Esports: Includes live streaming, live tournaments, advertisements, data collection, professional partnerships, game play hardware and fantasy sports.
Summary: The first advancement in Esports was the original multiplayer game, which changed video games from a solitary activity to one with a group. Expanding on multiplayer was LAN, which allowed people to gather multiple consoles together and connect them allowing for larger groups to play together. Then came revolutionary online game play, which finally allowed the world to play together. Over the years different types of games including League of Legends and Warcraft started to add personal collaborative elements video games. This resulted in small leagues being formed and the popularity continued to grow organically within this group of people.
In 2014 Amazon paid nearly $1 billion to acquire Twitch, a platform which streams people playing video games around the world. The platform has over 100 million unique monthly users who both watch video game streams and play themselves. This represented the first major acquisition in the Esports industry and put everyone on notice of potential value in this space. As visible in the chart below, investment skyrocketed in 2015 and showed no signs of slowing down in 2016 (the chart only represents half of the year).
The most recent significant acquisition in the space was Time Warner’s purchase of Machinima for approximately $100 million. Machinima was a Youtube channel and website which had a strong following of gamers subscribed to their content.
More recently professional sports leagues have started e-leagues such as FIFA and just yesterday the NBA announced an NBA 2k league, where 17 professional teams have already signed up. These partnerships legitimize the content as true entertainment media and will only increase Esports relevance with the marketing expertise.
Today the revenues continue to grow and the users continue to compound.
- This industry is not necessarily solving a problem, but it is simply a new opportunity, which did not exist. The entertainment world did not know that there was such a strong viewing demand for people playing video games.
- This audience is global, has disposable income (as reported by Newzoo market research) and has never been so accessible to advertisers before.
- No one knows what the size of the market will become, but growth patterns show it has no sign of slowing down because of its global reach.
Many Opportunities for Investment
- Esports is such a new market that it creates opportunities around every aspect of it. Publishers of the content, event coordinators, technical hardware for the gamers and of course the advertising/marketing potential.
- All of these different divisions of Esports allow for many companies to reap financial success by securing a foothold before being swarmed with competitors.
- I believe the industry will become a league even more profitable than professional sports teams because of the global audience and nostalgia from most people having played video games in their childhood.
Longevity and Significance
- This industry will not go away in a crash and now that it has hit the mainstream it is here to stay. This should be thought of as a new professional sport with the same market potential and dedication of its fans.
- Everyone has the ability to play a video game, but not everyone has the ability or confidence to play physical sports. By lowering the barrier of entry to play the “sport”, Esports will command a massive audience in perpetuity.
- Esports are significant because industries like this do not come often. I would compare its rise to the mainstream to skateboarding or snowboarding, which had patches of success. The only difference is that video games have been around and extremely popular for 30+ years so they won’t be going away any time soon.
Channels: Twitch, Youtube, Azubu, ESL, Machinima
Brands: Nvidia, Intel, Samsung, Logitech, HTC
Events: The International, ESL ONE, Extreme Masters
Publishers: Activision Blizzard, Wargaming.net, Riot Games, Valve
Conclusion: The chart above shows the growth of Esports in just the past two years and projections moving forward are only supported by the significant amount of money being thrown at this industry by corporations and venture capitalists. I believe that this period of growth will provide opportunities for different types of startups as the industry adapts. While some people might think it is too late to get in on the growth, I think that it is just getting started.
The largest question I am left with is what part of this industry would make the most attractive investment? There are so many different ways to play the space that it is difficult to pick one. There are investments ranging from specific medical doctor practices for gamers to video game gambling companies, with all of the more traditional opportunities in between. With all of this going on I believe a diversified approach would be the best course of action and I would try to gravitate toward companies who have organically acquired users. For users with the specific interest like these people have – it would be difficult to convince them to use your product, so they must actually like it.
So what companies would I invest in? Big, Medium,Small…
Big: No big company I really like now that hasn’t been acquired…
Medium: Azubu –
Small: Newzoo – I believe this company would be the ideal first investment in the space because they are a research startup who gathers all of the data around Esports. This team would be valuable as council for future investments and likely turn out to be a successful startup itself.
Landscape for reference: