Throne of Games

The risks and rewards of investing in the sport industry's unstoppable force


By Simon Lamb, Group Marketing Manager

19th October 1972. This is the date of the earliest known video game competition, involving Stanford University students who battled it out over Spacewar. Fast forward 43 years and 16 professional teams are competing on Dota 2 in a sold-out KeyArena in Seattle, United States, for a prize pool of $18 million. As this history demonstrates, eSports is not a new phenomenon but in the last few years, triggered by the advent of broadband infrastructure, it has exploded onto the sport industry’s radar.
 
The topline statistics are impressive. Year-on-year growth is 20% and the global revenue for 2016 is estimated to be $500 million, rising to a billion-dollar industry by 2018. eSports has a young, affluent, engaged and growing audience. Put into context, the 2014 League of Legends (one of the sport’s most popular games) World Championship was watched by 27 million people, which is significantly more than the 18 million who watched the deciding fifth game of the 2015 NBA Finals.
 

Audience

Who, then, is this audience? They are predominantly male (85%), aged between 18-25 (50%) and are highly engaged (the average eSports fan consumes 10.5 hours of content per week compared to 7.5 hours among traditional sports fans). Interestingly for brands, they are affluent (30% of U.S. fans are in the high income bracket) and have a propensity to purchase (33% have made an in-game purchase). As this young audience continue to trade traditional media for digital, mobile and social, eSports offers an authentic marketing platform for how this consumer lives, communicates and pursues their passion.

Opportunity for sponsors

The current sponsorship landscape is dominated by endemic brands. For non-endemic brands, understanding the new phenomenon is a challenge. Its fragmented nature, with multiple publishers, games, leagues, teams and events makes it difficult to sculpt a clear commercial proposition.
 
That being said, some big brands such as Coca Cola, Beats by Dr. Dre, McDonald’s and Vodafone, have carved their own niche and taken the step. Red Bull runs its own tournaments – the Red Bull Battle Grounds and the Red Bull Wings Academy – as well as sticking true to its traditional sports strategy and signing a number of eSports players to become brand ambassadors. These superstar players perhaps hold the key to authentic brand awareness, as they boast a significant social following loyal to their gaming heroes. It is this fandom that West Ham United Football Club is looking to tap into by becoming the first Premier League team to sponsor a player, while European football clubs Besiktas and Schalke have their own eSports teams.
 
Formula E, in typically bold, disruptive fashion, will be running the first-ever virtual championship – the Race Off Pro Series ­– with four online rounds run alongside its race weekends. Alejandro Agag, the CEO of Formula E, believes that eSports is a “golden opportunity for motorsport to embrace the digital age and reach a new audience.”

Risks for sponsors

It is hard to ignore the fact that eSports is at odds with traditional sports’ aspirations to inspire a healthy, active lifestyle. eSports lacks an obvious link to promote physical activity, so sponsors will have to work hard to come up with creative solutions to this challenge. In 2011, the issue of internet addiction among teenagers in South Korea became so significant that the government passed The Cinderella Act which required gamers to log in with their national ID number so that hours played could be monitored and anyone under 16 had their account shut down automatically at midnight.
 
There is also the perceived danger of video games on the psyche of young people. It is difficult to see how a non-endemic brand could position itself alongside a first-person-shooter game. However, with many of the other highly popular games the opportunity for brands is both undoubted and hugely exciting.
 
Finally, the eSports betting industry is booming, to the extent that companies predict $1.5 billion will be wagered in 2017. With such a lucrative betting market inevitably comes the challenges, such as spot fixing, that more mature, traditional sports continually battle to overcome meaning this new world of eSports will have to move fast to protect itself.

Too much hype?

While there is undeniably something significant afoot in the world of sport and entertainment, a ‘hype filter’ might be useful on some of the statistics. Even if, as expected, revenues triple by 2020, eSports would still represent only 1% of global sports revenue, so relatively speaking it remains a small player.

The big events are huge, there is no denying that. However, these are few and far between. In 2015, the top event had 36 million unique viewers but the 11th biggest had only 310,000.
 
For brands planning to access this audience, it is difficult. They are the ad-blocker generation and have a fine antenna for authenticity. A brand has to be digitally astute and make a clear contribution to the viewing experience otherwise they risk ostracising the very audience they are trying to appeal to.

The conclusion?

eSports is undoubtedly an evolving opportunity that is a long way from realising its full potential. It is truly global, culturally important to a consumer that is difficult to target and has a growth rate larger than anything else in sports or entertainment. eSports is here and it is here to stay.

Written by Simon Lamb
Group Marketing Manager
simon.lamb@csm.com