Foley and Lardner LLP and The Esports Observer have put together their 2nd Annual Esports survey report noting that the nascent industry is seeing investors “jump in,” revenue sources evolve, and technology progressing.
Outside investment in esports expected to rise
Investment growth is expected to come from both traditional investors such as private equity and venture capital companies as well as from traditional sports teams and sports industry participants. Revenue growth will likely be driven by advertising and sponsorships, and secondarily by in-game purchases and media rights.
For the report, 204 esports, traditional sports, media, and agency professionals were questioned. In a sign of maturity for the sector, 47% of those asked expected outside investment to rise, up from 39% in last year’s survey. A further 47% believe sports teams and leagues, as well as sports athletes and celebrities, will increase their financial commitment to the industry.
Bobby Sharma, an advisor to law firm Foley and Lardner’s Sports & Entertainment Group says:
“The increased involvement of private equity and venture capital firms is a clear sign that traditional investors believe in the longevity of the space and have made the financial judgment that esports is now part of the culture.”
Sharma adds that “investors are betting on the opportunity here given the massive scale of the global competitive video gaming audience.”
Lisa Glahn, vice chair of Foley’s Construction Practice and member of its Sports & Entertainment Group says:
“We continue to see significant interest from traditional professional sports in investing in esports, particularly hard assets such as venue development, streaming and technology.”
Revenue growth will primarily arrive via advertising and sponsorships
51% of the survey’s respondents most expect advertising and sponsorship deals to lead esports revenue growth, up from 41% last year. As esports audience figures rise more big brands are likely to step-in to the industry.
Tobias Seck, business analyst at The Esports Observer, says:
“Many stakeholders in esports, such as teams, personalities and tournament brands, create their primary value in the currency of attention, brand awareness and reach, rather than in products and services. Consequently, advertising and sponsorships offer significant opportunities to generate revenues.”
The report points to continued growth and evolution for the esports industry. And that the sector will continue to attract outside interest drawn by massive year-on-year revenue growth and a rapid rise in esports audience numbers. It also details threats the industry may face with the number one concern being cheating and match fixing.
Esports associations may already be working to get ahead of the curve and preserve esports credibility. A number of global gaming industry bodies recently published a set of esports “Principles for Fair Play.”
Image courtesy of ESL