Given the time when we are all at home and can’t do much, many people are back to talking about eSports. More and more often I hear that ‘they are the trend of the future‘, that ‘professional gamers are earning a lot of money and living the good life’ or that ‘major global brands are investing in eSports’. Not to mention ‘I’m going pro gamer too’! I’m not telling you that they’re not an incredible phenomenon, but I get the impression most people talk about them a little bit out of hand, without actually knowing what they really are. So I ask you: do you know what eSports are?
“But yeah, come on, it’s video games and stuff.”
If your answer is anything like this, my article is for you. I thought I would summarise the key concepts you need to know about this phenomenon to provide some clarity.
Sports vs. eSports: what are the differences?
Let’s start with a traditional sport like basketball. When we talk about basketball we can do two things:
- watch it. Alone or with friends or on TV or at the bar or in the stadium,
- play it. With friends on the court or in a team at a competitive level or even as professionals (no, this is not my case 😊)
For video games it works the same way. We can play it with friends, alone, online or we can watch professional gamers to be entertained. Depending on what you choose to do you will use different services and products. In fact: completely different.
Those who decide to watch basketball on TV will have to pay a subscription (NBA TV, SKY or others) and will be subject to advertising; if they go to the stadium they will buy tickets to see the athletes live. Those who play, on the other hand, will need the right ball, basketball shoes and clothing, and perhaps use court rental services. And online?
Those who play buy consoles, video games, in-game features and other devices. Video gamers do not necessarily buy games: rather, they use subscriptions, are subject to advertisements, buy tickets to go to arenas, can donate to their favourite video gamers and subscribe to certain paid channels.
Of course, there are ways in between. Very often those who play games are also spectators and vice versa, of course, but we use completely different products and services to do these two things .
eSports and video games
Many of those who talk about eSport, from both a marketing and financial point of view, say they invest in video game companies: it is clear that they are connected, but not directly. It is not necessarily the case that the growth of eSports translates into more sales of video games. Because maybe there are different types of video games, and the most popular competitive ones are only 3 or 4. In this case, the emphasis is not on the popularity of the eSports phenomenon but on Activision selling more copies of the new COD, for example. It would be like saying I want to invest in sports entertainment, and I invest in shares of adidas or Nike. There is a logic behind it, but they are two completely different things. Want a demonstration? Try looking at the annual report from Newzoo, a company that compiles an annual report on the eSports industry and other tech industries. The infographic below shows revenue streams in the various industries in question.
Do you happen to see the item ‘Revenues from sales of video games’? No. Precisely because video games have nothing to do with eSports.
I would like to point out that the numbers you see exclude prize money and player salaries, which are considered costs, and exclude all forms of in-game revenues (which are more related to gaming) or betting. And also consider that the items “digital” and “streaming” are not to be understood in general, but refer to revenues of eSport teams and their athletes and their broadcast channels.
The eSports market
In 2019, this industry recorded a turnover of approximately $1.1 billion. The main revenues include sponsorships, broadcasting rights, commissions to be paid by the developer, merchandising, tickets and streaming services. You might think that the commissions paid by the developer are the main source of income for event organisers, but if you look at the revenue segment (referred to in the infographic as ‘publisher fees’) you can see how unimportant it is compared to the whole ecosystem. Not only that: it is also stuck at 0% growth year-on-year, becoming less and less relevant at the expense of other revenue sources. After clarifying what eSports are and the differences with the world of video games, let’s see what the most interesting points of this ecosystem are.
Teams and players
As is logical, as the industry becomes more professional, more and more professional players group themselves into teams. Many are just groupings of players to compete in a tournament or league, but it is interesting that professional clubs are springing up, with business structures designed to enhance the value of the players. Increasingly popular are gaming houses where teams live together and prepare supported by:
- athletic trainers and physiotherapists, to keep fit and prevent joint problems caused by excessive hours of play ;
- sports psychologists, because the pressures are so high;
- marketing specialists, because professional players are becoming celebrities and seek to exploit their image. Many brands are interested in being associated with these phenomena.
But how much does the ‘CR7’ of gamers earn? In 2019, the highest earner from tournaments was Kuro “KuroKy” Salehi Takhasomi, reaching $3.6 million. I excluded content creators such as Tyler “Ninja” Blevins from the considerations, because they do not earn from competitions: their source of revenue comes from streaming on their channels. They are, therefore, professional gamers but they live from donations while streaming, not from tournaments. I dare say, however, that they live well. Ninja, for example, has an annual income of around $13-14 million, and his move to Mixer (Microsoft’s streaming platform) earned him a $50 million contract.
‘Wow, crazy! What does it take to become a professional gamer?”
According to most professional gamers, the average daily gaming time should be around eight hours a day from an early age (Ninja himself, in numerous interviews, recounts the many sacrifices he made and the 12 to 16 hours a day gaming sessions). 84% of today’s professional gamers started before the age of 9. Typically, their career peaks between the ages of 17 and 25.
Professional eSport competitions
The infographic shows the average number of viewers during the finals of the various disciplines: League of Legends has more viewers than the NBA and almost all American sports. In fact, its eighth edition became the most watched eSport event in history, peaking at over 200 million simultaneous viewers during the finals, and even surpassing the peak viewership of the Superbowl (standing at 148). To understand the economic interests around eSports, I thought it would be useful to make a comparison with traditional sports prize pools.
Broadcasters and platforms
Streaming platforms are the most popular channels for watching eSports. The main ones are:
- Twitch in America and Europe. Purchased by Amazon for 970 million in 2014, it has a turnover of around $1.5 billion. Unfortunately, it is not listed in Amazon’s consolidated, so it is very difficult to find information.
- Huya, YY and Douyu in China enjoy enormous success. They are both listed and profitable. The infographic shows revenue growth from 2016 to 2019 (from about 750 million in 2016 to 7-8 billion in 2019).
