Esports: More Than Fun & Games

Millions of viewers, screaming fans, sold out stadiums – this is how we think about professional sports. But today’s champions might just as likely be called Team SoloMid, Team Secret and Team Liquid instead of the Lakers, Red Sox or Barcelona. Competitive, multiplayer, videogames played for spectator enjoyment, esports, have been quietly undergoing a period of explosive growth. Having made it to the mainstream, worldwide viewership is consistently increasing and the total esports audience is expected to top 557 million viewers by 2021. Once relegated to Asia, esports are developing globally with the world’s top players hailing from countries such as Estonia, Jordan, Norway, and Canada. Along with changing demographic trends, audiences are enjoying changes in matches which are now run in arenas in front of large crowds.


From increasing audiences, game entities are realising better customer engagement and have been able to monetize accordingly. Esports revenues for the 2019 season will reach $1.1B from a mix of advertising, sponsorship and media rights. Sponsorship opportunities are going beyond the small niche players with names such as Coca Cola and Mercedes Benz being common occurrences. Yet despite their popularity esports are only responsible for a tiny subset of the total $152.1B of revenues that the global gaming industry will generate in 2019.

With the development that comes from the growth of the esports/gaming community, firms are becoming aware of the implications that these have on enterprises working in both core and periphery industries. Tech firms, venture firms and incumbents operating on the peripherals are all poised to benefit from the disruption inherent in the industry life cycle. Firms previously not within the realm of traditional gaming services are now realising opportunities not previously recognised.


Changing industry trends are encouraging tech firms of all sizes to seek new revenue models for game monetization. Games which were traditionally played on console are now moving to mobile and are even adopting more abstract forms, such as using the cloud as their primary distribution and run source. The shift from owning a console for a given set of games to no longer needing one at all is creating new business dynamics and forcing game development studios to encourage spinoffs into mobile and to commence cloud operations. Cloud based competition is already underway, with Alibaba, Google, and IBM all coming to market with their own offerings. While the platform agnostic future may be viewed as something best left to the larger, established firms, there are segments for smaller players too. Boutique marketing and intelligence firms are all vying for their chance to access the untapped esports audiences. Despite having lower average annual revenues per fan than other sports, e-audiences are in their infancy and still not well understood. Moreover, what they lack in average revenues is compensated for in customer profiling.


Firms with analytics capabilities that can add holistic customer understanding are likely to benefit the most. While data for fan identification, personalization, and understanding the customer life cycle are effectively bettering game experiences for both audiences and players alike. These learnings, when properly applied, will lead to better engagement, loyalty, and subsequently increase consumer bases for other products.


A lesser discussed element of gaming is consumer demographics. Today’s gamer is long removed from the typical image of a basement-bound, teenage male. Currently there are more people over the age of 45 playing games than there are below the age of 20. Additionally, thanks to an influx of women developers games are taking more androgynous roles and female participation has increased drastically. With 47% of US gamers, and 52% of UK gamers, being female. All of this has led to new opportunities for developers and esport teams. The nostalgia factor is high, publishes are recreating older games such as Pokémon, Mario and Final Fantasy at a premium and seeing significant margin uplifts.


The changing face of esports is evolving the way in which we experience games and entertainment. The first move was from the big screen (PC / console) to small screen (mobile / device). The next may be to the cloud. The evolution of esports combined with improvements in 5G have lead to firms prioritizing their cloud and cloud streaming services. Platforms like Google Stadia, which let gamers stream live to Youtube, will allow for richer audience experiences and let fans follow their idols more closely. This fragmentation between the players and viewers is expected to be commonplace on all platforms and will lead to customer segmentation between those who play and those who watch. As fan-gamer observation becomes more conventional, content adoption by OTT providers is expected to follow suit. It can reasonably be expected that as the industry develops, audiences can prepare for a transformation from watching seasonal esports events like the League of Legends World Championships to regularly watching their favourite streamer all from the same media provider.


But behind this growing “watching” of esports is the core question, does watching equal buying? Successful investment in the industry will depend on whether marketeers are able to properly monetize their segment of the game vertical. Pitfalls may arise from underestimating how fragmented the industry is and not properly grasping the dynamics of the fandom. The breadth of games available and the nature of fan engagement, as it is split amongst players, teams and independent streamers, means that marketers are vulnerable to the poor management of campaigns. Grasping the demographic of the esport viewer presents challenges and an improved understanding of audience metrics will help to solve the efficient reach problem. A lot of the earlier ad campaigns have not worked, and not all products lend themselves to esports attribution. Rather than being a quick fix, this requires real investment, made by brands and companies over a multi-year period to gain awareness and results.


The future of gaming and esports is bright. The industry that has undergone extensive growth, has shown its viability and is ripe for monetization. As new dynamics evolve, opportunities will arise for technology businesses, both large and small. Esports audiences can expect advancements in the way that content is delivered and gamers can expect advancements in the way content is created. Changing demographics will shape the future of the industry and maintain its popularity. As data availability and quality increases, the cloud is set to become the dominant platform and blur the lines between gaming, entertainment, sport and ecommerce.

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