Among the few thriving industries during the onslaught of the economic slowdown caused by the worldwide COVID-19 pandemic, the global video game industry is thriving. While social distancing drastically decreased business prosperity, gaming offers engagement for people at home in need of social interaction. New data shows huge growth in playing time and sales since the lockdowns began.
A subset of the video game industry, eSports, has been on the rise in the past few years. While some consider eSports a risky investment due to the impact the coronavirus pandemic has had on the cancellation of its live events, the fallback is expected to be limited. In fact, the case for eSports is becoming a more reliable and valuable market as the pandemic accelerates its popularity.
The Gaming Business Model and eSports Market
In 2020, the video gaming market is worth $159 billion, with the largest market revenue in Asia-Pacific, holding half of the market value. North America holds a quarter of that revenue. A separate part of the gaming world, eSports is projected to grow to over $1 billion in 2020.
Almost all gaming revenue are entirely driven by consumer spending, but the business model has evolved during recent years. Players now purchase fewer games than in previous decades, but they spend more time playing the games. As a result, the business model has grown from single-unit to recurring revenue from a broad base of active users.
The industry is now hyper-focused on increasing engagement per user. Aside from making video games with more compelling storylines and visuals, the strategy also focuses on adopting in-game monetization opportunities in the form of new features, tools, character, or expansion packs, all of which can be applied to eSports. The business model for eSports, in particular, closely follows professional sports and their competitions, with the majority of revenue earned through advertising and broadcasting. Although eSports are a smaller part of the overall gaming market, it is a relevant sub-sector because it is highly connected to the industry’s continued growth.
As improvements in gaming software, bandwidth, and the access to mobile internet expands, high-quality games become more accessible across a wide range of devices and platforms. Now, close to half of the industry’s revenue (48%) comes from mobile gaming.
COVID-19’s Impact on eSports Engagement
ESports is not immune to the impacts of coronavirus, with many canceled or postponed events. However, experts say that the impact is short-term. And while three-quarters of eSports revenue comes from advertising and broadcasting, those deals were made before the economic shutdown. As restrictions on large, public gatherings continue, esports-related income may fall, but we need to consider how eSports is growing in prominence due to COVID-19.
During COVID-19, gaming has picked up because of more time available and the need for players to socialize virtually with each other. The era has brought a massive increase in audiences to the gaming world. Since it’s typically an at-home activity, many reports show how it is flourishing during the pandemic’s social quarantine. For example, gaming companies like Nintendo showed increased sales in their first quarter and sold nearly half of their games digitally, which increased profits by 41%. GameIndustry.biz research shows that sales across 50 markets rose by 63%. Games released during the pandemic are also up; Comcast reports that new game downloads increased by 80%.
Engagement has also peaked amidst the backdrop of coronavirus. Verizon has reported a high in gaming traffic by 75% during peak hours. Streamlabs data shows that platforms like YouTube Gaming, Twitch and Facebook Gaming have also experienced a surge in growth, with around 20% increase in usage hours across multiple services.
Now, sports leagues across the globe are engaging with the sector and fans in new ways. Many eSports competitions are shown on live TV, as broadcasters look to fill hours of scheduled sports programming that are unfilled due to the shutdown. NASCAR has successfully maneuvered the cancellation of events with its iRacing Series. One event drew in 1.3 million viewers. In a broad sense, the sector is rising as the result of affordable marketing opportunities and as circumstances continue to push people to seek out more ways to engage and play with others from home.
Long-Term Growth in eSports
At the very least, the pandemic has led to the normalization of eSports games. A large market of highly engaged consumers is present and growing. Many analysts have described eSports as “popularized and legitimized in an unpredictable and profound way,” thanks to eSports’ adoption by leagues, athletes and broadcasters who want to engage fans.
Recent movement in the sector will likely push eSports towards the mainstream. We saw this come true in Nevada, which recently legalized betting on competitive gaming only two weeks into the United States’ social distancing orders.
Mike Sepso of the eSports infrastructure platform, Vindex, says, “Among younger demographic groups, a prolonged shutdown for traditional sports leagues may drive more fans to eSports regularly – which globally would represent tens of millions of new consumers for the industry.”
Outlooks for the market remain strong. The Console Games Global Market Report 2020-30: COVID-19 Implications and Growth reports that the number of gamers worldwide is expected to reach 2.73 billion by 2021. According to Nielsen research, 64% of the USA’s general population are gamers. eSports viewers will also significantly contribute to the popularity in console games market; it’s estimated that approximately 557 million people will watch eSports by 2021. As more interactive devices like VR and gamers feel the need to participate in and socially bond over a shared hobby, the market will grow — and we could even expect larger events like an eSports Olympics.
With an anticipated market growth of $2.11 billion by 2023 at a CAGR of 23.82%, the sector is ripe for investors to play on.