Commentary

There's More To Esports Than Just Esports

Around Labor Day, Needham & Co.’s Laura Martin released a comprehensive report on the state of esports in 2019, which offers a number of recommendations and conclusions -- most importantly, the suggestion that investors begin to pay attention to the potential of esports as it grows in popularity in the United States.

The report explains that esports is likely not a fad, but is an important emerging industry due to its global scale, engagement, revenue growth, audience growth, and the major investors already involved, among other things. 

With Laura’s report as a solid foundation for those examining esports from the outside, I want to touch on a few points made by the report that I believe will benefit from further discussion.

The report by Needham & Co., "Esports: High Impact and Investable," asks the question “why have you never heard of esports?” Laura’s answer: “zero of the top 30 earning players in the world were from the U.S. in 2018. Also, the top 10 professional players earned $1-2 million each in 2018, well below other professional athletes."

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True. The total amount of prize money given out across all esports titles and competitions since 2008 has risen from $7.4 million to a whopping $161.9 million in 2018 (as Laura's report shows), and even though the bulk of that money has gone home with American competitors -- approximately $125 million -- it is spread across 14,000 players. As a result, there are no notable “esports” athletes.

At this time in 2019, however, three Americans have entered into the top 20 earners in esports: Kyle “Bugha” Giersdorf, a 16-year-old from the Northeast who won the Fortnite World Cup Solo finals and the $3mm prize, shooting him to #12, right above the other two top-earning American esports competitors, both Dota 2 players.

Strangely enough, with the exception of Bugha, all the other top 20 earners all earned their millions from Dota 2 alone -- a game that crowdfunded its prize pool from $1.6 million to $34 million for its main event this year.

While Laura’s focus is on esports, which the report defines as “players competing at a video game in front of a live audience while being live-streamed,” the esports industry is inherently connected to the $130 billion-plus gaming industry as a whole.

Is it likely that you’ve heard about or seen “esports” proper, as defined by Needham? Probably not. But the impact of the gaming industry is inescapable. By the end of 2019, the U.S. is set to overtake China as the largest contributor to gaming revenue, at approximately $37 billion.

In the U.S., esports had 63mm viewers throughout 2018 -- overtaking the NHL and MLS, but on par with the NBA -- and raked in approximately $140mm in advertising revenue alone. That number doesn't include all the money and viewership generated by the craze around gaming in the past year, which deserves critical attention.

Streamers like Ninja, who only sometimes competes in esports events, are frequently brought into the conversation about “esports.” After revealing that he earned $500,000 per month from his Twitch subscribers in 2018, Ninja was placed on the cover of ESPN as a Pro Gamer.

Does Ninja play video games on streaming platforms for a living? Yes. Does that mean Ninja is an “esports player”? No. Ninja did not even qualify for this year's Fortnite World Cup, and the winner, Bugha, was not even known before his victory earlier this year. But does that mean that Ninja is not worth all the hype? Absolutely not.

Ninja is currently worth approximately $15mm, but only $200,000-300,000 of that comes from esports winnings because he rarely participates in “esports” competitions. Yet, Ninja streams almost every single day -- pulling in massive amounts of donations and subscription revenue, and the rest comes from his plethora of sponsorships with Red Bull, UberEats, and, most recently, Adidas and Microsoft's streaming platform Mixer.

Games like Fortnite have thrived because of their relationship with streamed recreational gaming.

While Ninja does compete in esports competitions occasionally, he is more often streaming himself, playing on a day-to-day basis, playing match after match of Fortnite or whatever other games he gets sponsored to play.

The rise of esports is inherently tied to the successes of the gaming industry's breakthrough into the mainstream, as the consistent mentions of Ninja reveal.

The convergence of the two comes from the hype generated for these games by popular streamers like Ninja, the celebrities like Drake who play it too, and the accessibility for anyone to be a “pro” at the game -- if they are good enough.

Inherently, esports is but another piece of the puzzle that provides proof of the viability of gaming as a form of entertainment powerful enough to make its way into the mainstream.

Needham is right -- esports is not a fad -- and by implication, viewing, playing, and attendance are all linked to esports, as each generates additional interest and revenue for the industry.

On its own, the data presented by Needham on the esports industry is compelling, but when linked to the gaming world at large and the entertainment value of video gaming, the inevitable, continued success of esports is that much more assured.

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