucrative investments and huge growth.