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eSports: Maybe the Kids Should Stay Inside to Play

Delwin Graham - Oct 12, 2018
The eSports industry is projected to earn over $1.1 billion and reach over 436-million consumers around the world by 2019, according to market predictions . . .

Can’t or won’t get off the couch? You can still play sports - eSports. The term “eSports” (short for Electronic Sports) is the name given to professional competitive gaming. Basically, competitors play video games while being watched by a live audience and millions more watch the games on-line. The eSports industry is projected to earn over $1.1 billion and reach over 436-million consumers around the world by 2019, according to market predictions by analytics firm Newzoo (Cf., Alex Gray, “The Explosive Growth of eSports”, July 3, 2018,

This is a big deal but perhaps not that surprising. All in all, 2.2-billion people in the world played a mobile, console, PC, handheld or virtual-reality game in 2017 (Cf., Mark Goad, “Video Games Are Not Just a Hits Business – An Investor’s Guide”, October 1, 2018, That’s a lot. Just as is the case with traditional sports like football, baseball, basketball and hockey, participation can foster the familiarity that allows for appreciation of eSports at the professional level. There are primarily two venues for spectators to view eSports: on-line and in stadiums. On-line viewership is large and growing. Back in 2016, the League of Legends Championship Finals attracted 43-million viewers. Contestants competed to earn US$1 million in prize money. In fact, winning eSport tournaments can net participants up to US$25 million, when winnings, sponsorship and appearance fees are taken into account. In fact, the highest-earning player, German Kuro Takhasomi, has earned almost $3.5 million to date (Cf., Gray, “Explosive Growth”).

As with traditional sports, fans like to chant and cheer in public venues and they are filling stadiums in large numbers. On August 27, 2016, when the North American League of Legends made its Canadian debut at Air Canada Center, now known as the Scotiabank Arena and home of the Toronto Maple Leafs and Raptors, tickets for the two-day event sold out in 34 seconds, faster than any sporting event or concert in the venue’s history. Noting this demand, Cineplex acquired 80 percent of World Gaming in September 2015 for CDN$10 million and then went on to acquire the remaining 20 percent in 2017. Their entry into eSport events makes sense given its predominantly younger customer base and the fact that average theatre occupancy is below 15 percent.

Whereas the public venues for eSports range from disused movie theatres to soccer stadiums, the major on-line viewing platforms are largely solidified with Twitch (acquired by Amazon for US$970 million back in 2014) and YouTube Gaming dominating the market with a combined +90-percent market share and 343-percent and 197-percent annual growth respectively. Playing catch-up, Facebook has attempted to seed its platform by paying streamers with a few-hundred followers a reported US$10,000 per month to play exclusively on their platform (Cf., Goad, “Video Games”).

Whereas many businesses in media and entertainment make a living by collecting the attention of a cohort and selling it to advertisers, eSports offers a way to reach a demographic that is increasingly beyond their grasp. In general, players and fans are younger, less likely to watch linear TV, and often less interested in professional sports than the population as a whole. In 2017, Nielson Media evaluated the demographics of eSports enthusiasts and found that 70 percent are males, ages 13 to 40; two-thirds say they watch live eSports; and 37 percent have attended live eSport events (Cf., Chris Arkenburg et al, “eSports Graduates to the Big Leagues”, July 23, 2018,

This cohort is important to advertisers but so is the medium. In the past two decades, multiplayer competitive video gaming has globalized and spread across the internet and social media, aggregating large audiences of digital natives who have grown up in these virtual environments. On-line access minimizes physical differences between individuals in a growing number of settings. With audiences spread across social networks, streaming platforms, and game worlds, advertising success can pay dividends if and when it goes viral

As you would expect, the eSport industry has gained interest and investment from some of the biggest names in sports, tech and media. But with big money comes the demand for stability. Unlike in traditional sports, where independently-owned teams are organized in leagues, a single publisher controls each eSport game. For example, Riot Games publishes the League of Legends and organizes the League Championship Series (LCS). Centralized ownership typically means that each publisher needs to work closely with players, advertisers, and broadcasters once a particular game becomes popular enough to create a league. One of the earlier and most successful iterations, the League Championship Series, operated on a system of promotion and relegation; at the end of the season, the worst teams would drop down to the league below while the best teams from the second division would be promoted to the LCS. While this was egalitarian, it did not provide the stability for long-term investment in a team. Enter the Overwatch League, which was created in 2018 around region-specific permanent franchises; fourteen teams represent Dallas, New York City, Los Angeles, San Francisco, and Shanghai among other cities. The Overwatch League runs much like a traditional sports league in terms of setting matches and monetizing those games with broadcasting and streaming rights, sponsorships, merchandise, and ticket sales. They offer guaranteed contracts to its players with minimum-salary requirements, and other perks like healthcare benefits, retirement plans, and free housing. Teams are also investing in state-of-the art training facilities and regularly employ chefs, dieticians, sports psychologists, physical trainers, and others to ensure that players are in top shape both physically and mentally.

As eSports continue to chase mainstream popularity, traditional sports organizations have steadily joined the ranks. In 2018, game publisher Take-Two announced a partnership with the NBA to launch a new professional league based on NBA 2K, one of the best-selling sports games in the world. Seventeen of the NBA’s thirty teams participated and each drafted six players to represent them. NBA 2K League teams include the Warriors Gaming Squad, Wizards District Gaming and Raptors Uprising GC. At the moment, however, sports video games typically make up a very small percentage of the eSports market. While NBA 2K is popular, the most enduring competitive games are first-person shooters like Overwatch or strategy games like Starcraft. So far, the average NBA 2K League match has just a few-thousand viewers on Twitch, compared to Overwatch or League of Legends, where games average more than 100,000 viewers on any given night. At the moment, the NBA considers the 2K League more as an opportunity to expand its reach and connect with younger fans, rather than as an effort to establish a major new professional league (Cf., Andrew Webster, “Why Competitive Gaming is Starting to Look a Lot Like Professional Sports”, July 27, 2018,

In the case of eSports, what was a fringe hobby is now turning into a remarkably lucrative phenomenon. Growth-oriented investors will want to be there. Please contact me (; 780-408-1518) for more details and a few actionable ideas.