THE ESPORTS ECOSYSTEM: The key players and trends driving the red-hot, fast-growing esports space that's on track to surpass $1.5 billion by 2023
Esports and gaming have burst into the mainstream in recent years, transforming from a vibrant
niche to a central form of entertainment around the world. While esports may have once stood for a subset of sports culture, it has grown into a full industry in its own right.
That shift has been powered by championing from mainstream celebrities like Michael Jordan, Drake, and DJ Marshmello, an increasing amount of coverage from traditional outlets like ESPN, and, at least in part, the breakneck rise of Fortnite.
As competitive gaming cements itself in the popular culture, global investors, brands, media outlets, and consumers are all paying attention. Total esports viewership is expected to grow at a 9% compound annual growth rate (CAGR) between 2019 and 2023, up from 454 million in 2019 to 646 million in 2023, per Business Insider Intelligence estimates. That puts the audience on pace to nearly double over a six-year period, as the 2017 audience stood at 335 million.
The pop-culturization of esports has helped power the explosions in esports investment and revenue. Esports has hit this stratosphere in large part because of the social component of live streaming and gaming. Gaming-specific streaming platforms like Twitch and YouTube Gaming give fans a direct connection to the players and teams, while more mainstream socials have allowed those connections to flourish. Certain esports organizations, like FaZe Clan, are also moving aggressively into areas like merchandise, lending their brands more notoriety than if they'd stuck to esports alone.
Rick Yang, partner at NEA — a venture capital firm that invests in esports — underscored this in a conversation with Business Insider Intelligence: "I actually think of esports as the mainstreaming of gaming, or the pop culture instantiation of gaming versus the pure idea of these players becoming professionals to compete at the highest levels." It's essential to think of the esports opportunity in this way — one inclusive of gaming, media, pop culture, and commerce — as it shines a light on opportunities beyond gaming events alone.
As a result, the industry has seen a huge uptick in investment from venture capitalists, and more recently from private equity firms. The number of investments in esports doubled in 2018, going from 34 in 2017 to 68 in 2018, per Deloitte. That's reflected in the total dollars invested, too: Investments are up to $4.5 billion in 2018 from just $490 million the year before, a staggering YoY growth rate of 837%, per Deloitte. These investments are distributed to players across the ecosystem — from esports organizations, to tournament operators, to digital broadcasters — allowing it to function and grow.
The net result is that esports has matured from its roots in arcade gaming to the complex digital ecosystem it is today, and in this report, Business Insider Intelligence will provide a comprehensive breakdown of the key players involved in the space. This report will provide a high-level overview of the industry to clarify how the many moving pieces of the esports ecosystem fit together. It will also break down how money flows into the ecosystem.
The ultimate goal of this report is to give readers a clear understanding of how the major players and components of esports function so that they can more readily take advantage of the many opportunities this dynamic ecosystem presents.
The companies mentioned in this report are: Activision Blizzard, Alienware, Amazon, Apple, AT&T, BAMTech, BMW USA, Bud Light, Caffeine, Champion, Chinese Mobile, Cloud9, Coca-Cola, Comcast, Deloitte, Disney, Douyu, DreamHack, Electronic Arts, Epic Games, ESL, ESPN, Facebook, FaZe Clan, FIFA, G-Fuel, GamesBeat, Gen.G, Google, HBO, Honda, Huya, HyperX, Instagram, J!nx, KeSPA, Liquipedia, Madrinas Coffee, Manchester City, Marvel, Microsoft, Mixer, MLB, MLG, Monster Energy, NBA, NEA, NetEase, Newzoo, NFL, NHL, Nielsen, Nissan, NZXT, Old Spice, OnePlus, PandaTV, Pizza Hut, PlayVS, Postmates, Puma, PwC, Red Bull, Renegades, Riot Games, SAP, SK Telecom, Steam, StreamElements, Sunshine Soldiers, TDK, Team Liquid, Tencent, TJ Sports, Treyarch, Twitch, Twitter, Uber Eats, Ubisoft, Valve, Vivendi Games, YouTube, 1 UP Studios.
Here are some key takeaways from the report:
- Most projections put the esports ecosystem on track to surpass $1 billion in revenue for the first time this year. And revenue is expected to grow from here — Newzoo projects it to hit $1.8 billion by 2022. Money flows into esports through media rights, live event ticket sales, merchandise sales, and in-game purchases, but most of the revenue (69%) comes from sponsorships and advertising, per Newzoo figures cited by Statista.
That growing revenue comes from around the world:
- Asia-Pacific (APAC), North America, and Europe are the top three esports markets, respectively, in terms of audience and revenue. APAC will account for over half (57%) of global esports viewership in 2019, up from 51% in 2017, per Newzoo. Meanwhile, North America is set to hit $300 million in esports revenue this year, while Europe is expected to reach $138 million, per PwC estimates.
- The rest of the world only accounts for about 15% of total esports revenue, but it contains several regions to watch. One of the fastest-rising regions is Latin America, which is expected to hit $18 million in esports revenue in 2019 before skyrocketing to $42 million by 2023, per PwC
- The future of esports will likely be powered by mobile, which will further reduce barriers to entry and allow even more gamers and fans to pour in. The mobile gaming segment is set to make up 45% of the total global games market this year. That popularity is already spilling over into some competitive spaces, as China already has a thriving mobile esports scene.
In full the report:
Clarifies what the esports space is, who the major players within the ecosystem are, and what roles they play.
Highlights the key demographics within the space, their interests, and what spaces are ripe for brands or other interested investors.
Breaks down how revenue is generated and what the key areas of future growth are.
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