A booming eSports industry

Last year, Valve Corporation, a premier video game development company, organized a tournament labeled “The International 5” for one of its most popular PC games, DOTA 2. The tournament, which featured sixteen teams from around the world, had a prize pool of nearly $18.5 million. The first place team, which starred a 15-year-old kid from Illinois, walked away with a grand total of over $6.6 million.

Interestingly enough, Valve only contributed the first $1.6 million to the tournament’s prize pool. The other $16.9 million came from in-game sales on special items called “compendiums” created specifically for funding the tournament’s prize pool. 25 percent of the sales on these items went towards the tournament prize pool, while Valve pocketed the other 75 percent. At a price of $10 per compendium, simple arithmetic would suggest that there were roughly 6.76 million compendium sales, but this does not account for upgrades, repeat buyers and the like that should reduce this figure. Regardless, it is still a fairly interesting statistic considering that the game itself is otherwise free-to-play which implies that either many players are willing to monetarily contribute something, or a few players are willing to contribute a lot. Other metrics, including a jump in the number of players and spectators, can be seen not only in Valve games, but across the entire competitive gaming, otherwise known as the “eSports” industry.

Moving this case study aside, a look at the eSports industry as a whole has shown similar growth and promise. According to SuperData Research, the eSports industry generates $748 million in revenue worldwide, $579 million of which comes from sponsorships and advertising. What’s more, major league gaming events, with a global audience of well over 250 million people, have become as popular as other sporting events. In 2013, the League of Legends Championship sold out the Staples Center within an hour. In 2015, it sold out Madison Square Garden within minutes. That same year, the online audience for the League of Legends Championship eclipsed 27 million viewers. In 2014, the online audience for DOTA 2’s “The International” surpassed 20 million viewers. To put these numbers into perspective, when compared with traditional sports, TV viewership in 2014 was around 25 million for the Masters, 15.5 million for the NBA Finals, 13.8 million for the World Series and 5 million for the Stanley Cup Finals.

Furthermore, a look at the typical gamer profile published by ESPN seems to debunk many misconceptions concerning the demographic this industry caters to. For one, 44 percent of eSports fans have children, and 38 percent are women. More than half of these fans are employed full-time, and more than one-quarter are above the age of thirty-five. It is also important to note that 52 percent of the market is in North America and Europe, while roughly 44 percent is in Asia.

Even more shocking is that Twitch.tv, the primary source of eSports streaming, accounts for more internet traffic than every other source save Google, Netflix and Apple. Truly, the numbers for eSports are pretty impressive given that it doesn’t seem to generate quite as much hype as the traditional sports that we all know and love. Taking this point a step further, research by ESPN shows that, as an overall category, gaming is more followed on YouTube than sports, news, movies and education. In fact, the only category of videos with a greater presence than gaming on YouTube is, as you might guess, music.

So how has the business sector received the rise of this industry? Well, in anticipation of industry-wide revenue reaching nearly $2 billion by 2018, Yahoo recently announced plans to launch a dedicated eSports news section. ESPN managed to do so earlier this year. In addition, Mark Cuban, owner of the Dallas Mavericks and renowned Shark Tank “shark," recently discussed his intent to own a League of Legends team. It is also worthwhile to note that he was a major player in the Series A round of financing for Unikrn, a company that creates betting platforms for eSports competitions.

In addition, former NBA player Rick Fox purchased a League of Legends team this past December. Marc Lasry, owner of the Milwaukee Bucks, and Robert Kraft, CEO of The Kraft Group which owns the New England Patriots, have collectively aided the efforts of Skillz, a company that constructs software platforms for hosting eTournaments, to raise $15 million in Series B financing. We are also seeing big brands enter the gaming industry through partnerships and sponsorships. Coca-Cola, Monster Energy, Nissan, Red Bull and, oddly enough, YouPorn are some of the bigger sponsors in the industry. But perhaps the biggest name in eSports by virtue of its endurance in the industry is Intel, which for the past 10 years has been using the eSports industry to establish a marketing platform that promotes itself as being the premier source of gaming products. Certainly now, and perhaps over the course of the past year, they have found that their patience was worthwhile.

Quite frankly, this is a very interesting topic to consider through the lens of a growing American entertainment culture. There is just so much more money in sports now than there was in the past, and it is hard to foresee a decline. For the purposes of comparison, Mickey Mantle’s 1968 salary in today’s money would be worth roughly $770,000. The average baseball player today makes around $4 million. Hence, even after adjusting for inflation, the amount of money in sports has skyrocketed dramatically. We might see a similar development with eSports as more money continues to pour into it. Gaming is quickly gaining sport-status by virtue of its clout, hype, players, fans and sponsors. When considering the future of entertainment in the developed world, the digital age becomes more and more apparent. The promise of virtual reality and various other technological advancements provides reason to believe that there are many more exciting escapist advancements to come in the realm of gaming, and many more sponsor partnerships to be formed. Looking at the big picture, the growth of the eSports industry truly does seem to be a testament to the ever-increasing value that our society places on “sporting” in all of its forms.