We’re very excited about the potential of Esports at Remagine Ventures. Apart from the cultural phenomenon and increased viewership of Esports, like any other professional sport, there’s also a business aspect. So what’s the relationship between Esports and money and where does it stand in 2020?
A recent McKinsey report focused on the potential Esports represents for brands prompted me to dig deeper.
Esports revenues as an industry
Despite the massive viewership, Esports as whole is still relatively small when it comes to revenue. In 2020, revenues are expected to reach $1 billion, and grow by 60% in 2023.
A few facts about Esports revenue according to Newzoo:
- Global esports revenues will grow to $1.1 billion in 2020, a year-on-year growth of 15.7% from $950.6 million in 2019.
- In 2020, $822.4 million in revenues—or three-quarters of the total market—will come from media rights and sponsorship.
- China is the largest market by revenues, with total revenues of $385.1 million in 2020.
Tournaments and Prizes
Imagine that every sport was owned by its inventor. i.e. the person or company who invented Soccer, would be the sole decision maker on the format, timing and rules of competitions, and would be entitled to a revenue share from each event. That’s not the case with FIFA, the ruling body for soccer, but it is the case in Esports. Players may have a dream job, but the game publishers have all the power, as recently picked up by Wired magazine:
“Publishers made a game. They sell the game. They own the IP. Anything having to do with the games has to go through them. And now they own the leagues, too”
Game Publishers Have All the Power, Wired
During the Covid-19, social distancing measures made large tournaments which usually draw millions of ticket holders to stadiums, to either get cancelled or moved to virtual formats. But still, the huge prizes offered in Esports tournaments are a big draw to players and teams.
Sponsorship
Sponsorships and advertising account for the bulk of revenue for Esports. Nearly 60% of the total esports revenues in 2020 ($636.9 million) will come from sponsorships.
Esports as a sponsorship asset, a recent report by McKinsey, asserts that it’s now clear that Esports is an attractive target for reaching a specific demographic group:
- Young (on average 26 years of age)
- male (over 70 percent)
- tech-savvy
- highly educated group
It is also a group that is very effectively targeted:
“Due to the fans’ direct interactions with all elements of this ecosystem,
Source: McKinsey
each element, ranging from athletes and influencers to leagues and tournaments to operators, is a potential sponsorship asset”
Moreover, it’s an audience that is interested in different products than the average traditional sports viewer
Teams and Merch
Esports teams make money in a variety of ways: sponsorship (primarily), broadcast rights, ticket sales and merchandise.
But running a successful Esports team today can also be very lucrative as a lifestyle brand. 50% of Esports fans say that they’re willing to spend big bucks exclusive merchandise. A good example is 100 Thieves, a team that sold more than $500,000 worth of apparel in five minutes.
The brands are taking note. Nike just came out with its first Esports commercial, a spotlight usually reserve to superstar athletes in basketball, soccer, or football. This commercial is a sign of maturity for Esports’s popularity, which has been gaining rapidly during Covid-19 (especially in the US) as other sport events went dark.
Louie Vuitton’s League of Legends line. Fnatic and Gucci’s collaboration. According to Vouge Magazine, Fashion and Esports is a match made in heaven. Adidas, Puma and others have also done collaborations with streamers and teams.
LV and Lol 
Gucci and Fnatic
Game Streamers
There were approximately 443 million Esports viewers in 2019, and that’s expected to surge to roughly 646 million viewers by 2023. The primary viewing of Esports is not competitions, but influencers (streamers) who broadcast and commentate on their game play. They are not necessarily Esports athletes or affiliated to a team.
According to a report by StreamElements, viewership on Twitch grew 56% in Q2 2020 compared to Q1 2020, surpassing 5 billion hours watched in the first half of 2020.
Despite the huge popularity of streaming services like Twitch, Facebook Gaming or Youtube, game streaming represents a small amount in terms of revenue ($18.2 million). The majority of the revenues for streamers come from sponsorship, advertising and in some cases merchandise.
Esports enabling tech
The rise of cloud gaming platforms, which are being released by Google (Stadia), Amazon (Luna), Microsoft (xCloud) as well as players like Epic Games, create huge tail winds for Esports.
Not only many of these platforms support a ‘one click to stream’, which immediately grows the potential gaming content that can be monetised, but also democratise access to the games – lowering the minimum requirements to own the game, own an expensive kit or even a console. I’ve previously wrote about the Bundle Wars, in which gaming plays a big role.
Generally speaking, gambling and betting are excluded from most industry projections, but taking into account their growing popularity, Esports betting activities are poised to become a big business. The sports betting industry has been valued at $85 billion in 2019. Esports betting is projected to be at $12 to $15 billion in wages in 2020 according to the Esports betting report. Our portfolio company Madskil is pioneering an interesting approach in this space.
New industries are being established around every aspect around Esports: training (we are investors in Novos, the leading training platform for Fortnite), nutrition, commerce, content, media, fintech/payments, etc.
We at Remagine Ventures continue to look for the top teams building ambitious startups in gaming, Esports and the Metaverse. Please get in touch if you think we can help.
I'm a former general partner at google ventures, head of Google for Entrepreneurs in Europe and founding head of Campus London, Google's first physical hub for startups.
I'm also the founder of Techbikers, a non-profit bringing together the startup ecosystem on cycling challenges in support of Room to Read. Since inception in 2012 we've built 11 schools and 50 libraries in the developing world.
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