Prepared by John Shehata, Andy Fahey and Eugenia Guarda Nardini
Have you ever heard about esports? Probably you have heard about them, but you don’t really know what they are exactly, and above all you will not know that esports represent a very new and promising business opportunity.
Esports, short for “electronic sports,” transform online gaming into a spectator sport. Professional players are competing in different games and viewers get what has been the foundation of entertainment for thousands of years: community experience. The mechanics of esports are not so different from traditional sports. Although organized competitions have long been a part of video game culture, these were largely between amateurs until the late 2000s, when participation by professional gamers and spectatorship in these events through live streaming saw a large surge in popularity. Just as traditional sports fans enjoy watching top athletes perform at the top of their craft, the same is true of those who watch top video gamers compete. Competitors from different leagues or teams face off in the same popular games: Fortnite, League of Legends, Counter-Strike, Call of Duty, Overwatch and Madden NFL, to name a few. These gamers are watched and followed by millions of fans all over the world.
The development and enhancement of information technologies and communication, the birth of titles entirely based on multiplayer and an increasingly multimedia society are all factors that have contributed to the evolution of the esports segment on a global scale. And the business is one of most boosted by the actual pandemic.
The consequences of the pandemic
Prior to COVID the majority of the gamers were already viewed online, but the matches had the glitz and glam of live events – today the pandemic drove the online audience up significantly. During the lockdown esports fans increased the hours of PC game play (48%), and there has been a positive impact on purchases streaming or on-demand (15%), on the download of video games (15%), and on the purchase of in-game content (11%). Due to the lockdown, 38% of fans replaced the enjoyment of traditional sports with the vision of esports events, while 63% started following new types of esports. More than 40% of esports fans also declared that the lockdown period impacted the time spent watching esports online and in playing console video games.
According to IDC data the COVID-19 lockdowns have increased global gaming sales up to 20% to nearly $180 billion in 2020 and there are reasonable possibilities due to release of next-gen Playstation that there will be a further growth in 2021.
Moreover, Milano Fiera has hosted the 10Th edition of the Milan Games Week, but – due the lockdown – not in its physical structures. All the event has been organized online and 1,200,000 fans have participated, many of which for the esports competitions which were in live streaming. The numbers are interesting, especially for industries in crisis like trade fair.
The variety of ways to play games
The video game industry has boomed in recent years because of the variety of ways to play games. It seems that the main reason for this is to be found in the new ways of playing – gone are the days when games were sold for their respective consoles and PCs. Nowadays users have mobile games, in-app purchase freemium games, cross-platform games that aren’t limited to a specific console and streaming game services. Excluding in-game ad revenue, world-wide mobile gaming revenues are expected to surge 24% from a year ago, to $87.7 billion. A big reason why mobile game revenue is expected to widen its already large lead over console- and PC-based games is a matter of economics. Mobile phones, which serve as the primary online connection for billions of people world-wide, can be cheap — or free with a usage plan — unlike dedicated gaming consoles which can run from $300 to $500.
Esports are no longer just for gen Z or millennials
In recent years the esports industry robustly grew into a profitable business that attracts organizations from a variety of sectors, with millions of fans (reports indicate over 495million people in 2020 and projected to be 646 million by 2023) and billions of dollars up for grabs. From a relatively niche global market worth $194 million in 2014, in 2020, the global esports market was valued at just over 950 million U.S. dollars, and total esports revenue will add more than US$1.0bn in revenue over the next five years, presenting a dizzying array of opportunities for tech specialists, platform providers, network specialists, events organisers, game developers and even the world of mainstream sports. The business of the esports is a multi-billions dollar industry with a growing international audience. As the industry expands, there are increasing job opportunities in areas related to professional and recreational esports, including law, event management, facility management, marketing, engineering, artificial intelligence, virtual and augmented reality and much more.
Due to the unexpected and explosive growth of the esports market, economic players are now looking for opportunities of getting involved in the industry. At this point, connected to and surrounding the esports market, there are five main areas to which stakeholders may find areas for investment:
- Team ownership/franchises: Teams are able to create new revenue streams of their own much like traditional sports teams. For those video games for which leagues have been created, the publishers can also sell “teams” that can participate within those leagues to third parties. The new franchising system represents an obvious, long-term financial benefit for participants, especially those that perform well;
- Media rights: digital and linear media have entered into the esports business as it is a fast growing industry with an attractive audience size; larger rights deals are being struck with a range of platforms they will be the fastest-growing source of revenues by 2023, reaching $506 million;
- Fan payment: esports ticket sales will rise to $706 million by 2023;
- Sponsorship and advertising are currently the single biggest source of revenues for esports, reaching $724 million in 2023;
- Betting: betting on esports is not legal worldwide since it depends on where you live. Each country has different rules when it comes to sports and esports betting. Anyway, allowing esports companies to partner with betting firms could be transformational for the industry – and this is starting to happen
This diversity of revenue opportunities is tempting also stakeholders from traditional sport business. Major professional sports leagues have begun to incorporate esports into their portfolios. For example, the NBA has launched the NBA2K league with 21 teams representing their NBA counterparts competing this past season. While viewership is similar to some professional sports and is closing the gap with others (NFL), its revenue is lower due to the relatively early-stage, evolving platform. Soccer star David Beckham has launched an esports team which aims to bridge the gap between sports and their video game counterparts and plans to launch academy programs for youth esports players, and according to the company, Beckham will help develop coaching and provide mentorship. The former footballer is co-owner of Guild Esports, a London-based organisation, which completed its floatation on the London Stock Exchange last October, with a market capitalisation of £41.2 million.
The esports market is innovative, has an agile infrastructure and passionate user base underpinning the market — strengths that are coupled with a frontier mindset and a relative lack of industry regulation.
Are esports really sports?
The esports associations, including the Italian Interactive Digital Entertainment (IIDEA), are trying to fulfill the lack of regulation above mentioned and they have developed principles to support and improve “a fun, fair and enjoyable experience for all players in the world, within an environment open and inclusive“. These guidelines aim at promoting values such as respect, inclusiveness, safety, integrity and fair play.
Additionally, the “Federazione Italiana E-Sports”, which is a member of Global Esports Federation, has as its primary objective to be able to have esports in the category of sports activities recognized by Italian National Olympic Committee (CONI). This result would certainly represent one of the keys to the evolution and definitive consolidation of the entire ecosystem of operators in the esports industry.
But the assimilation of esports to traditional sports is one of the most controversial and debated issues in recent years. This is due there is no shared among all definitions for esports – just as there is no generalized sharing of which video game titles can be considered esports and which ones must remain outside this category. However, there have been some positive signs in the last months: esports has been named as a full medal event for the 2022 Asian Games, a major step towards the mainstream for a sport that has long harbored Olympic ambitions and which will further boost its acceptance and popularity.
The green field of esports
The esports market is not solely an industry for video game competitions. If industry trends can be indicative of anything, it’s that a huge part of the growth in esports has to do with interaction, involvement, and engagements on its stakeholders – and that kind of involvement leaves esports very attractive for investors looking for players, customers, and viewers that they can entice to subscribe, support, and avail their products and services. The esports sector is developing really quickly and additionally many countries are planning to invest in digitalization, which will let the sector to have a lot of perks benefits. This means that the esports business will keep growing steadily, and so will its economic and legal implications, becoming one of the most interesting game fields for entrepreneurs and professionals.
 Source: IDEA, Italian Interactive Digital Entertainment Association, “Rapporto sugli eSports Italia 2020”
 International Data Corporation, https://www.idc.com/getdoc.jsp?containerId=US45803620
 Source: Global Entertainment & Media Outlook 2020-2024, Video games and esports, PwC.
 Source: Global Entertainment & Media Outlook 2020-2024, Video games and esports, PwC.
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