A 2018 update on trends in eSports

It started as arcade games in California in the 1980’s. Today, competitive gaming, or eSports, has evolved into something quite astonishing. It has an estimated 250 million players, more than several of the traditional Olympic sports federations combined, and second only to soccer as a global sport. Some predict that it will surpass even soccer within 20 years.

Successful eSports companies, investors, and players all stand to profit from this growth. One of them is Play2Live, which has developed the first blockchain-driven streaming platform for gaming and eSports.

The success of the Play2Live project will be to a large extent defined by the success and trends within eSports. This article explores these trends.

Esports growth statistics
There is probably a no better way to summarize the growth in eSports than to repeat the key takeaways from Newzoo 2018 Global eSports Market Report:

· Global ESports revenues will reach $906 million in 2018, a year-on-year growth of +38.2%.

-North America will account for $345 million of the total and China for $164 million.

-Brands will invest $694 million in the ESports industry, 77% of the total market. This will grow to $1.4 billion by 2021, representing 84% of total ESports revenues.

· The total Esports audience will reach 380 million this year, a year-on-year growth of +13.5%.

-The number of eSports Enthusiasts worldwide will reach 165 million in 2018, a year-on-year growth of +15.2%.

-The global average annual revenue per eSports Enthusiast will be $5.49 this year, up by 20% from $4.58 in 2017.

· In 2017, there were 588 major eSports events that generated an estimated $59 million in ticket revenues, up from $32 million in 2016

-The total prize money of all eSports events held in 2017 reached $112 million, breaking the $100 million mark for the first year.

-The League of Legends World Championship was the most watched event on Twitch in 2017 with 49.5 million hours. It also generated $5.5 million in ticket revenues

Revenues, audiences and events are growing exponentially. All of these statistics indicate double-digit growth, with brand investment, predicted to reach triple digits. The League of Legends World Championship shows how audiences have grown. It filled the Bird’s Nest, Beijing’s major Olympics arena, seating 80 000 people, and also had 60 million viewers online.

Drivers of growth in eSports
There are a number of factors leading to this growth, including

· The emergence of franchises

· Technology

· Convergence of business models

· The growth of video on demand

The emergence of franchises

In traditional sports there are major leagues of franchises such as the NFL and NBA, where teams have a regular spot and fans can follow their rivalries and progress every year. This system provides some stability for organizers, teams, brands, sponsorships and broadcasters.

The same system is being developed for eSports. In North America, the North American League of Legends Championship Series (NA LCS) and Overwatch League (OWL) have been established. In China, mobile eSports is booming, with top franchises such as Tencent’s Honor of Kings and Giant Network’s Battle of Balls.

Technology
Mobile has had the greatest impact on gaming as a whole, although it is still developing in eSports in the West. In Asia, however, the growth of mobile eSports exploded during 2017, and it has already developed franchise structures with professional leagues, live stadium events and millions of viewers. This popularity is for both core competitive games such as Arena of Valor and for more casual games like Battle of Balls. In the West, PC-based franchises are likely to dominate eSports viewership, while mobile will grow the more casual formats.

Blockchain and cryptocurrency have also impacted the growth of eSports and is likely to be a major driver in the future. One of the most important reasons is that blockchain technology puts the power back into the hands of the participants — organizers, streamers, viewers. They will be able to interact directly with each other and payments can be made seamlessly. This includes payments for advertising, betting, subscriptions, donations to players, crowdfunding, purchases of in-game items — all can be made securely and transparently and with no intermediaries. Transactions are tracked, making match-fixing much more difficult and ensuring payment of rewards.

Convergence of business models
Brands, media and entertainment companies are looking to capitalize on gaming and eSports.

Traditionally, media companies rely on advertising for their revenue. Gaming, on the other hand, depends on consumer spending. The convergence of these business models will provide media companies with a more sustainable revenue mix and will allow advertisers access to the gaming market.

Live streams and events have moved gaming into the arena of broadcasting and media. For example, Turner, which is part of Time Warner, operates the ELEAGUE, a CS:GO league which is broadcast on TBS, Twitch and YouTube Gaming. Warner Brothers publishes games. Disney has majority shares in BAMTech which operates digital streams for traditional sports, and now has included League of Legends.

Content creation and entertainment have become as important as winning tournaments. Tech and e-commerce giants like Apple and Amazon are starting to invest heavily in content.

This convergence of telecoms, media, sports and entertainment is driving the growth of eSports. The competition for eSports content is growing, with media and telecoms companies vying for rights to teams and leagues. Media rights revenue grew by nearly 50% from 2016 to 2017 and is expected to double again in 2018. This puts it just behind sponsorships as the highest revenue stream in eSports.

Audiences are growing, especially amongst younger generations, as a result of the increased media coverage, the growth of franchises and the developing technology, especially mobile.

Growth of video on demand
One of the main drivers of change in the broadcasting and media market is the video on demand (VOD). People increasingly want to decide what they watch and when they watch it. They want to exclude advertisements if they choose. There is a move away from cable and satellite TV towards live streaming and more flexible and affordable offerings such as that provided by YouTube and Netflix. Platforms for gaming and eSports are growing in viewership. For example, Twitch has 100 000 monthly active users.

Interaction between traditional sports and eSports
There is increasing interaction between traditional sports and eSports. Esports titles that are developed on the basis of traditional sports help to bring newer fans to the traditional sports fan base and vice versa. One study in the US found that 52% of eSports fans were also NFL fans, and 39% were NBA and Major League Baseball fans. Many of the traditional sports players are themselves gamers, playing games on planes and in hotels while on tour.

Some recent examples of interaction include:

· A championship in Japan in January 2018 brought together players of the baseball video game Pawapuro with pro players from the Nippon professional baseball teams.

· In Canada, the NHL is setting up a 2018 NHL Gaming World Championship for virtual hockey, to be played in Canada, the US and Europe.

· NASCAR has two initiatives to include eSports. One is to host tournaments at the major tracks during race events. The other is for NASCAR teams to own their own teams, to compete in their own pro league. This follows similar moves by Formula One and Formula E. Porsche and Audi are also active in the market.

· Professional basketball in the US has strong links with eSports. Several teams are owned by NBA teams. For example, The Philadelphia 76ers own Team Dignitas and Team Apex in the UK. Houston Rockets own Clutch Gaming and Golden State Warriors own the Golden Guardians. Some teams are backed by individuals who are owners or co-owners of NBA teams. These include owners of Milwaukee Bucks, Washington Wizards and Cleveland Cavaliers. NBA itself has announced a partnership with Take Two Interactive Software to develop its own eSports league.

· Soccer teams are also venturing into eSports. Well-known examples include West Ham United, Manchester City, Bundesliga’s Wolfburg, Valencia and FC Schalke, Paris Saint-Germain and Real Madrid.

Recognition of eSports as an official sport
ESports players are starting to be recognized as athletes. They require excellent eye-hand coordination and the same amount of dedication, focus and mental preparation as for other sports.

There is a move to include them in major sports events such as the Olympic Games. A step towards this has been the inclusion of eSports into the Asian Games. A statement from the International Olympics Committee in October 2017 read that:”Competitive eSports could be considered as a sporting activity, and the players involved prepare and train with an intensity which may be comparable to athletes in traditional sports”.

While the growth of eSports will continue with or without Olympic recognition, it certainly would boost the credibility of the sport.

The World Movement for the recognition of eSports began in South Korea, China and South Africa. According to Cybbet, the list of countries that either had recognized or were considering recognizing eSports is shown in the table below, as at the end of 2016:

Clearly, Asia is leading the way. During 2017, recognition was granted also by the Philippines and Thailand.

The United States recognized eSports players as professional athletes as far back as 2013. France has a plan to regulate eSports, and German Chancellor Angela Merkel has made supporting the growth of eSports a part of her party’s platform. The major benefit for players is that there will be tax benefits and easier ways to get visas.

The Middle East is also emerging as an important gaming market. A Statista report highlighted Turkey, Saudi Arabia and the UAE as the countries with the largest following, and with the potential to adopt the idea of eSports.

The International e-Sports Federation (IeSF) is attempting to become a global body that could promote eSports around the world, and also bring together the very fragmented industry, that is largely driven by games developers and publishers. A single body will be required if eSports is to become a part of the Olympic Games.

Opportunities for business
eSports is growing exponentially as a new independent business and industry. Large businesses and investors are making sure they do not miss out on the opportunity. Tencent, Amazon, Alibaba, USM Holdings and even Warren Buffet have invested in some way in eSports.

The eSports economy includes media rights, advertising, sponsorships, merchandising and ticket sales. Interestingly, the producers and publishers of games do not make as much from the increasing use of the games as would be anticipated. Rather, the large producers such as Riot Games are making their money from their own leagues and championships.

However, games development is important. For example, Finland is a major center for the development of games. Supercell, the developer of Clash of Clans and Clash Royale, was recently bought out by Tencent, but remains headquartered in Finland. Critical Force has just released mobile versions of its popular C-Ops game. It has also established an academy for students at the Kajaani University, which has one of the best game development curriculums in Europe.

Suppliers of computer and gaming equipment are seeing huge growth. For example, Logitech has been making computer and gaming equipment for decades but has seen the growth of between 25 and 35% over the past four years in its gaming division. The CEO, Bracken Darrell, says they are “equipment makers, just like Nike is for athletes”. He predicts that eSports will be bigger even than soccer.

Broadcasting and streaming of tournaments and competitions is more and more in demand. Companies like Twitch and YouTube are meeting much of it, but there is space for more platforms.

As the sport grows, so too will be the need for event production companies around the world.

Conclusions for Play2Live
There seems no doubt that eSports is a huge and growing trend, and that it offers significant business opportunities.

The Play2Live business model is based on it deriving income from a variety of industries, including gaming, eSports, betting and in-game items. Its income from eSports seems assured as it is tapping into the trends. It also brings with it the technologies that appeal to eSports fans — especially the control and interactivity offered by blockchain.

The success of Play2Live may depend now on its ability to carry out the steps in its roadmap for 2018, which include intensive marketing to attract fans and streamers and the acquisition of rights to broadcast major eSports events.