19.08.20 Quarterly Insight

The global esports market will generate revenue of $1.6 billion by 2023 with improved media rights to be a driving force as well as the growth of betting and mobile esports, according to a new research report.

Oakwell Sports Advisory, the London-based sports advisory firm, has predicted that media rights will account for 37 per cent of esports revenue in 2023, up from just 14 per cent this year.

At present, sponsorship generates the most revenue for esports at 38 per cent but, in a new report, Oakwell said this will drop to 10 per cent in 2023 and will fall under media rights as well as ticket revenue.

Despite this, Oakwell added that “competitive tension dictates future media rights values.”

Higher growth is expected in Asia from the increased streaming competition with platforms such as Huya and Douyu in China but Oakwell said the “monopoly” by YouTube and Twitch “restricts streaming and media rights growth in North America and Europe.”

Significant growth potential is cited in mobile esports, especially in the Asian market, while, as expected, betting is the fastest growing market segment.

By 2023, Oakwell expects betting and fantasy sports to account for 46 per cent of the revenue growth within esports.

The firm’s research also discovered that the global lockdown period during the coronavirus pandemic saw esports betting increase from 1 per cent of the total sports betting market to 35 per cent.

Oakwell does not envisage the pandemic will have a major long-term effect on esports despite a revised revenue forecast of $974 million this year, down from $1.1 billion.

The company said “despite revised forecasts and continued uncertainty, the global esports industry is expected to maintain a 15.6 per cent compound annual growth rate (CAGR) through the period 2018 to 2023”, predicting an increase of $42 million on pre-Covid-19 projections to $1.6 billion.

The revised forecast for 2020 was due to a $46 million decrease in merchandise and ticketing, driven by the transition to online-only during the global pandemic, and a $75 million combined decrease in media rights and sponsorship, which was largely broadcast driven and therefore impacted by the cancellation of events.

There was, however, a $2 million increase in team streaming due to higher viewership during the global quarantine.

Oakwell described esports as “a high growth sector” with the potential to attract a wide pool of investors such as venture capitalists, private equity firms, conglomerates and endemic and non-endemic brands.

Indeed the growth of esports is translating into increased investment activity, with $2 billion invested last year, growing at a CAGR of 140 per cent between 2016 and 2019.

There were 141 deals in 2019, a 104 per cent CAGR between 2014 and 2019, which Oakwell said was as a result of the franchising of esports leagues.

However, the company has found that in 2020 there has been a shift in focus away from team investments to the service providers and platforms within the industry, such as betting, distribution and analytics.

Gambling on esports, particularly in the absence of live sporting events, has seen an increase in investments and strategic acquisitions within the sector.

Across the media and tech ecosystem, the report showed there has been increased investment into content developers, distributors, enabling technology and organisers.

The London-based firm also found that esports has increasingly become important to traditional sports as “Covid-19 has crystalised the importance of the esports sector as an integral piece of traditional sport’s present and future commercial strategy.”

Building out an esports offering has allowed traditional sports to grow their fanbase, create additional revenue streams, create new inventory to diversify sponsorship portfolio, utilise game streaming platforms as additional distribution platforms, produce diversified content and multi-faceted brand building.

Oakwell said: “The lockdown period has allowed traditional sports to further explore the use of esports as an engagement tool, whilst for esports, it has legitimised the sector and provided exposure to a new audience.”

Esports’ viewership figures have increased year-on-year and is projected to grow at 16 per cent CAGR by 2022 to 645 million.

Over 300 sports teams now have a presence in esports, including European soccer giants like Barcelona, Paris Saint-Germain, Manchester City and Ajax, as well as renowned Major League Baseball franchise the New York Yankees.

Oakwell added: “Covid-19 has driven further symbiosis between ‘traditional sports’ and esports and has become a key pillar in driving brand recognition in new markets and is used as a platform to reinforce the connection between the virtual and real world.”

For a copy of our full report please contact: info@oakwellsports.com

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