ESports Economics: A Primer To The E-Sports Industry

  • June 20, 2017

From the pixelated and harmless arcade games of Space Invaders and Pacman, eSports, or competitive video gaming, has already rocketed to the limelight with its multi-million dollar revenues.

Newzoo, a market-intelligence firm, has recently reported that eSports’ revenues last year has amounted to $194 million and will increase more than twofold in 2017, reaching $465 million. Undoubtedly, eSports has and will become a remarkable item in the sports economy.

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What is eSports?

lcs studio

As a refresher or for those new to the industry, eSports is considered to be an umbrella term for competitive video-gaming, and this industry has shot up to fame as fast as the improvement of internet speed.

Streaming platforms has also emerged, where you can watch your favourite video games and players battle in real time. These games are now played professionally and not just as past time hobbies.

The games played in eSports are usually played as first-person shooters, one of the most famous would be Counter Strike. Other games are now called as “multiplayer online battle arena” or MOBA, like League of Legends and Defense of the Ancients (DoTA) 2.

We used to just chill in the couch at home and enjoy the game for ourselves or with our friends, but now there are stadiums and arenas where professional tournaments of these games are played with thousands of live audiences watching and a million more enthusiasts watching the stream on the internet.

“Computer geeks” No More

The typical idea of gamers as “computer geeks” has now transitioned into the positive light, because it turns out that these “nerds” and “geeks” as stereotypes often portray are now in the online market, even making more money doing their hobby than most people with normal day jobs.

And some of them aren’t even skinny or fat – just take a look at C9 Balls:

c9 balls workout

These gamers take their endeavour seriously, practicing for several hours a day, taking extra care of their physical and mental health by exercising and eating healthy, much like the athletes of traditional physical sports.

They also consider pursuing eSports as a legitimate and stable career. At present, several eSports teams have already been deemed as celebrities, even with fan bases across multiple countries.

eSports Are For Lazy Daisies… Not.

The proliferation of eSports and video games in general lies greatly in the fact that it’s very easy to get into.

You can have a flexible time, you can practice at any time of the day you wish, and you will have opponents that are online whether you’re a morning person or a nocturnal owl.

As long as you have a reliable computer set-up and a fast internet speed, along with your burning desire to destroy your opponents, then you’re good to go.

Being a video game superstar is not easy-peasy, however.

On an interview with MC, the current world champion in StarCraft 2 player, he stated that he literally had to win thousands of matches to get to where he is now.

MC

MC, one of the greatest Starcraft players

It just takes determination, dedication and passion in achieving your goals. It is just the same ingredients to success in all the other disciplines in life.

How Did We Get Here?

Electronic games have already been around since 1980’s, and in the early 90’s there has already been large eSports tournaments on the popular games like the Nintendo games and NBA Jam.

By the late 90’s the eSports world has grown even more, with the creation of CounterStrike and Warcraft, a few of the most popular games in the gaming world until today.

These tournaments, however, are only based in the US at that time. By the year 2000s, with the innovations leading to the improvement of broadband internet connections, eSports has grown popular globally, so are the tournaments and the booming of more online games.

A decade later, multiplayer online battle arena (MOBA) games have successfully entered the eSports market, and has already started taking over as professional competitions.

The most popular games include the Defence of the Ancients or Dota, League of Legends, Call of Duty, StarCraft, Overwatch and Hearthstone. Here is where the booming of the eSports economy starts.

eSports Today

In 2015, eSports has become most popular in Asia—Korea in particular—and in the US, since the rise of the MOBA games. Popular not only in the number of players but more so in terms of audience interested in the game.

Sometimes you don’t even want to be an actual eSports superstar, but it’s just that watching the games is just plain entertaining.

At present, eSports is now bigger than ever. There are already so many eSports teams, big-time events and competitions, with notable prize pools and solid online communities and streaming platforms.

As an example, “The International 2016”, a major DoTA 2 tournament, has a total prize pool of $20,770,640. League of Legends, on the other hand, has a different system for running their tournaments so their prize pool is relatively smaller, but still a hefty $5mil for their LoL 2016 World Championship.

The International 6 Prize Pool

eSports Arenas

The booming of the eSports world has rained money not only on the actual players but also for the other markets that can benefit on eSports.

As such, Skillz, an online multiplayer competition platform for mobile games, is one of the eSports arenas operating on cash competitions. This business is a million-dollar idea, and has partnered with thousands of game studios along with the games the respective studios has created.

Basically, an electronic sport needs to have an arena where it can execute its tournaments and Skillz provide that service.

Over 150,00 tournaments are hosted by Skillz every day over 180 countries, and has already paid out in excess of roughly $13 million to players. League of Legends and StarCraft are some of the games that have invested in Skillz, and they sure made the right decision.

eSports And…Chill?

In this light, another market has been flourishing as influenced by the eSports hype: eSports bars. The Blurry Pixel, an eSports bar in the Canadian capital of Ottawa, can prove to owe its current status as a sensational bar to eSports.

the blurry pixel

Credit: The Blurry Pixel

As competitive gamers from around the world gather in a grand tournament somewhere in Las Vegas, The Blurry Pixel seem to be like a cinema that caters the entertainment needs of the eSports enthusiasts. It offers a cozy space for the audiences of the competition.

You would have opted to stream the game online at home, but some things are really better enjoyed with fellow enthusiasts, sharing good food and booze. You can even meet new people and enjoy great conversations about the games you love.

You could have been just sitting at home watching the game, but hanging out with other fans makes the game more interesting.

Like watching the real sports such as the Super Bowl or the NBA, watching the tournaments in a crowd also has the thrill and excitement in betting. And there, microbusiness owing its success to eSports.

Accessories and Mechandise Stores

Another venture that root its progress to eSports are the online marketplaces, selling virtual items and accessories used in eSports games. One of the most popular of these is the Steam Community Market, owned by Valve.

However, scamming is prevalent in these kinds of marketplaces due to lack of organization and monitoring. Thus, some wise eSports enthusiasts provided solution to this problem and created OPSkins.

Since the launching of OPSkins, gamers have felt more secured in buying and selling their virtual weapons and goodies. There are other gamers who had probably somehow lost faith in the game due to scamming experiences, but through OPSkins their interest have been rekindled.

The creators of this virtual market place, Artur Minacov (21 years old) and John Brechisci (28 years old), are actually earning roughly $12,000 a day. That’s definitely an enormous sum wad of cash just by sitting in front of your computer.

Moreover, Minacov is running the company from his parents’ basement. They are perfect epitomes of getting rich by doing what you love.

Their mission and vision isn’t also just to earn money with so little effort, it is actually touching to know that their passion for the game is what drives them. They wanted to create this market place to help out their fellow gamers. The revenues only come second.

Promotions Of Other Brands

The games and the platforms aren’t the only things that the top teams and players actually promote in the league of eSports. While most of the attention tends to focus on marquee tournaments and events, several companies have already integrated the eSports strategy.

They have realized that across events, media, public relations, advertising, social and promotions, their brands can be viewed by millions of eSports consumers worldwide.

Ons of which is the PC maker Alienware, knowing that fine computer sets are definitely essential in eSports. On the a little unnecessary part, one of the most famous energy drinks, Red Bull, also has found its way in the eSports realm.

Other clothing lines also hook up to eSports superstars, such as Lee, having their t-shirts and jackets advertised during the tournaments’ finals.

Traditional Sports x eSports

Top clubs across Asia, America, and Europe have been already getting involved in eSports. They are buying up eSports teams and players to represent them in the electronic sports tournaments.

One of the most famous football video games is FIFA, and the world champion in this game, Kieran “Kez” Brown has already been signed by Manchester City. In this case, Brown is now an employee of Manchester City and all he has to do is to represent the team in the FIFA Interactive World Cup and hopefully win.

Not only would Manchester City have a great promotion on the eSports world, but it would be good for eSports as well; a massive audience of football fans, probably clueless about eSports, will turn their heads to the new virtual ambassador and become eSports enthusiasts.

As usual, these football teams have their own nemesis, and Brown has already met his. Sean Allen, another FIFA Pro player has also been signed by another Premier League club, West Ham United. Allen even has an official squad number that he will wear in FIFA leagues.

In Germany, big football clubs such as Bayem Munich and Borussia Dortmund, have been buying not only the best players but an entire eSports team as well. They are hoarding eSports team to represent them not only in football video games, but also in basketball, bowling, chess and handball.

Now on the world of basketball, the infamous Philadelphia 76ers has already been the first U.S. Professional Team to plunge in the eSports world. For the last several seasons, 76ers have become known to be benchwarmers, but it seems that investing in eSports has been a great decision in light of redeeming their name.

Apparently, the owners of 76ers aren’t afraid of risking their name and resources in projects outside of basketball (where they seemed to be spiralling downwards). They have purchased two of the most popular teams in the eSports realm, Team Dignitas and Team Apex. The plan is to form a super team from the two, and just let them do their thing, stand out on games like League of Legends, Counter Strike, Overwatch and etc., while bringing the name of the Philadelphia 76ers.

Joshua Harris, Philadelphia 76ers Managing General Partner has stated in his latest interview that their management sees that their entrance into eSports a natural extension of their expanding interests in traditional sports and entertainment, and that they are confident that their involvement will hasten the already rapid pace of growth of eSports as a whole.

It wouldn’t be shocking if other NBA teams will gradually be acquiring virtual superstars as their employees in the near future. As a matter of fact, even retired basketball icons have already started investing in eSports as well, Shaquille O’Neal to name one. Undeniably, eSports is now viewed as a great investment with an exquisitely high growth potential and a bright future ahead.

What Does The Future Hold?

At present, it would seem that eSports is still sitting on the edge of becoming recognized as true sport. It seems that eSports is merely an accessory to the traditional sports, being used predominantly as a promotional tool and source of revenues for whatever the champions have earned.

However, as the fandom of eSports increase, brought about by the involvement of traditional sports, eSports would hopefully be appreciated as an authentic and stand-alone sports realm.

The rapid pace of eSports’ growth at present allows the prediction that a year-on-year growth of the eSports economy will be by 43%.

This serves an audience of 131 million legitimate eSports enthusiasts and another 125 million who are only occasional viewers tuning in mainly on the big international events. Newzoo’s 80-page report details that the global esports market is expected to generate $1.1 billion in 2019.

Let us not forget as well that eSports is still very young, yet its popularity and revenues have already been remarkable soaring. There is still a lot more opportunities for the players to be explored, a lot more improvement in the field of technology, and a lot more business models to be developed.

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