Research

The dawn of the cyberathlete

Why eSport is in a league of its own.

At the junction point of the leisure industry, video game publishers, the events business, the sports world, media rights, advertising and sponsorship rests an emerging gamer behemoth. It’s called eSports, and it’s already being touted as a global phenomenon in the world of media.

A simple definition of eSports is ‘a multiplayer video game played competitively for spectators, typically by professional gamers’. It’s a description dwarfed by the reality of an industry that boasted an audience of more than 380 million in 2017 alone. Added to that, thanks to new games, leagues, teams, streaming deals, advertising and sponsorship agreements, eSports already has an estimated worth of US$700millioni.

The International Olympic Committee is exploring the possibility of including eSports in future Games, starting with Paris in 2024. It says that competitive eSports could be considered as a sporting activity, and that the players involved may be comparable to athletes in traditional sports as they 'prepare and train with an intensity.'

- Morgan Stanley Researchii

Playing for keeps

For many participants, eSports is a serious business, and intensely competitive. Games most commonly take the form of organised, multi-player tournaments and the most common genres are real-time strategy, fighting, first-person shooter (FPS), and multiplayer online battle arena (MOBA). Some tournaments are broadcast live, streamed online or broadcast on TV and many offer prize money to competitors.

Data cited in a report by Morgan Stanley Research revealed that eSports held the most appeal for a young audience – with over 80% of players in the 18-34 age range. Players were also more likely to be affluent, with 62% having a full-time job.

The eSport audience is global, which makes it an attractive option for advertisers.

In Australia, awareness of the relatively young industry is growing. A YouGoviii report on the eSport market and its future growth found that at least 4 in 10 Australian adults were aware of eSports. Of those 4 in 10 who were aware of eSports, one third had watched them. Additionally, 21% of all adults surveyed were interested in watching eSports in the future.

Game On: Revenue streams in eSports

The independent forecaster Newzoo estimates that the eSports economy grew 41% in 2017.

So how is money being generated from people playing virtual online tournaments, largely from the comfort of their own homes? And how will future growth be generated?

The main revenue sources for the eSports industry include:

  • Sponsorship: Tournaments and eSports teams attract sponsorships from big companies like Coca-Cola, Red Bull, and American Express.

  • Advertising: Advertising revenues come from an agreed-upon amount of exposure on screen or at tournaments.

  • Media rights: Tournaments and championships sell online and broadcast media rights to various distributors.

  • Tickets & Merchandise: Ticket prices depend on the popularity of the game to be played, popularity of the event itself, location, etc. Event merchandise revenues from promotional products often constitute the majority of event's B2C revenues.

  • Game publishers fees: Game publishers invest in seeing their games promoted via eSports tournaments and leagues, often through payment to third-party organizers and through sponsoring prize money.

Future growth

In terms of generating future growth, the focus will be creativity. If fresh ideas and newer games are innovative enough to keep players engaged and challenged – as well as attracting new audience segments - a commercial chain reaction could be set in motion.

Increased eSports popularity will lead to increased viewership, which will boost advertising and sponsorship. A subsequent rise in the value of media rights could generate extra spending per customer at events, producing a powerful catalyst for merchandise & ticket revenues. Another boost for the industry could come in the form of virtual reality and hardware developments that serve to drive innovation and entertainment.

For information on investment opportunities in sports, leisure and entertainment please contact your Morgan Stanley Financial Adviser.

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