The big money world of professional online gaming
Last year, electronic sports, or e-sports, the competitive playing of
online games ranging from Call of Duty to League of Legends, broke
records for viewership, prize money and investments. And this year looks
set to continue the trend.
This
month, 113,000 supporters attended the Intel Extreme Masters in
Katowice, Poland, the largest annual e-sports event, which has awarded
prize money of $5.6m (£4m) over the past ten years.
USM Holdings, founded by industrialist Alisher Usmanov, is ploughing up
to $100m into Russian e-sports team Virtus Pro, while retired
basketball player Shaquille O’Neal and New York Yankees baseball star
Alex Rodriguez are investing in NRG Esports, which owns teams in the
Counter-Strike and League of Legends tournaments.
Market intelligence agencies Newzoo and Repucom forecast that global
e-sports revenues will rise by 43pc to $463m this year, entertaining 131
million enthusiasts and 125 million occasional viewers. By 2019, they
predict there will be 145 million enthusiasts and global revenues of
$1.1bn.
Big businesses have already taken notice and Coca-Cola and American
Express are among the sponsors of the League of Legends Championship
Series.
Matt Wolf, Coca-Cola’s head of global gaming, has said
that for the demographic of men aged 17-30, tournaments organised by
League of Legends and the games group Riot Games crush traditional
sports events.
“The Super Bowl is a massively viewed event with
more than 111 million viewers [in the US]," he told a conference in
Munich. “But when you layer on a gender and age split that we’re very
interested in as a consumer packaged goods company, it comes pretty far
down.”
The growth of e-sports has escaped many people’s radar.
“Viewership is growing in such an amazing way and unless you’re in the
games sphere it just doesn’t resonate,” he adds.
Gfinity, a UK
company set up in 2013 to buy Europe’s Warped Gaming League, has had as
many as 419,000 registered teams on its bespoke gaming platform. It
operates a London venue at which spectators pay to watch e-sports on
giant screens, and organises G3, a gaming event that has drawn 4,000
paying spectators and nine million online views from 35 countries.
Neville Upton, its chief executive, believes an e-sports player could
win the BBC Sports Personality of the Year award within a decade.
Gfinity has 156,000 Twitter followers and has attracted 92,000 Facebook
likes, while Twitch, an online social video platform and community
owned by a subsidiary of Amazon.com, claims 60 million users a month.
“The key is the 18-34 age demographic,” says Paris Davies, business
development manager at Pitch International, the sports marketing agency.
“I’ve never seen a [group] as concentrated towards young affluent
males. It’s not just that you’re reaching this target audience; you’re
also able to engage with them in a very powerful way.”
Newzoo
says 18 to 34-year-olds account for more than half of broadcast and
online e-sports audiences, compared with some 7 per cent for Premiership
rugby and about 10 per cent for Premier League football games.
Ashish Mistry is managing partner of BLH Venture Partners, which has
invested in KontrolFreek, a company making accessories that give gamers a
competitive edge. “A unique opportunity in the live-streaming e-sports
space is that brands can sponsor players,” he says, adding that it can
make sense to align with an individual rather than a whole team.
There are risks for sponsors, with violent games, but Davies adds:
“Those games are not as popular on the e-sports scene as people believe.
Fantasy games are the most popular. We haven’t seen any [reputational]
issues there. We think e-sports are just going to get stronger.”
"The video games industry is changing, and e-sports is part of this
evolution. Investors used to be sceptical about gaming as a hits-driven
business beholden to the success of a few key titles. But a positive
change to the business model, moving from expensive retail distribution
to downloads, recurring digital content and mobile gaming, drove revenue
growth, improving margins.
As revenues became more sustainable,
we have seen valuation re-rating, and major games publishers Activision
and Electronic Arts delivered substantial out-performance to
shareholders, including Standard Life Investments’ Global and US equity
funds.
E-sports may be the next step. Activision wants to create
an “ESPN of e-sports”, hiring an ex-CEO of ESPN to lead that effort.
One of the most successful sports broadcasters in history is now
popularising e-sports for the general public.
Other companies
benefit from this, too. Gaming-related channels on Google’s Youtube are
extremely popular, building the rapid growth of advertising revenues at
Google that we have seen in recent quarters." – Mikhail Zverev, head of global equities, Standard Life Investments
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