The esports industry has experienced significant growth in recent years, with revenue expected to reach $1.08 billion in 2021, and predicted growth rates of 14.5% year-over-year, according to Newzoo’s Global Esports Market Report. Sponsorships and advertising are major factors driving revenue, with Twitch generating $2.48 billion in 2020 alone. Employment in the industry is expected to increase by 11.5% annually and reach over 30,000 people by 2025. However, player burnout, regulatory issues around video game formats, and potential government regulation around loot boxes are potential challenges the industry might face in the future.
The Business of Esports: Economic Analysis of the Industry and Its Prospects
Introduction
The world of video games has evolved tremendously over the past decade, and so has the world of esports. Esports refers to competitive video games played at a professional level, where players compete against each other in organized tournaments. The esports industry has grown rapidly in recent years, with millions of people tuning in to watch tournaments across the world. It has become a global phenomenon, with teams and players earning millions of dollars in revenue. In this article, we will take a closer look at the economic analysis of the esports industry, its prospects, and the potential challenges it may face in the future.
The Economic Analysis of the Esports Industry
The esports industry has created significant economic opportunities for various stakeholders, including game developers, league organizers, teams, players, sponsors, and broadcasters. According to Newzoo’s Global Esports Market Report, the total esports industry revenue is estimated to reach $1.08 billion in 2021, with a projected growth rate of 14.5% year-over-year. The report also predicts that by 2023, esports will generate $1.6 billion in revenue, with a global audience of over 646 million people.
One of the significant revenue streams for the esports industry comes from sponsorships and advertising. Brands such as Coca-Cola, Intel, and Red Bull have recognized the vast potential in sponsoring esports tournaments and teams. In 2020, the global brand involvement in esports increased by 16.3% year-over-year, with non-endemic brands accounting for 70% of the total revenue. Additionally, advertising revenue from streaming platforms such as Twitch and YouTube has contributed significantly to the industry’s growth in recent years. In 2020, Twitch generated $2.48 billion in revenue, with over 1 trillion minutes of content watched by viewers.
The esports industry has also created significant employment opportunities for people worldwide. Beyond the players and team staff, the industry has created jobs for game developers, event organizers, journalists, broadcasters, and commentators. According to a report by PwC, the global esports job market is expected to grow by 11.5% annually in the next four years, with estimated employment of over 30,000 people by 2025.
The Prospects of Esports
The success and growth of the esports industry over the past few years have established it as a legitimate form of entertainment and sport. The industry’s prospects look bright, with an increasing number of game developers working to create esports-compatible games, and major sporting institutions showing interest in investing in esports.
Furthermore, the industry’s COVID-19 adaptability has been impressive, with tournaments and events transitioning to online platforms successfully. In 2020, the League of Legends World Championship was broadcasted live, reaching over 99.6 million viewers worldwide. The Dota 2 International, held in 2019, had a prize pool of over $34 million, making it the highest paying esports tournament worldwide.
Esports tournaments and leagues have also become a significant source of tourism for host cities. The Dota 2 International 2019, held in Shanghai, generated over $34 million in tourism revenue for the city. The event drew over 10,000 travelers from abroad, contributing to an estimated 40,000 hotel nights during the tournament.
The emergence of mobile gaming as a prominent sector in the video game space has also significantly impacted the esports industry. According to a report by Niko Partners, mobile esports generated over $15 billion in revenue in 2020, with the majority of the revenue coming from East Asia.
The Potential Challenges for Esports
Despite the growth and success of the esports industry, specific challenges could impact its future prospects. One of the significant challenges is player burnout. Professional esports athletes spend hours practicing every day, leading to physical and mental fatigue, which can result in long-term injury and player burnout.
Additionally, regulatory challenges are emerging around the choices of video game formats that qualify as esports. This problem could lead to the exclusion of some games from esports tournaments and limit the growth of the industry.
Lastly, a key challenge the esports industry faces is potential government regulation around loot boxes and their perceived similarities to gambling. Belgium and the Netherlands have already banned loot boxes in video games, and other countries are considering similar regulations.
Conclusion
In conclusion, the esports industry has become a significant player in the entertainment and sports world, with significant economic benefits to those involved. As we have seen, the industry’s growth prospects are bright, with game developers creating esports-compatible games, and major sports organizations investing in esports. Nonetheless, the industry is not without its challenges. Player burnout, regulatory issues around video game formats, and potential government regulation around loot boxes may impact the industry’s success in the future. Despite these challenges, the esports industry continues to grow and evolve, and its future prospects remain positive.