Esports: Is it smooth growth or are there speed bumps along the way?
12 February 2019
Watch my vlog or read the blog version below.
Our latest entertainment & media outlook shows significant growth in esports over the next 5 years; from $800m to $1.5bn at a rate of 20% per annum. This growth is being underpinned by sharp upturns in revenue from media rights, sponsorship and funding of professional teams.
These are very positive predictions and are consistent with the general feeling among the esports community. However, will this growth start to happen organically? Or, will the growth become ever more reliant on deeper pockets from investors and sponsors? The answer is likely to be a combination of the two. A more complex question is: what needs to happen to achieve this likely combination of growth through self-generating, profitable revenue, and increased investment through sponsorship and equity release?
There can be no disputing the desire, passion and determination of the leaders within esports to make this exciting new frontier a success. Publishers, teams, pro-players, media outlets, event organisers, brands and especially the community, clearly have an interest for the market to succeed. However, these characteristics can only take the industry so far. Perhaps in order to succeed it is worth casting an eye over the potential bumps in the road that may halt progress.
As mentioned in an earlier blog: What happens when the regulator comes in?, the impact of inevitable regulation can no longer be ignored. There are potential benefits to regulation (compliance with authorities, providing assurance, investor confidence, player welfare, etc.), as well as the obvious challenges it will provide (administration, less agility, costs, etc.). When regulation does come in, it should be challenged if not fit for purpose, but certainly not fought against. Regulation, implemented wisely, will most likely enhance and stimulate growth.
Monetise the viewer
Monetise the viewer successfully and the market could gain exponential growth. Fail to monetise it at all, then there is the risk of stagnation. Monetising incorrectly gives rise to the risk of losing a large section of the community, therefore a balance needs to be found.
Nevertheless, it needs to be addressed. This could be through direct monetisation such as ticketing, merchandise and esport-specific subscriptions - like the Twitch/OWL All Access Pass. Links to general gaming, mainstream media subscriptions and third-party involvement can help drive indirect monetisation.
It is the lack of clarity around the future monetisation of the viewer, which has proved too much of a shot in the dark for some would-be investors - it has been a deal breaker. However recent investment from well-known figures such as Drake, Michael Jordan, Nike, Tiesto; as well as substantial financial investments in teams such as Excel Esports and Team Vitality, suggests an immediate return is not everything for everyone, and there are other reasons to enter the market.
To the part-time esports viewer it is a complex digital matrix. While a dumbed down version is not the answer, a certain clarity into the stature and structure of competition being observed would help. Not only would the casual viewer become more informed if a certain class is afforded to top level competition, esports would become more transparent and attractive to investors and sponsors alike. Giving assurance that they are supporting elite level competition. You can point to the franchised system as a way of bringing such clarity and regular format, ring-fencing this elite competition. However, this is itself a very contentious issue.
Differences of opinion
Passion comes in waves throughout the esports ecosystem. A lot of people are new to the industry and find themselves rubbing shoulders with those that have been synonymous with the industry since the very earliest of esports tournaments in the late 1980s and early 1990s. Many people and organisations are setting foot in the industry for very different reasons. There are major organisations and new start ups, all looking to find their place.
With this level of diversity, there are differing views on which direction of travel the industry should go in, right across the ecosystem.
The industry working together and each pursuing one's own ideals, while not trying to do so at the expense of others, will be critical in long term success. More competition drives growth and market size.
Diversity and perception
Esports is a male heavy environment and will need to work hard on increasing diversity and driving more inclusion, overcoming some recent bad press. By doing this, the perception of the industry will start to change and unfair stereotypes will be broken down.
Improving diversity and changing perception, allows the market to open up to many more people, which will only encourage more investment and more sponsorship. A win for everyone.
Encountering new challenges demonstrates progress and confirms the market is moving forward. No new challenges suggests the market is standing still.
It is natural that for any growth business or industry, challenges do arise which need to be tackled. These challenges may require the esports network and community to collectively take them on. Some organisations may fall by the wayside, but those that embrace these challenges and overcome them, will likely prosper; as will the community by being provided with an enhanced experience. These battles on the horizon demonstrate a clear sign of growth. It is time to fight these challenges head on and move to the next level.
For more of my views on what's happening in the esports industry, check out my earlier vlogs and blogs on the race to invest, what happens when the regulator comes in? and the growing presence of the UK in esports. And do get in touch if you'd like to talk more about esports.