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Esports Industry Table of Contents 1. Introduction 2. Market Overview a. Global Esports Industry b. Americas Esports Industry 3. Growth Drivers 4. Challenges 5. Opportunity 6. Major Franchises and Tournaments 7. Major Teams and Players 8. Transaction Overview a. Overview b. Private Equity Funding 9. Media Coverage and Rights a. Media Rights Deals b. Media Coverage Introduction Introduction Overview • Esports or Electronic Sports is competitive gaming at a professional level and in an organized format (a tournament or league) with a specific goal (i.e., winning a champion title or prize money) and a clear distinction between players and teams that are competing against each other What is Esports? • The platform is usually video games, or any other game where a winner and a loser can be decided • The different video game genres associated with eSports are real-time strategy (RTS), first-person shooter (FPS), fighting, and multiplayer online battle arena (MOBA) • The majority of popular esports are team-based games played in leagues or tournaments throughout the Type of Esports year, culminating in one final event. Some of those leagues or tournaments are region-specific, for example, European leagues where European teams will only play other European teams • Around the world, there are different Esports tournaments and leagues organized which are held at major arenas • Esports tournaments are viewed through both physical attendees at the venue as well as online viewers. Esports Tournaments Esports also has online streaming platforms which get exclusive rights to stream the events on their website • The players generally compete for both cash prizes and recognition Source: The Telegraph Introduction History of Esports The growth of eSports in South Korea, which is one of the major In April 2006, the G7 teams The first known Esports market, is federation were formed by seven Esports video game thought to have been prominent Counter-Strike teams. Twitch, an online competition took influenced by the mass The founding members were streaming platform place on 19 October building of broadband 4Kings, Fnatic, Made in Brazil, launched in 2011, 1972 at Stanford internet networks Mousesports, NiP, SK-Gaming, routinely streams University for the following the 1997 Team 3D. The organization was popular eSports game Spacewar Asian financial crisis dissolved in 2009 competitions 1980 2000 2010 2013 1972 1997 2006 2011 The first large scale video The Korean e-Sports Esports sees tremendous Twitch viewers of the game competition, The Association, an arm growth, incurring a large watched 12 billion Space Invaders of the Ministry of increase in both viewership minutes of video on Championship was held Culture, Sports and and prize money. The the service. During by Atari, attracting more Tourism, was founded number of tournaments one day of The than 10,000 participants to promote and increased significantly, going International, Twitch across the United States, regulate eSports in from about 10 tournaments recorded 4.5 million establishing competitive the country in 2000 to about 260 in 2010 unique views gaming as a mainstream hobby Source: Esportsearnings.com, The Verge, Dailydot Market Overview Market Overview Global Market Overview Global Esports Industry • Global Esports revenues has grown at a CAGR of 50.0% from $194 million in 2014 to $655 million in 2017, and is expected to grow at a rate of 26.0% to $1,650 million in 2021. In 2018, it is expected that North America will account for $345 million and China for $164 million out of the $906 million • The number of Esports Enthusiasts worldwide will reach 165 million in 2018, a YoY growth of ~15.2%. The total Esports Audience will reach 380 million this year, a year-on-year growth of ~13.5% • The global average annual revenue per Esports Enthusiast will be $5.49 this year, up by 20% from $4.58 in 2017 • The total prize money of all Esports events held in 2017 reached $112 million, breaking the $100 million mark for the first year Market Size Audience Growth Revenue (in $millions) In millions $1,800 600 $8.0 $1,650 $6.8 $1,488 $6.3 $6.6 $7.0 $1,600 500 $1,400 $5.5 $6.0 $1,187 400 307 $1,200 $4.6 $5.0 $4.1 273 $1,000 $906 300 242 $4.0 215 $800 $655 $2.7 $2.2 192 $3.0 $493 200 160 $600 115 114 $2.0 $400 $325 250 $194 100 190 218 143 165 $1.0 $200 90 120 121 - 0 - 2014 2015 2016 2017 2018P 2019P 2020P 2021P 2014 2015 2016 2017 2018P 2019P 2020P 2021P Esports Enthusiast Occasional Viewers Average Revenue Source: Statista, - 2017, Newzoo per Esports Enthusiast Market Overview Global Market Overview 2018 Market Breakdown Merchandise and Tickets (10%) Sponsorship Revenue (40%) Consumer spending on tickets and Sponsorship is the highest grossing merchandise will total $95 million esports revenue stream worldwide, increasing from last year spending of $96 contributing $359.4 million in 2018 $86 million compared to $234.6 million in 2017 $116 Game Publisher Fees (13%) $359 Game publisher fees will remain the slowest-growing revenue generator for esports toward 2021, with a CAGR (2016-2021) of ~3.5% $161 Media Rights Revenue (18%) Advertising Revenue (19%) $174 Media Rights is the fastest-growing Advertising will be contributing $173.8 revenue stream growing with a CAGR million in 2018 compared to $140.4 (2016-2021) of ~50%. By 2021, media million in 2017 growing at a rate of rights revenues will more than double 23.8% compared to 2018 Source: Statista, Newzoo, EsportEarnings.com Market Overview Global Market Overview Brand Investment Revenue Revenue Breakdown • Brand Investment Revenues, i.e., revenues from Media Rights, $1,800 Advertising, and Sponsorship has always been a major chunk of $1,500 $265 the entire esports revenue over the past several years. It is $1,200 expected to be more than 83% of the total revenue of $1,650 $900 million by 2021 $212 $1,385 $600 $187 $143 $300 $694 $350 $468 - In millions 2016 2017 2018P 2021P Brand Investment Revenues Other Revenues Sponsorship Revenue Media Rights Revenue • Sponsorship Revenue comprises of any revenues generated by • Media Rights Revenues are generated through media property, teams and organizers through sponsorship deals. All deals including all revenues paid to industry stakeholders to secure the relating to sponsoring an event, including product placement, rights to show esports content on a channel. This includes sponsoring teams, and payments by brands for the use of team, payments from online streaming platforms to organizers to event, or game-specific IP rights in their marketing broadcast their content, foreign broadcasters securing rights to communications show content in their country, or copyright costs to show video • Previously, sponsorship was only provided by companies and content or photos of an esports competition. organizations directly involved in the gaming industry such as • Growing with a CAGR (2016-2021) of ~49.8%, media rights is the Razer which manufactures gaming accessories and devices. fastest-growing revenue stream. By 2021, media rights revenues However, more and more firms from mainstream industries such will more than double compared to 2018, making it the second- as Coca-Cola are beginning to invest in this sector which will largest generator of esports revenues globally boost the sponsorship by a significant margin Source: Newzoo Market Overview Americas Market Overview Americas Esports Industry Americas Audience Growth • The Americas are a key region for Esports, representing 25% of In millions the global esports audience and 40% of the revenues generated 175 within the esports industry 150 • North America has had some large investments in the esports 125 sector from different game publishers, venture capitalist, and 79 traditional media which is boosting the industry performance as 100 a whole in that area 75 54 44 • In 2017, the total revenue from North America was 36.4% of the 50 entire global revenue, i.e., $240 million with an average revenue 67 per fan of $9.7 25 41 49 • Recently, there have been many major traditional sports teams 0 which have invested into esports and bought a team. Some of 2016 2017 2020P the prominent transactions were Magic Johnson being part of a Esports Enthusiast Occasional Viewers group which acquired the esports franchisee Team Liquid as well as Philadelphia 76ers who acquired esports teams Dignitas and Apex Source: Statista, Newzoo Growth Drivers Growth Drivers • Esport Enthusiasts are those viewers who regularly watch esport events as well as participate in them sometimes. They are one of the major drivers of revenue in the industry Esports Enthusiasts • Enthusiasts have been increasing at a significant rate with the occasional viewers also converting to enthusiasts over the past years. They help generate revenue through ticket purchases, streaming, and merchandising • Esports franchises are now planning to focus on Mobile Esports games. Due to the drastic increase in the mobile phone users worldwide, inclusion of mobile esports will increase the viewership as well as the Mobile Phone and Internet number of participants in the coming years Penetration • With increasing mobile phone devices it will also provide an opportunity to players who are unable to invest excess money into the hardware required for PC gaming to participate in esports • With the market being in a growing stage, new publishers are entering the market on a daily basis which is increasing the number of tournaments and leagues organized around the world New Publishers and Games • New games are also being introduced to match the traditional sports which have their own fan base and therefore increase the overall viewer base • Previously, the Esports industry had funding only from the game publishers and gaming-focused companies who would invest into teams and tournaments Increased Funding • Recently, in the past few years, the industry has been seeing an increased funding from other investors as well who want to venture into the Esports world.