The coming year will see the Esports Economy grow to $696 million, a year-on-year growth of 41.3%. Brands are expected to spend $517 million, broken down into $155 million on advertising, $266 million on sponsorship, and a further $95 million on media rights. Brand investment will double by 2020, pushing the total market to $1.5 billion. Consumer spending this year on tickets and merchandise will amount to $63 million. The remaining $116 million is the total investment that game publishers will make into esports, that is, the share that is not directly recouped by any of the other revenue streams. It illustrates that, for most game publishers, esports is currently not a profitable business. However, their investment is justified by the positive impact on game revenues and the future potential of their esports activities as a stand-alone business.
Peter Warman, CEO at Newzoo comments “Esports is not only growing exponentially as a new independent business and industry, it is also accelerating the convergence of various established industries. For brands, media, and entertainment companies, esports provides a chance to capitalize on the favorite pastime of digital natives and Millennials: playing games and watching game content. With the arrival of live streams and events, gaming has entered the realm of broadcasters and media that can now apply their advertising business model to a market previously out of reach for them.”
ESPORTS ENTHUSIASTS OUTNUMBER OCCASIONAL VIEWERS
The global esports audience will reach 385 million in 2017, made up of 191 million Esports Enthusiasts and a further 194 million Occasional Viewers. The number of esports fans is expected to grow by another 50% toward 2020, totaling 286 million. In traditional sports, total revenue per fan is a key indicator of how well a sport is “monetized”. It encompasses all revenue streams, including media rights, sponsorships, and consumer spending. Based on our audience and revenue expectations for 2017, the average revenue per fan this year will amount to $3.64. As the esports industry matures and incorporates an increasing number of local events, leagues, and media rights deals, the average revenue per fan is anticipated to grow to $5.20 by 2020. This is still a factor three lower than a popular sport such as basketball and a factor twelve lower than the most commercial league in the world, the NFL.
ESPORTS REVENUE SCOPE: WHY BETTING IS NOT INCLUDED
Betting on esports is the hottest topic in the real-money gaming industry, as betting companies see esports as a huge “blue ocean” of opportunity. Betting on esports has been around for many years, as it does not require the involvement of any esports companies to organize. Three years ago, a traditional betting company stated that esports was already its seventh-biggest sport worldwide in terms of betting volume, positioning it above golf and tennis, for instance. Traditional sports market reports do not include betting or fantasy league business models, let alone sponsorship from these betting companies. The two industries are separate for obvious reasons. Moreover, sports betting is a far bigger business than sports media rights, sponsorship, and consumer revenues put together. As an example, the NFL generated $13 billion last year, but betting and fantasy leagues around the NFL games are supposed to have made north of $50 billion. With most big betting companies already embracing esports betting on a global scale, it’s possible that esports betting alone is larger than the esports economy itself.
NORTH AMERICA LEADS IN BRAND AND SPORTS INVOLVEMENT BOOM
North America is the largest esports market, with revenues of $257 million in 2017. This will more than double to reach $607 million by 2020. Most of these revenues come from sponsorships, which will total $113 million in 2017. This is partly due to North American teams that have welcomed a lot of new non-endemic sponsorships and the region hosting several of the world’s largest leagues and tournaments that generate a high amount of sponsorship money. The 25 million Enthusiasts in North America generate twice as much revenue per year than in any other region, $10.36 per fan per year, highlighting the lead that American media companies and brands have taken. The involvement of American and European sports teams and their marketing agencies will continue this year, pushing brand investments up even further. The impact of traditional sports and media are already reflected in esports’ fastest-growing revenue stream: media rights trade. The sales of esports content licenses are expected to generate $95 million this year on a global scale, up 82% from 2016.