Esports: Are We Ready For The Next Big Wave And How its Arriving
Keynesian theory states that whenever there are changes in aggregate demand, resulting from instability and volatility in investment demand, it entails a new economic cycle. Whether the cycle is a new revolution such as the Agricultural, Industrial, Technological, or a major bust such as the Great Depression, is a direct function of the intervention policies of the powers that were. Notably, there was one thing common throughout every revolution –each was bigger and arrived faster than its predecessor.
We are in the early cycle of another revolution – the do-it-yourself (DIY) economy. This cycle is being powered by youngsters who are fed up of waiting for free education, quota-based jobs, and subsidies, in general, an average existence. The youth today wants to be famous, loved and openly creative, while making money. This is the reason why ‘old school’ experts on economic value creation are baffled by the success of digital platforms like TikTok. Regardless of how childish and non-serious these social platforms seem to the academics, the fact is that the children have accepted it and they will define our future direction. Frankly, we need to let them, based on history and for the sake of natural order.
The economic wheel is being reinvented and one of its defining cogs is Esports. Anyone keen on noticing what the youngsters spend their time on would be aware of the mobile gaming space. The space is becoming extremely organized and starting to look much like that of conventional sports. Consider some of the recent happenings,
Last year, the US Army pulled out as a sponsor of the All-American Bowl, Army’s biggest recruitment and marketing event for past 17 years. Reason given, “It isn’t the draw it once was. We’re looking to innovate”. At the same time, the US Army sponsored an Esports team, the US Army Esports, operating under the Fort Knox-based Army Marketing and Engagement division.
Mukesh Ambani, in a recent conversation with Satya Nadella, said Esports is poised to be bigger than media, TV and movies combined. Yes, that’s huge.
Some Esports teams are beginning to receive valuations that are creating major ripples in the investment world. TSM, Cloud9, Team Liquid, FaZe Clan are worth USD 400m, 400m, 320m, and 240m respectively.
FaZe Clan has amassed 19 million followers across YouTube, Twitter, and Instagram, more than the Dallas Cowboys (7.2 million) and New York Yankees (6 million) combined.
In December 2019, Denmark’s Astralis became the first Esports team to IPO. The round was oversubscribed.
These are precursors of what will play out in the 2020’s. Those conventionally-inclined are still trying to overcome the stigma of getting attached to something that is (wrongly) perceived with time wasting, low IQ, low skill, or a fad could soon go the dinosaur path. A few with the vision to understand what our young ones will be up to, and we will have no control over how they behave, are aligning themselves.
The big question for investors is where in the entire Esports value chain does the highest/easiest alpha sit. In all likelihood the government will be the catalyst in bringing about the inflection point. Meanwhile, at Cianna Capital, we have moved to embed ourselves in the ecosystem itself. After analyzing the commercial model of owning teams we realized that a more sustainable play for us is to facilitate, promote, organize and distribute Esports. Our touch points include players, team owners, influencers, fans, sponsors, and game developers.
First phase will be organizing the game and gamers. We need to develop visibility and platforms, and create heroes (global, national, regional, and citywide). A God for many of us, #10, took the world of cricket by storm when he was 16 and carried the game itself for almost two decades. He came from Mumbai and trained at Shivaji Park. Get ready for many young Sachins coming from nooks and corners you may have not heard of.
The next phase will bring sponsorships and media deals, brand ambassadorships, cut throat scout networks, and training centers. Things will finally stabilize with where the English Premier League, the National Football League and the National Basketball Association are newsworthy mergers and acquisitions, teams with budgets larger than some gross domestic products, and lives on the line.
Skin this, whatever way you like; it’s going to be big and quite definitely so.