An investor’s guide to ESports

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According to Steve Bornstein, a chairman at the video-game giant Activision Blizzard, ESports are likely to form one of the most popular types of sport out there, competing with even the most traditional games. We’re talking about basketball and football levels. With this much potential, it’s no wonder that so many investors are considering an investment in the industry.

Still, many others mistakenly think ESports contests are small and made up of teenagers with nowhere else to go in life. This stereotype is completely wrong. The players involved in these competitions are highly skilled virtual athletes who’ve put countless hours into training their minds not only to survive the burden of high-paced video games but to thrive.

And the numbers are there to back this up. Last year’s League of Legends World Championship game attracted 44 million concurrent viewers. To put that into perspective, the unusually high viewership number for the last game in the 2016 NBA Finals was around 31 million.

The prospects for investors and gamers alike seem very bright, and are only expected to blossom as gaming technology gets bigger and better.

What are ESports?

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Imagine you’re watching an NBA game on television, with LeBron James and other famous players going head to head in an actual location. You’re doing the same thing with ESports, but with famous and skilled virtual athletes using avatars to compete in a virtual location. The concept is quite simple.

The world of ESports

ESports appeal to millions because of their incredibly dynamic nature. Sure, ESports like the FIFA eWorld Cup are surprisingly accurate simulations of their real-life counterparts, but the virtual world does not stop at realism. Massively popular games like League of Legends, Smite, and Dota are all based on fiction or lore. For many, ESports bring together the love of sporting tradition and the brilliance of fictional worlds.

Currently, the most-watched ESport is League of Legends. An MMORPG (meaning a “massively multiplayer online role-playing game”), it has a complex character system and vast online battles.

Other popular ESports are based on the FIFA, Dota 2, and Madden NFL video games.

Community

The ESport community differs in important ways from the physical-sport one. Baseball and basketball players are often elusive and avoid their fans. ESport champions are the opposite. They train and compete with fans regularly. And the fans are able to interact not only with their heroes but with each other as well. The community is present through live streams, charity events, social media, and so much more.

Player independence

Ultimately, in the virtual worlds of ESport competitions, gender, and physical attributes are irrelevant. Players don’t need to worry about having been born too short, tall, heavy, or light. ESports embrace individuality. Players are free to cross boundaries that have kept so many from competing in real-world sports. In ESport competitions, it doesn’t matter what country you’re from. All players are equal from start to finish. The only separation is in how you compete with your opponents.

Becoming a competitive player

Becoming a successful competitive player is no easy feat and requires extraordinary skill. This means hours and hours of practice and online activity, and nonstop hand-eye-coordination training. Players also need to know the ins and outs of every game, in the same way that football players need to know the ins and outs of each and every play.

Streamers

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People who live-stream themselves on the Internet playing a video game are called streamers. They tend to make money through donations and advertising revenue, and are often very popular. Typically, there are two types of streamer: some are known for their personalities, others for their skill in a video game.

PewDiePie, for example, is one of the most popular streamers out there. With more than a hundred million subscribers to his YouTube channel, he’s a prominent example of a streamer known for personality. He may not be highly skilled at a particular ESport, but he managed to rake in over $15 million in 2018 alone. Such profits highlight the outlandish prospects of the industry.

Professional players

Professional eSport competitors have been known to start their careers at age 16, and to retire at 24—incredibly early compared with real-world athletes. When players retire from ESports, they often go on to stream themselves playing games, or to consult and guide others toward a sport.

Teams and organizations

Similar to real-world athletes, ESport players can join teams. Often they are recruited or asked to audition. Joining a team can be the ultimate path to real-world cash prizes, and to bigger and better things. And as with real-world clubs, ESports teams trade players, pay salaries in six or seven figures, and have devoted fan bases.

Leagues

ESports are often set up in the same way the real-world sports are. There’s a regular-season when all standard play happens. Players from all over the world compete, and the best compete against each other through different levels, including playoffs and world championships.

The prize money can be surprising. In 2016, the highly popular Dota 2 eSport offered an overall prize pool of more than $20 million.

Publishers

Publishers are widely known as the gods of the ESports world. They control everything, simply because they own the rights to everything. They own every ounce of intellectual property published, and so they choose who plays and where championships happen. This should come as no surprise, considering that the publishers—including such prominent companies as Riot, Activision, and Valve—make the games themselves.

Advertising

Typically, advertising revenue comes from advertisements shown during live streams, video streams, and other ESport events. Large corporations like Coca-Cola and Samsung are among the regular advertisers. Analysts believe this is due to the fact that advertising on ESports events is cheaper than on real-world sports, and can bring exposure to more viewers. It should be noted, however, that the price for advertising during eSports is rising rapidly.

Sponsorships and partnerships

Sponsorships are becoming more and more popular in ESport events. Sponsors range from private individuals to corporations and support ESport teams financially. Computer companies like Alienware and Asus have supported teams, and have increased their own revenue by doing so.

The confusion surrounding investing

Unfortunately, ESports are much harder to invest in than traditional real-world sports. ESports have dozens of complicated channels to work through, and the ESport universe is constantly expanding. This may sound daunting but remember: all of that complexity and confusion means there are limitless ways to invest, and that the industry has only begun to grow. New technologies equal new ESport channels, which, of course, mean new investment opportunities.

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