The Unfolding Future of eSports

Video games were introduced to the world in the early 1950s and we have come a long way since then. All of us are quite familiar with the existence of multiplayer games, and can admit to having played them at least once on our phones or laptops. To some, these video games are an escape from reality and a way to relax. eSports are a form of a sport that uses video games to compete, wherein the players could range from professionals to amateurs. eSports emerged when competitive gaming became an organised multiplayer platform that is often characterised by live matches and large audiences. This industry was worth more than $950 Million in terms of revenue generated in 2020 and showed a 15.7% Year-on-Year growth. Coming to the video games industry, it constitutes all kinds of platforms on which video games are played. This industry is, in a manner, a superset of the eSports industry. The latter generated a revenue of more than $134 Billion in 2018.

History

The history of video games began from as early as the 1950s, when computer scientists started designing simple video games and simulations for recreational purposes. In the next couple decades these recreational activities would reach the masses. Magnavox was the first to commercialize the video games industry with the Magnavox odyssey and after that, this industry did not look back. It came up with new video games with enhanced graphics every year. Coming to the eSports industry, its inception took place in Stamford university in 1972, when the first “Space Invaders” championship was organised. It had a massive attendance of 10,000 participants. Such competitions then became common by the next decade. With the advent of the internet in the 1990s, the scope widened even more. People could now attend global championships in the comfort of their homes. At this time companies such as Atari, Blockbuster and Nintendo started sponsoring such championships. In 1997, the Red Annihilation tournament for the game “Quake” was organized. It is widely regarded as the first eSports event in history. Eventually with the beginning of the new millennium, this industry would regularly start organizing such events and different players would enter into it as well. Games such as World of Warcraft, Defence of The Ancients (DOTA), Counter Strike and Call of Duty would become the centre around which eSports championships would revolve and prizes in terms of money, membership and merchandise would become common. As the internet would grow, so would the frequency of eSports competitions, the variety of games as well as the number of participants. From installing and saving video games on floppy discs to playing the game directly on apps and websites, this industry has seen tremendous growth.

Current Scenario

There are almost 3 Billion gamers worldwide. They are not limited to Consoles or PCs as gaming is accessible on our mobile phones as well. The prevalence of internet connectivity has made it easier to contest eSports matches. The prize pools in such competitions are as huge as $35 Million. They are organized by companies such as ESL (formerly known as Electronic Sports League), the largest and oldest eSports company. ESL conducts a tournament series every year, called ELS One, in many major cities such as New York, Hamburg and Cologne. The infamous gaming app, PUBG Mobile (PUBGM), organises one of its largest annual events, the PUBG Mobile Club Open. It had a prize pool of $1 million in 2020. However, this Industry is not just limited to huge corporations organizing their own events. Many gaming parlors organize their own eSports events at a local level as well.

Stakeholders

Gamers: The first and foremost stakeholders would be the customers. Gamers are the key drivers of this industry. Every time a game is released, its most important objective is to be appealing to the user.

Developers: The developers in this industry are the creators of these video games. They are usually companies that create video games with the help of professional developers.

Investors: This industry has witnessed large investment inflows in the past decade due to its stupendous growth. The investors play an important role since they provide funding and consequently boost growth. They are directly impacted by the actions of the firms. Some gaming companies such as Activision and EA sports are listed on the NASDAQ stock exchange.

Hardware Companies: Video games require powerful processors and even more powerful graphics cards. Companies like Intel, AMD, NVIDIA and Corsair constantly upgrade their technology according to the needs of gaming companies. The demand for their products is derived from the market demand for video games as well.

Market Size and Financials

With eSports gaining popularity, it has appealed to investors, brands, media, and consumers alike. Celebrities such as Drake, Jennifer Lopez, and Will Smith have seen potential in eSports and have chosen to contribute. The number of gamers has constantly been increasing, the industry is in a boom of sorts and isn’t going to die out anytime soon. A recent global tournament of popular mobile video game PUBGM gathered 3.8 million concurrent viewers across all its streaming platforms. In 2020, the global revenue was over 950 million USD, and it is expected to nearly double itself by 2023. Coming to the Video Games industry, it generated sales worth $135 Billion. These companies are even listed on various stock exchanges around the world. Even Disney has started producing Star Wars games. Year-on-Year growth is visible across all platforms, be it PC, Mobile or Console. The total viewership growth rate is at a pace to double itself over a six-year period. 2018 alone witnessed an astounding Year-on-Year growth of 837% with 4.5 billion USD compared to 490 million USD the year before. eSports mainly function over prize pools which are also seeing drastic increases over the years. In 2020, a video game called DOTA 2, playable on a computer, amassed a whopping prize pool of over 34 million USD in its signature tournament, which is also the biggest prize pool to date. Asia-Pacific region and North America are the top eSports hubs with China alone accounting for one-fifth of the sum.

While traditional sporting events could not be conducted due to the COVID-19 pandemic, the number of eSports games and tournaments rose over two times compared to similar results from the previous year. However, with rapid cancellations of live events, even this industry faced some setbacks. The industry-wide revenue fell by 150 million USD, where a 16% increase was expected, creating a trickle-down effect that hampered merchandise sales, and relinquished sponsorships and media rights.

All this being said, an eSports organization’s functions are more or less identical to those of a ‘real’ sports organization: bringing potential players under contract with certain rewards and restrictions while they represent and perform for their employers. They organise a ‘boot camp’, where players live together to build teamwork and synergy, and receive necessary infrastructure and salaries. In return, the organization is entitled to a share in the winnings of the team. Only earnings from the prize money, however, is not enough for the sustenance and growth of the organization and thus, it encourages its players to collaborate with other brands and players alike. Money inflows also include media rights, live event ticket sales, merchandise sales, streaming, and in-game purchases but the majority (69%) comes from advertising and sponsorships.These players have also amassed large fan bases, owing to their exemplary performance, on online streaming platforms such as YouTube Gaming and Twitch.

Team Solo Mid, an American eSports organization that houses lineups in several competitive games around the world, boasts of a video game facility worth 50 million USD for its players and content creators. They have sponsorship deals with technological giants such as Amazon, Cadillac, and Lenovo. Team Liquid, a veteran in the eSports scene, has amassed a total of 36 million USD only from tournament earnings and has turned its star players into millionaires.

In India, the eSports industry is just dawning. It’s growth was hindered due to the ban of PUBGM, a result of the increasing conflicts on the Indo-China border. 8 out of the top 10 eSports organizations that ranked as highest earners in India came only from the winnings from ‘PUBGM’ tournaments. Although PUBGM was banned, it laid out the path and gave rise to other titles that gained speedy popularity and diversified the eSports industry in India. Moreover, considering the demographics and the number of mobile phone users in India, the eSports industry is bound to see exponential growth in the coming years.

By Salav Niraula and Devansh Jajoria