Why investing in esports is an opportunity for forward-thinkers


G2 Esports fans during Quarter Finals League of Legends World Championship match between G2 Esports and Damwon Gaming on October 27, 2019 in Madrid, Spain.

Borja B. Hojas | Getty Images

For the uninitiated, think of esports like you would any other sport. Instead of baseball, hockey, chess or curling, it’s video games like CSGO, League of Legends, Call of Duty or Fortnite. After all, a sport is just a set of rules, a field of play, and competitive infrastructure spanning players, teams, leagues, broadcasters and the viewing audience. Every game in esports has its own set of rules. Swap physical mastery for mental acuity. Replace stadiums and ballparks with virtual arenas and game modes, and everything else (infrastructure) is similar when you boil it down. Right down to those pulse-pounding moments when the home team clinches a one-in-a-million play to take home the title.

So then, why are esports getting so much attention lately? For starters, events like League of Legends World Championships matched the Superbowl in terms of viewership, and young gamers in the 18- to 25-year-old age group watch 34% more esports than traditional sports. One big reason for this is esports, like its audience, is a digital native. In a world where few millennials consume television or radio, esports is everywhere. You can stream it on Twitch, play it back on Youtube, discuss it on Discord, watch and share clips across TikTok, Instagram and Twitter.

It’s no wonder esports are worth roughly $1 billion in 2019, and being projected to grow 400% in the next seven years to $4.28 billion by 2027, according to Data Bridge Market Research. Some might say this is a conservative estimate with the global traditional sports market worth $388.3 billion in 2020 alone. With more than 2.7 billion gamers on earth, we’re barely scratching the surface of what’s possible for esports. 

In just the past decade, esports has made huge strides evolving from a largely underground culture into a mainstream industry. As a worldwide phenomenon, the sector has attracted notable investors like Mark Cuban, Alexis Ohanian and Ashton Kutcher. Esports is even pulling in capital from traditional sports figures such as David Beckham, Steph Curry, Rick Fox, and Shaq, as well as musicians like Drake, Wiz Khalifa, and Steve Aoki, just to name a few. The nascent industry offers vast opportunities as its infrastructure, pro athletes and teams continue to develop.

After factoring in the roughly century-long head start that traditional sports have had, there is a lot to be excited about. Speaking as someone who was there at the very beginning (2000-2004) competing in video game tournaments strewn about shopping malls (remember those?) it was eye opening to see the gigantic prize pools of modern-day titles like Dota 2’s $34.3 million International or Fortnite’s $30.4 million World Cup, both akin to the esports version of the World Series or U.S. Open. It was events like these, and the maturation of global organizations dedicated to competitive gaming, that got me off the sidelines.

In the summer of 2019, my co-founder Gavin Silver and I took the leap to start Allstar, a platform that allows casual gamers and esports athletes the world over to create and share professional quality highlights. Since then (and with help from everyone’s favorite shark, our investor Mark Cuban), we’ve seen the explosive growth of esports firsthand, quickened during the stay-at-home world brought on by Covid-19. Those mega esports events? They are watched by more than 500 million viewers, which make up more than half of the audience for an even bigger market: Gaming Video Content (“GVC”), worth $6.5 billion in 2019, according to Nielsen’s Superdata. GVC spans services like Twitch, Youtube and others, which drive revenue via people watching other people playing video games, competitive or otherwise.

GVC is unique to most forms of media in that it’s produced by anyone. Well, it can be produced by anyone. But, by and large, it’s still made by the professionals. For example, just 3% of Twitch users stream, larger than YouTube’s 2.5% content participation rate yes, but dwarfed by services like Snap, which see close to 60% of users regularly creating content. This is why everyone should be paying very close attention: There is an epically undervalued opportunity in esports’ audience as not just content consumers, but content creators themselves.

Unlike traditional sports, almost everyone who watches esports actively plays the games that they watch. Once a tournament is over, these gamers boot up, log on and play their own competitive matches, have their own moments of glory. But instead of tossing a football around in the back yard or playing catch with a friend at the park, it’s as if you could spontaneously air-drop into Yankee Stadium and hold your own regulation game, nine innings, pinstripes and all.

The thing about esports is that the gap between the players and the audience is actually really, really small. They are playing on similar equipment, they lead comparable lifestyles, and they play the exact same games, with little to no difference in the rules and field of play. The primary separator? The lack of infrastructure. Existing esports infrastructure is entirely focused on the pros. Top players, top teams, big tournaments, major events. Everyone else playing esports games? They’re just the audience.

This is incorrect thinking, leading to a hugely overlooked opportunity. With a global 24/7 community of gamers playing highly watchable competitive games, pulling off feats of skill, strokes of luck, hilarious follies or glorious triumphs — often on par with the entertainment offered by the pros — there are billions of hours of hyper-social, high-value GVC that is going extremely underleveraged. While today’s professional esports organizations have their own production studios, up-and-comers and casual fans alike lack the means to create, personalize and share their own gaming content. While TikTok unlocked the potential of crowd-sourced entertainment shot on the smartphone, the esports audience is still waiting for their turn to star.

The first to “crack the code” of mainstream gaming content will unlock the floodgates of a massive market: new content creators who are predominantly competitive gamers, playing and creating content from the same esports games that they watch.

 —By Nick Cuomo, CEO and co-founder of Allstar.gg, and an avid gamer



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