Worldwide eSports viewership is expected to grow by nearly 50% from 2018 levels to 560 million by 2021
Sean Mason | April 10, 2019 | SmallCapPower: Video games are nothing new – people have been playing them since the 1970s. But with the proliferation of social media in recent years, electronic sports, or eSports, could eventually generate more revenue than traditional professional sporting events, such as National Football League (NFL) games.
eSports can be most simply defined as organized, competitive video gaming at the professional level, where participants compete in a virtual environment for money and recognition. Much of eSports’ appeal is in its inclusivity, as anyone with dexterity and determination can, in theory and with plenty of practice, reach an elite level regardless of their athleticism. And thanks to the Internet, eSports tournaments have quickly gone global. This, after all, is due to the fact that the distribution of eSports is almost entirely digital, with fans being able to stream eSports content for free anywhere in the world.
To give you an idea how much growth potential exists within the eSports sector, it represented just 1% of the global gaming market at nearly $700 million in 2017, with the industry expecting to reach $1.65 billion by 2021, representing a 27.4% CAGR estimates Newzoo.
With its popularity rising, worldwide eSports viewership is expected to grow by nearly 50% from 2018 levels to 560 million by 2021. In fact, in the U.S. eSports viewership on key streaming platforms such as Twitch, Youtube, and TV with traditional channels like TBS, ESPN have already surpassed that of the NHL and is expected to take the #2 spot behind the NFL by 2021, according to an August 2018 report by Eight Capital, adding that the sector remains under-monetized relative to traditional sports. To put that into perspective, average revenue per eSports enthusiast was just $3.60 in 2017, a fraction of the $15 average revenue per basketball fan and $54 average per sports fan globally, this based on a study by Newzoo.
Audience engagement for eSports is extremely high, which has become ideal for advertisers to target a captive and young demographic. According to a Goldman Sachs eSports report dated October 2018, eSports generated an estimated $655 million in annual revenue in 2017, 38% of which came from sponsorships, 14% from media rights, and 9% from ticket revenue. By 2022, though, media rights are anticipated to reach 40% of total eSports revenue, with sponsorship expected to become the second largest contributor of revenue at 35%.
Goldman Sachs believes eSports will increasingly migrate from PCs to other platforms, such as console and mobile. For mobile eSports, Goldman Sachs said it is seeing increased venture investment in the space. Since 2013, there has been $3.3 billion of venture capital investment in eSports-related start-ups, which is set to capitalize on two primary trends: the opportunity for live-streaming to monetize the growth in eSports; and the popularity of eSports in Asia. China’s eSports market is derived from the largest gamer base in the world, with approximately 442 million gamers by the end of 2017 and a 57.2% penetration rate of China Internet users, according to CNNIC.
Technological evolution in the eSports space will likely mean more money will flow into trends such as streaming, mobile, and Virtual Reality (VR). To that end, Canadian company YDX Innovation Corp. (TSXV:YDX) already has direct experience in eSports in addition to a product that fits well with the segment.
“When we created our VR game a year and a half ago, we already knew we were taking the platform in an eSports direction,” YDX Innovation CEO Daniel Japiassu told SmallCapPower in an interview.
YDX Innovation’s Arkave VR Arena is a gaming platform that brings an immersive Virtual Reality experience to different venues – a highly scalable business model according to the Company. YDX Innovation announced recently that it had signed an agreement with eSports company Jackpot Rising to organize tournaments using Arkave VR.
And, in 2019, YDX plans to launch its Game On festival for the new gamers, younger players who have not yet experienced competitive gaming.
“This is an industry (eSports) fueled by people 10 years of age and older,” Mr. Japiassu said, adding that although it’s a new industry there’s already a substantial number of participants.
Disclosure: Neither the author nor his family own shares in the company mentioned above.
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