Newzoo Adjusts 2016 Esports Revenues Upwards Due To Favorable Market Development

esports industry revenue predictions
In a recent report, market researcher Newzoo updated its esports revenue predictions for 2016, increasing the forecast by 7 percent from $463 million to $493 million.

The new figure reflects a year-over-year growth of 51.7 percent, proof that the competitive gaming market is nowhere close to slowing down.

Big publisher investments drive esports growth

“The slight increase in esports revenues is mainly due to a higher-than-anticipated investment by publishers and a faster uptake of the media rights business model within the esports economy, creating a shift from direct advertising income to media partnerships comparable to traditional sports,” says Newzoo in the report.

As the industry grows, publishing companies are looking for new ways to expand existing business or launch new ones.

One way to do that is partnerships with existing members of the industry, something that has happened quite often recently: Yahoo partnering with ESL, the ELEAGUE and FACEIT partnership, and Blizzard joining forces with Facebook, to name a few.

Moreover, as this new development is included in the revenue projections, the industry revenue forecast for 2019 now stands at $1.1 billion.

SuperData, on the other hand, expects revenues to reach $1.23 billion by 2019. SuperData is another market researcher in the field that, unlike Newzoo, includes esports gambling figures in its calculations, which is why there is a discrepancy between the projections.

Emma McDonald, Newzoo’s marketing director, explained in a statement:

“More and more publishers are embracing esports strategically as a way to increase the longevity of their games through increased player engagement, and to boost franchise awareness among a broad audience through live competitions and tournaments. For the latter reason, many publishers have looked to third-party organizers to help them set up tournaments around their new franchises.

In total, Newzoo estimates that by the end of 2016, publishers will have spent close to $100 million to organizers to help them set up a tournaments, competitions, and leagues for their franchises.”

Even though year-over-year growth is gradually slowing down, it is still increasing by about 50 percent every year. This means it’s doubling every two years, an impressive development for an industry that was close to unknown a couple of years back.

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North America leads the way with 36 percent of global revenues. Asia, the place where competitive gaming was more or less born, is lagging behind only by a bit, with China and South Korea accounting for 22 percent of global revenues.

Esports brand revenues will define the pace of future growth

Newzoo esports revenue growthAccording to Newzoo’s projections, brand revenues, which consist of advertising, sponsorship, and media rights, should amount to approximately $350 million this year.

These will be the drivers for later growth in the industry as publisher investment is expected to slow down toward 2019 because the lack of new, emerging publishers.

Brand revenues represent 71 percent of the market, with the remaining 29 percent generated by consumers through event sponsorships, video advertising, and ticket sales.

Although the sponsorship and advertising opportunities are growing, they are nowhere close to traditional sports.

Newzoo’s report suggested that for future expansion, “One thing that needs to happen for esports revenues to accelerate is for publishers to take a more active role in creating opportunities for sponsoring and advertising and to share revenues with the organizers and teams that exists around their franchises.”

This being said, initiatives for creating opportunities are already on their way (e.g. Mountain Dew stepping in with its own CS:GO tournament), and the exposure of the industry has been growing steadily (e.g. ESPN bringing esports to a mainstream audience, or a UK TV channel launching 24-hour esports coverage).

With such commitments, there is no doubt that industry revenues will keep going up, bringing the esports market closer to the traditional sports industry.

Image c/o Newzoo

Dejan Zalik

About

Dejan has been involved in gaming for over 10 years. Moving from classics like Diablo 2, Lineage 2, and Warcraft 3, he found his passion in Dota 2, which he’s been playing ever since. He also likes to keep up to date by reading and writing about whatever is happening in the industry.