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Time to invest in eSports?

ESports is no longer the future, it’s the present. The competitive gaming industry is on the cusp of becoming a mainstream attraction and investors everywhere are clamoring to get in on the action before it really takes off. More and more people are playing video games and more and more people are watching the very best gamers do their thing for potentially huge sums of money. So, is now the right time to put your money into eSports?

Growth

Not much is certain in sports. A missed free-throw or a poor pass could cost a game, a tournament and inevitably a whole lot of money. There are so many variables on the field which is why most of the money is made off it. One thing which is certain is popularity. People love sport and it seems that that love is extending to a relatively new area of the sector: eSports.

The idea of people playing video games for millions of dollars was a laughable concept just a few years ago but things have changed. Back in 2011, the worldwide value of the eSports market was estimated to have been less than $100 million. By 2019, that will top $1 billion and by 2022, will surpass $2 billion.

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League of Legends and Counter-Strike: Global Offensive are the two biggest titles in the eSports world right now. In March, a Counter Strike event known as ESL attracted 100,000 visitors in person and over one million people tuned in to watch the final on an internet live stream. A number of other tournaments regularly have a seven-figure grand prize.

It’s not limited to those two titles. EA’s FIFA series attracts crowds and there are plans for a new North American basketball eSports league based on Take-Two Interactive’s NBA 2K series. Famed games designer, Blizzard is also getting in on the action with their popular first-person shooter Overwatch. The Overwatch League is scheduled to begin next year, a worldwide league with teams from North America, Europe and Asia. Already, groups like Kraft and Kroenke Sports & Entertainment have purchased franchises in the competition.


Revenue streams

So why are they doing it? Well, many investors are viewing it as a chance to get in on the ground-floor of a potential new mass entertainment industry. That doesn’t happen very often and it offers both limitations and opportunities.

For owners, there is a need for diversification. Teams exist within teams and each organisation usually has several different sets of players on various platforms. As previously discussed, the larger titles like League of Legends and Counter-Strike hold tournaments with massive prize pots, this effectively allows some teams to support others within the same organisation.

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This structure is good for things like merchandising – fans tend to stick to one team and follow them across various game titles – but it can pose its own challenges. Betting company Betway launched a partnership with popular Swedish eSports team, Ninjas in Pyjamas. It’s a successful agreement which worked well for both parties but the deal violated the rules set by League of Legends and was cancelled for that particular title. The partnership is still in place in some of the organisation’s other teams but be aware of the risk.

But sponsorship is just one source of revenue and this is hardly a traditional sector. Expect income from ticket sales and merchandising like any other sport but it will also come from streaming. The competitive gaming community has its own popular figures that regularly fetch in thousands of daily viewers when they stream their day-to-day games. Most North American players use Twitch, a service which was purchased by Amazon for $970 million way back in 2014.

Differences versus traditional sports

Competitive gaming is unlike any of the more traditional, popularised sports. It’s still in its infancy which means that prices are low. The best League of Legends players in the world are on salaries ranging from $500,000-$800,000. It’s a huge number to amateur gamers but a miniature one to other professional sports stars at the top of their respective fields.

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ESports today is similar to the early days of other popular sports. Players are hardly tied down with teams forming and disbanding almost at will. There’s also a difference in the nature of the player base. The utilitarian nature of eSports means that players can come from any background providing they have a decent gaming computer and high-speed broadband. Reactions are crucial in most games so expect more players in their teens than their thirties.

Any investment made now would effectively be a way of laying the groundwork for the future. Some of the largest companies on the planet are doing just that and who can blame them? The growth of competitive gaming has been phenomenal in the last few years and it doesn’t show any signs of slowing. Sure, it carries the same risk as regular sports but now is as good a time as any to get investing in eSports and you don’t want to be one of the endless stories of people who missed the investment opportunity of their lives.