E3 is a celebration of gaming. As I walked around the JW, convention center, restaurants, and events in the evenings, it’s extremely evident that everyone from the casual gamer to the largest companies in the world care about this space.
After announcing our 4th investment last week, we remain committed to investing in the infrastructure and “picks & shovels” of the video gaming & esports industry. The other two ways to play this are by investing in game studios (binary, crowded) or pro-teams (over-valued). We avoid both of those and are focused on scalable technologies, as evidenced by our first 4 portfolio companies.
A few reflections from E3:
Social Connectivity - gamers are more social today than any point over the last 50 years of video gaming. Technology has allowed for gamers to not only “show up” in virtual worlds (10M person concerts in Fortnite) but also at conferences like E3 (70k+ in attendance). Attending an event like E3 further confirms our belief that the evolution of entertainment is primarily taking place through gaming.
Entertainment - at its core, gaming is an entertainment industry and this E3 showcased the continued convergence of technology, media, entertainment, and gaming. These segments are now becoming ubiquitous with the gamer (consumer) as the main driver for many of the fastest sectors of innovation. Around the corner is the continued emergence of AR, 5G, virtual marketplaces, cloud gaming, etc.
Esports Teams / Organizations - the professional teams are entertainment companies that are building their own systems for cultivating not only just pro-athletes but also professional content creators. Both of these are key components to the esport org’s brand, reach, and monetization.
Game Studios | Esports - the largest game studios are viewing esports as a consumer engagement tool that can help keep their games relevant for longer (longer tail, higher spend, lower CAC). It’s not the primary driver for how developers are building games, but it’s a component (like any other) at this stage.
Free to Play (FTP) - it’s one of the many ways to monetize games, but by no means is going to be the only path forward. Even with the success of FTP games like Fortnite and Apex Legends, the traditional model of charging players upfront to download a game title is by no means gone.
Esports Arenas - in 2-3 years, esports fandom will grow to the point where it can sustain dedicated arenas that have been built with esports experiences in mind. Over the next decade, these facilities will remain multi-purpose (music, conferences, corporate events, gaming) yet the next generation of 2-10k person arenas will be designed to help optimize the experience for gaming.
