Evolution of the Esports Industry: An Inside Look at This Booming Sports Field

August 28, 2020

Playing video games was once just a hobby chiefly popular among teenage boys; today, it’s an industry expected to surpass $1.5 billion by 2023, according to Business Insider. According to Forbes, “Esports is fast on its way to becoming the most financially lucrative market on the planet, thanks to huge exposure and interest in major tournaments.” Celebrities, investors, and big brands are seizing the opportunities in this booming market by forming partnerships and making investments.

To learn more, check out the infographic below created by Maryville University’s online Bachelor of Science in Rawlings Sport Business Management program.

How esports has grown into a multi-billion dollar industry

The Appeal of Esports

In esports, the excitement of video games extends beyond bedroom walls to reach stadiums and arenas seating thousands of zealous fans.

Esports: More Than Fun and Games

Esports has a bigger audience than Major League Baseball, according to Forbes. Its 2017 total viewership of 335 million is expected to balloon to 646 million in 2023, and the number of monthly gamers is poised to jump from 167 million to 276 million between 2018 and 2022, according to Business Insider. Additionally, 30% of esports viewers and 35% of esports players are women, according to NBC News.

According to Forbes, “Dan and Phil, two UK guys who play The Sims and make videos of themselves playing it, have more views on a five-minute upload to their YouTube channel than prime-time news programs on CNN, MSNBC, and Fox.” Furthermore, the livestreaming gaming platform Twitch saw a 22% increase in the total number of minutes its users spent watching gamers play or discuss video games from 2016 to 2017, reaching 355 billion minutes. The Sims Resource (TSR), the largest Sims community site in the world, receives 2.5 billion page views per year. Players reap serious benefits from this interest: Ninja, a gamer who streams himself playing video games on Twitch, earns around $1 million per month.

Esports have also become a lucrative business for gaming companies. Esports events account for 9% of their revenue, and media rights represent 14%. They share the wealth, too: Developer Valve paid $25.5 million in prizes at a Dota 2 tournament called The International — twice that of the Masters Tournament — according to Forbes. EGLX, a gaming event held in Toronto during which YouTubers play against fans, had 55,000 attendees in 2018.

Why Esports’ Popularity Is Growing

There are several reasons for the explosion of esports’ popularity. For instance, Esports has a strong social component that easily connects fans to players and teams through gaming platforms and social media sites such as Twitch and YouTube Gaming. The industry also encompasses opportunities in gaming, media, pop culture, and commerce.

Additionally, the industry has received substantial investment increases to support its proliferation: $4.5 billion in 2018, compared with $490 million in 2017, according to Business Insider. Esports organizations such as FaZe Clan are offering merchandise to increase reach, and tournament prize money is increasing at an average rate of 42% per year. Since 1998, the number of professional gamers has been growing at a rate of 43% per year, according to Forbes.

The Players in Esports

A lot goes on behind the scenes to successfully host a tournament show. Developers, teams, tournament organizers, and brands work together to ensure this booming industry keeps growing.

How Esports Is Organized

There are four key components to a successful tourney, according to Esports Observer. The first component involves getting developers and publishers to license games out to league organizers and platforms and to host and publicize gaming competitions. The second component involves assembling players and teams to provide advertising space, recruit influencers, and provide game commentary and analysis. Thirdly, tournament and league organizers host and promote competitions, sell broadcasting rights, monetize esports fans via ticket sales, and make TV deals and partnerships. Finally, brands and advertisers invest in teams, players, and tournaments; provide branded materials to teams; benefit from screen time and name placement; and sell gaming hardware and peripherals.

The Leaders in Esports

One of esports’ top teams is Team Liquid, which features over 60 players and competes in more esports titles than almost any other organization, according to ESports Observer. Another top team, Faze Clan, first appeared in esports as a Call of Duty team. A third highly visible team is the London-based team Fnatic, which was founded in 2004 and has won more than 200 championships. Finally, the team Cloud9 became the world’s most valuable esports team after raising $50 million in Series B funding.

The top players in esports can earn plenty of revenue, according to Forbes. Tyler Blevins, aka Ninja, earned $17 million in 2019. Felix Kjellberg, who goes by the online handle PewDiePie, earned $15 million in 2019. Preston Arsement, known simply as Preston online, earned $14 million in 2019.

The top esports tournaments built around specific games can offer lucrative prizes for players, according to Hollywood Reporter. For instance, Dota 2 has awarded more than $219 million in tournament money. Counter-Strike: Global Offensive has awarded $87.1 million, Epic Games’ Fortnite has awarded $84.4 million, League of Legends has awarded $73 million, and Blizzard’s StarCraft II has awarded $32.1 million.

Opportunities in the Lucrative Esports Industry

Celebrities like Michael Jordan and Drake, along with top brands like Nike, Disney, and Facebook, have invested in esports in the past few years.

Brands, Celebrities, and Investors Joining the Fun in 2018

Several high-profile individuals and entities have gotten involved with the proliferation of esports. Former eBay CEO Meg Whitman invested in the esports organization Immortals. Another organization, 100 Thieves, welcomed Drake and celebrity manager Scooter Braun as co-owners. Micheal Jordan invested in aXiomatic, Team Liquid’s parent company. Finally, Pittsburgh Knights received an investment from the NFL’s Pittsburgh Steelers.

There have also been several well-known businesses that have entered into various sponsorship, partnership, and endorsement deals. PayPal partnered with Rainbow Six Esports, serving as the official payment platform for the Rainbow Six Pro League’s 2019 season. Facebook received exclusive broadcast rights for ESL’s CS:GO Pro League. Disney Entertainment finalized a broadcasting deal with Blizzard, resulting in the airing of the Overwatch League playoffs on Disney XD, ESPN, and ABC. Mastercard signed a global partnership with Riot Games, becoming the game’s first global sponsor. Nike signed an endorsement deal with Uzi, a League of Legends player for Chinese organization Royal Never Give Up. Intel and ESL extended their partnership through 2021 and plan to invest over $100 million over three years.