From the beginning of modern capitalism, the professional sports industry has consistently grown and expanded to new heights. Football, baseball, basketball, and soccer teams around the world are reaching multi-billion dollar valuations. These teams have essentially endless revenue streams through jersey sales, ticket sales, corporate sponsorships, and media deals. Even some of the world’s largest corporations like GE, Rakuten, and Wish pay tens of millions of dollars for their small logo to be stitched onto various NBA team jerseys. Various corporations have even paid over $5 million for a 30 second commercial for the SuperBowl. The reason for all of this big money in professional sports is viewers. A single game has the ability to attract over one hundred million viewers. That being said, the current sports industry is very solidified and proven to be a cash cow. However, there is a rise of a new sports market, electronic gaming, and venture capitalists are jumping on the opportunity to have a piece of this rapidly growing industry. I mean, who wouldn’t want to invest in the next potential NFL?
Like the NFL, the E-sports market has already proven itself as extremely valuable and rapidly expanding. Last year the IEM World Championships attracted over 46 million online viewers and 55 million more social media viewers, while the Super Bowl attracted 111 million viewers. This event also generated over 255 million social media impressions. This e-Sports viewership has expended tremendously since 2014, where the maximum E-sports views per one event totaled 20 million. E-sports has also attracted a tremendous amount of attendees at its events as well. At the 2017 IEM World Championship, roughly 180,000 people attended the event and surrounding festival. One of the most astounding aspects of this growing market is its world-wide presence. The IEM World Championships broadcasted its content across 70 linear and digital outlets worldwide across 19 languages. Finally, another revenue stream involving E-sports is online streaming through platforms such as Twitch, where gamers can broadcast themselves playing E-sports and make money per viewer they attract. Famous gamer “Ninja” attracted 600,000+ viewers when he played with famous rap artist, Drake. Daily, Ninja attracts a consistent 85,000 viewers. It is no question that the E-sports market is massive and expanding at an outstanding pace. That being said, there has been an exponential influx of venture capital into the E-sports industry across a variety of platforms. Newzoo estimates that the market will be worth $1.5 billion by 2020 with 600 million active viewers.
In the past 5 years, funding for E-sports startups has increased by about 1,125%. Crunchbase estimates that roughly $160 million has been invested in E-sports, however, there has also been a tremendous amount of funding that has not been reported. Modern sports owners have also taken interest into the expanding market of E-sports. Dallas Cowboys owner Jerry Jones has invested an undisclosed amount in professional E-sports team founded by Jason Lake of Complexity Gaming. Both gaming companies, streaming platforms, and professional gaming teams themselves have seen an influx of investment. Venture capitalists are steadfast in taking a risk to reap massive profits at all corners of the E-sports market. With the rise of gaming teams and individuals, who have been paid out $20 million+ in prize money in some tournaments, comes an influx of marketing managers, agents, and lawyers. The rise of these types of firms also has attracted venture funding.
An E-sports team that has gained notoriety is Dallas-based OpTic Gaming. Texas Rangers owner, Neil Liebman acquired a majority stake in the gaming team. Deep Space Ventures partner and OpTic Gaming investor, Stephen Hays has stated that the E-sports industry is “a huge, global market that is growing super fast.” He also states that big money will continue to be spent in E-sports primarily due to the growth of the market and the consistent high engagement of the viewers. He also believes that E-sports is a promising industry due to the ability for young viewers to view short-form content. To put the potential of the market into perspective, the size and notoriety of OpTic Gaming can be seen by their Twitter following, where they have 3.4 million followers. The Dallas Cowboys have 3.7 million followers, thus proving that E-sports teams have the potential to reach huge amounts of viewers, and even billion dollar valuations in the future.
Hays also describes that one of the on-going issues with monetizing E-sports is that media and advertising companies are still spending their money for NFL advertisements, for example, rather then E-sports ones, despite viewer numbers being the same. However, with more growth in the E-sports industry, it is likely that these media companies will switch over, especially because of the attractive elements of the streaming platform design. Unlike many typical sporting events, E-sports can be streamed on all different devices ranging from computers to iPhones to the Xbox. However, the most promising element of E-sports may be the fact that viewers can interact with the gamers themselves, and visa versa. This will be a very strategic opportunity for the E-sports industry to be monetized and for the venture capital investors to reap large returns on their investments.
In conclusion, it will be very interesting to see how the continuously growing E-sports industry begins to attract more corporations as an outlet to advertise and spread their content to a young, engaged user base. Although it has not been done yet, the ability for the users to interact with the gamers themselves provides media companies with a powerful, innovative way to reach their target customer base. With the continued influx of venture capital, it is likely that the E-sports industry will continue to expand to the level that the NBA, NFL, and MLB are at today. If I was a venture capitalist, the E-Sports industry is definitely one that I would be very focused on, and getting involved in.