According to Newzoo, an esports & video gaming market research firm, the global esports market grew by 102% in 2017 and is expected to grow another 38% in 2018 to $905.6 million. By 2020 this market is estimated to be worth $1.4 billion (yet we expect these estimates to be overly conservative). To put this rapid rise into perspective, the 2018 Dota International tournament offered a prize pool of $25.5M (USD), where the winner took home $11.2M. To put this into context, the winner of the Super Bowl took home $11M and the winner of the 2018 Masters (PGA) took home $2M. What made this tournament even more unique is that all but $1.6M million of the $25.5M was crowdfunded from fans. An interesting takeaway is how involved individual fans & gamers, not organizations or business, are in the growth of this sector.
According to Crunchbase, VCs are bullish on this sector and putting money to work. Global venture investment in esports startups surged to $701 million over 60 deals in the first half of 2018. This is up 73% compared to $403.7 million raised across 53 deals in the first half of 2017. Just this year, esports organization TSM (a professional team), raised a $37 million round led by Bessemer Venture Partners. This round also included Steph Curry and Telstra Ventures. According to Anna Kahn, VP of Bessemer, the rise of Esports can be attributed to “all the engagement and how much people buy post-play” This allows the revenue potential to become much greater. It’s also worth noting that TSM isn’t the only one seeing significant investment this year alone. Other major teams have been raising capital and the next few months will be quite active. This is just the beginning and soon esports teams will be coveted just like your traditional sports franchises.
According to VentureBeat, gaming ad spend jumped 30% in August from July as publishers are getting ready for the fall season. The most spending from a single publisher came from Nintendo who spent $6.2M on 11 commercials that were aired 3200 times and generated over 395 million impressions. Out of those 11 commercials from Nintendo, the ad with the biggest budget was Epic Games’ $2.6M ad budget, which promoted multiple games for the Switch, including Fortnite. In addition, Playstation ramped up their ad budget to $3.6M to promote Marvel’s Spider-Man which was released on September 7th. Other notable ads were FoxNet promoting Marvel’s Strike Force mobile app with the “Assemble Your Squad” ad ($3.6M) and Niantic’s “Play Together, Trade Together” ad for Pokemon Go ($3M). This month over month growth is indicative of how important the fall season is for video game studios.
According to a study by Electronic Entertainment Design and Research, 67% of Americans play video games. Here are some additional data points that they uncovered in their study:
In a funding round led by 21st Century Fox, Caffeine raised $100M (wow). Their co-investors included Andreesen Horowitz and Greylock Partners. This is a major step in partnering with a top media company that owns sports broadcasting network Fox Sports. According to Lachlan Murdoch, who will sit on Caffeine’s board representing 21st Century Fox, “The combination of the Caffeine platform with a content studio that benefits from Fox Sports’ expertise in live events and programming will help position Caffeine to deliver compelling experiences in esports, video gaming and entertainment.” This is an interesting partnership as it shows major networks understand how important it is to have streaming services alongside their live cable services. Also, since Caffeine is esports related, it should be noted that large networks don’t believe esports is just a fad and that it’s here to stay.
Nielsen is an industry leader in tracking trends across television programming. Now, with the acquisition of SuperData Research, they hope to become the industry leader in tracking gaming data. According to the SuperData Research website, they “collect point-of-sale and event data from publishers, developers, and payment service providers. This allows us to base our analyses on the monthly spending of over 160 million unique, paying digital gamers, worldwide.” This acquisition is incredibly strategic for Nielsen as they position themselves early, as a top research & analytics provider, in one of the fastest growing industries in the world.
Team Liquid has truly taken advantage and has capitalized on the growing Esports ecosystem. They have continued to win tournaments as well as sign partnership deals with endemic and non-endemic brands. According to the Esports Observer, Team liquid has inked deals with Alienware (Including a $4.5 million deal for the naming rights of their training facility), HyperX, Twitch, and Monster Energy. On top of this, they signed a deal with SAP for an analytics program that will analyze replays and help them gain insights to improve player performance. Over the lifetime of the organization, they have won over $24M (USD) through tournaments alone. Team Liquid is owned by aXiomatic which includes industry executives Peter Guber (CEO of Mandalay Entertainment), Ted Leonis (CEO of Monumental Sports which owns the Washington Wizards, Washington Capitals, and Washington Mystics), Jeff Vinik (Owner of the Tampa Bay Lightning and a minority owner of the Boston Red Sox), and Bruce Karsh(Co-founder of Oaktree Capital Management).