Denver, CO


/ Cambridge, MA



Konvoy Ventures is a thesis driven venture capital firm focused on the video gaming industry. We invest in infrastructure technology, tools, and platforms.

Esports Heading in a New Direction

Esports organizations continue to create well-rounded brands that go beyond competition

The Future of Esports

It’s been a while since we’ve written about esports in this newsletter. Our last update, “Esports Teams: Valued as Tech Companies”, was focused on elevated revenue multiples compared to traditional sports franchises. The lack of content focused on this segment of gaming isn’t a sign of personal disinterest from the Konvoy team, but rather a representation of the lack of immediately investable opportunities in a crowded space.

Esports is expected to generate revenues of approximately ~$1.1b in 2021, representing growth of 14.5% over 2020 (Newzoo). It’s a significant and expanding market that shouldn’t be overlooked, and individual organizations have been taking concerted action to make sure that everyone is paying attention. Esports organizations are no longer just parent companies that field teams across a portfolio of games; they have evolved into true entertainment properties. While fan engagement is certainly a function of competitive success, the real win for these brands is getting eyes on their content and getting supporters to open up their wallets. There is a reason that over 75% of esports revenue (~$834m) comes from media rights and sponsorships. It is fundamentally a consumer-driven business.

As a result, it’s no surprise that esports brands are taking significant steps to continue extending their focus beyond competition. Consider some of the latest announcements coming out of the space:

  • FaZe Clan, which is known for pursuing opportunities at the intersection of music, lifestyle, and gaming, recently signed DJ and producer Kaysan (Dexerto).
  • Complexity Gaming brought on popular streamer TimTheTatman as a brand partner and part owner. For reference, Tim streams almost daily with an average max viewership of ~50k (Esports Insider).
  • Misfits Gaming Group raised $35M in a round led by The E.W. Scripps Company with the goal of boosting content distribution capabilities (GamesBeat). 

It’s important to note that esports brands are not just competing in a closed loop system. Each entity is fighting with every possible medium of entertainment (television, movies, traditional sports) to maximize their share of users’ finite time and attention. Because of this, FaZe, Complexity, and Misfits are becoming more prominent competitors for Disney, Netflix, and the NBA. In fact, esports organizations have several advantages over their larger legacy counterparts such as more direct access to their digital-native audience and interactive streaming experiences.

While there have been a number of industry-wide efforts to expand the reach of esports, scalability for the entire ecosystem has always been a key question. We’ve seen a variety of approaches ranging from Activision Blizzard’s franchised Call of Duty and Overwatch Leagues, the pursuit of new distribution channels (ELeague pro matches on linear television), and merging with popular culture (esports integration in the XGames). However, as identities in esports transition from competitive teams to diversified media outlets, limits to success will become less dependent on the broader market.

Takeaway: The focus on individual brands and content seems like a healthy development that could enable the entire esports environment to continue leveling up. Organizations proactively diversifying their offerings will help expand their claim of mindshare while establishing new opportunities for monetization.

Cloud Gaming Comes Full Circle

Back in August, Microsoft announced that they are bringing cloud gaming to to Xbox Series X|S and Xbox One later this year (Announcement). The team made a step towards their promise earlier this week by launching xCloud console testing for a select group of Alpha users (The Verge). 

Bringing cloud gaming to consoles feels a bit ironic considering the technology is typically associated with expanding the accessibility and flexibility of high quality gameplay. This is especially relevant considering the games will run in 1080p at 60fps, which is the exact same specs as PCs, tablets, and mobile phones. If the machine you are running a game on can already handle it natively, what’s the point of the cloud?

Ultimately, the goal is to allow all Xbox Game Pass Ultimate holders to expedite downloads, join game sessions with friends more seamlessly, and quickly try Game Pass titles before installing. This is interesting for a couple of reasons:

  • Reduce Barriers to Cloud Gaming: Historically, cloud gaming has been a very intentional activity that requires users to opt-in and / or purchase specific hardware (i.e., Stadia). Bringing xCloud to the Xbox ensures native functionality that works without Game Pass users needing to address that it’s there.
  • Gain User Trust: This will serve as a proof of concept to a sizable base of users that are likely cloud agnostic. Hands-on experiences may help the market better understand the key benefits of cloud gaming and get past the notorious shortcomings such as latency and input lag.

Despite the compelling aspects of this strategy, there are still plenty of concerns around mass-adoption of cloud gaming. While not directly related to the cloud, the launch of Amazon’s heavily anticipated MMO called New World has brought networking constraints to the forefront of players’ minds. Upon release, users faced extended queue times and limited server capacity (Polygon). Time will tell if similar frustrations continue to drive underwhelming user adoption for cloud gaming.

Takeaway: Microsoft’s choice to bring cloud gaming to its consoles is not only an additional feature to tout for Game Pass, but also the latest effort to expand the ubiquity of cloud gaming through user awareness and native adoption. Maybe cloud gaming will find some traction in the hardware that it’s needed the least.