08.03.2016

THE GROWTH OF E-SPORTS: OPPORTUNITIES,THE NEED FOR REGULATION AND COMMERCIAL STRUCTURE

The growth and popularity of e-sports is nothing new (and not to be confused with i-gaming / internet betting). The internet has provided a global platform for players to compete on a professional level (leagues, prize money, fans, live events and endorsements). The seismic shift was that it also allowed fans to spectate and share the sport.

Now a spectator sport, e-sports is big business and getting bigger. As a result it will become more and more commercialised, creating opportunity for growth but also exploitation. The teams, leagues, and tournaments have turned professional with prize money and endorsements, therefore the sport needs regulating if it is not to be exploited. Its rapid growth and popularity also poses health implications in a society already battling with inactivity. Popularity and influence brings responsibility -  who do you want the next generation to aspire to play or be?

Firstly let’s look at the numbers (source newzoo / Repucom report published in 2015):

Current state of play (2014):

  • 1.7bn gamers worldwide
  • 205 million people globally that watch e-sports

 Sport vs e-sport

  • There are 2.2 billion people globally who consider themselves to be interested or very interested in sports.
  • Of these, 1.6 billion actively participate in at least one sport vs 1.7 billion of people who play games

This figure is set to rise to 2.1bn by 2017 meaning that there will be more people actively gaming than playing sport and as many gamers as sports fans!

If you categorise e-sports as an individual sport (which I guess it is)

  • There were 89m frequent e-sports enthusiasts in 2014 vs which is on par with swimming or ice hockey (95m)
  • This is on track to grow to 145m in 2017 which is the same as american football.
  • Can you imagine any of these sports not being regulated or governed?

A potential $1bn - $3bn economy (excluding game revenue)

  • On a global scale, 2 bn sports fans each generate an average of $56 per year across all sports, while e-sports enthusiasts generate $2.2 per person per year (without game revenues taken into account)
  • In general, individual sports generate anything upwards of $20 per fan per year
  • This currently values the sport at $0.5bn with conservative growth up to $1bn by 2017 (excluding game revenue)

The commercial opportunity is potentially significant but so are the risks

  • Emerging brands and established ones are already investing in advertising around e-sports. Given these kinds of participation and interest figures this investment will only become more mainstream.
  • I liken this to the beginning of the extreme sports era where sports such as surfing, skateboarding, snowboarding and wakeboarding became attractive to mainstream advertisers keen to promote themselves to hard to reach audiences. A lot of these got caught up in battles over who governed the sports and how to grow them. The participants themselves were resistant to ‘selling out’ to corporates or to be integrated into governing bodies.
  • To a large extent extreme or lifestyle sports with the odd exception hasn’t necessarily gone mainstream and maintained their identity and culture. However the accessibility of e-sports means there are very few restrictions to growth.

The benefits of a commercial strategy and  structure

  • The commercial opportunities are clear and advertisers and ‘broadcasters’ will want to tap into its ability to engage with the next generation and its content sharing culture.
  • e-sports has also started to attract the interest of the betting industry with companies starting to offer odds and advertising. One such provider serviced one million bets in 2014 alone. Again sports regulation (match fixing) and advertising regulation need to be considered around age – again back to regulation 
  • Similarly the impact on society needs to be considered - professional sport has many issues from a role model perspective but in a world where diet and lack of exercise are causing serious risks to health worldwide a generation growing up aspiring and to become professional gamers could be an issue if not considered. If soft drinks and fast food are regulated should e-sports? There is already talk of a ‘sugar tax’ on food to combat such concerns
  • From experience of working with a lot of emerging and niche sports over the last 20 years its important for stakeholders in the sport to work to a commercial vision and structure and within a regulated environment. This will not only fuel its ongoing growth but also protect its stakeholders (the participants and fans)

I want to  be clear, I am not anti e-sports. It is new, fast growing, disruptive and clearly popular - it’s a huge opportunity that needs to be manged responsibly and therefore we should all be having the debate. For example:

  • McDonald’s is derided for causing obesity vs obesity is caused  by lack of diet and exercise.
  • McDonald's sponsors football to appeal to kids vs its investments in grassroots football encourages more children to exercise
  • McDonald's sponsors FIFA vs how much of that money actually goes back to its stakeholders
  • Did I mention FIFA?

In summary e-sports is growing fast and is clearly a lucrative opportunity. Any sport has to protect is No1 stakeholders – its participants and fans. This takes time and money. The question is can it establish itself within enough time to protect itself?  Traditional sport is far from perfect. Like most new and emerging dot com ‘disruptors’ they benefit by a lack of legacy, the opportunity to start from a blank canvas. Maybe this is its biggest opportunity – create a new model for the governance of governing sport.

@RupertPratt

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