The bullish hype around esports continues to grow across key markets and the industry is expected to generate a CAGR of 20% between 2020-2024 to reach over USD3 billion in revenue across 16 key markets, according to a recent Euromonitor International pilot study. As legacy sports face an uphill battle when it comes to driving engagement and unlocking new fan segments, esports, albeit in its nascent stages, continues to flourish.
Strong synergies between participation and professionalism
There are often competing industry definitions of what esports is. One way to cut through the conflict is to attempt to disentangle professional esports as a spectator sport from the broader gaming ecosystem. Yet, it is undeniable that the lines between spectator and participant are far more blurred here than in other sports, given that the barrier to entry for gaming is much lower than, for instance, the capital investment required to partake in motorsports or the physical toll that mixed martial arts (MMA) demands of its aspiring athletes. Professional esports audiences are likely to be casual or social gamers that are more acutely aware of the skill level required to perform at the highest level of the sport.
This level of understanding at a participatory level is undoubtedly fuelling short-term successes but also has the potential to place esports in a superior position than legacy sports when it comes to the ever-present question of long-term sustainability. Professional sports as an industry is still in its infancy relatively speaking – association football emerged in the mid-19th century, while US major leagues were formed at the beginning of the 20th century. Esports is emerging into an entirely new world where dynamics such as globalisation and technology promise unprecedented scalability and growth that was not possible in the halcyon days of football or baseball.
Therefore, while esports remains a sapling within the professional sports ecosystem, many optimistic stakeholders view it as the great oak capable of overshadowing the sports and leagues that currently draw the highest attention across different regions. As a result, esports is increasingly becoming a part of the conversation within the marketing departments of many of the world’s largest corporations, even those that at first glance might not have an obvious synergy with esports or its burgeoning fanbase.
Non-endemic partnerships now pepper the esports landscape
Currently, around 33% of sponsorships in esports reside unsurprisingly within the broad net of computers and electronics. Yet, other sectors have noted the growth and are keen to get involved, as close to the ground floor as possible. Some categories are a natural fit – sponsorship by energy drinks comprises a significant portion of all soft drinks sponsorships in esports, while gambling partnerships are emerging to no great surprise given its ubiquitous presence across the sports landscape. Other categories are illustrative of a wider buy-in to the hype around esports. Finance and insurance partnerships represent 6% of deals (compared to approximately 10% in traditional sports), illustrating that esports is now quickly breaking ground in non-endemic sectors.
This increase in partnership activity is unlikely to dissipate. As the fanbase of esports mature, its spending power will naturally increase, creating further opportunities in sectors ranging from finance to luxury goods.
Does enthusiasm need to be tempered?
Esports has a long way to go before it is considered a real threat to the dominance of the properties that attract the bulk of attention in the sports industry. As a result of the pandemic, many consumers are keen to reduce their screen time and often place greater value on real world rather than virtual experiences. Regulation also plays a role. For instance, China is curtailing the level of gaming permitted in the country. A further series of hurdles will need to be delicately navigated to ensure that professional esports fits within current definitions of governance, integrity, and ethics (it should be stated that issues of this nature are far from unique just to esports). Yet, none of these factors are interpreted as showstoppers that cannot be addressed enroute to mainstream adoption.
What next?
The increase in investment and partnership activity from across the corporate spectrum, the frequency with which consumers in many key markets regularly game, and the realisation that gaming and esports naturally blend in a way that other sports can only dream of, to many in the industry point to a future where esports can threaten the hegemony of legacy sports globally. More likely however, is that cooperation will take precedence over competition and that partnership opportunities promising revenue and engagement growth will be more frequently capitalised upon by both legacy and esports properties.
To learn more about esports, head to Euromonitor International’s recent webinar: Discovering Investment Opportunities in Esports