eSports is Not a Fad

11.01.15

Professional gaming has exploded in popularity over the past two years.  Fueled by the rapid growth of streaming video and seven-figure event prize pools, eSports tournaments have developed a massive audience - approximately 150MM people will have viewed an eSports tournament by the end of 2015.  This rapid growth has created excitement even in industries outside of gaming, such as television, fantasy sports, and advertising.

Some have questioned whether eSports is a fad, similar to other recent bubbles in the games industry like motion-based gaming, music gaming, and games on Facebook.  While all of these gaming experiences still exist, none are as popular as they were 5 years ago. On the contrary, we believe that eSports has a stable, long-term future as a robust segment of the games industry, with long-term potential as a desired consumer experience and viable advertising channel.

We base this assessment on several major factors:

eSports provides a high-quality consumer experience that is growing mostly organically because of consumer demand.

eSports has grown organically in the genres that provide the best consumer experience.  League of Legends and Dota 2 have similarities to the most popular American sports, like football and basketball.  The action is viewed from the top-down, so viewers are able to watch amazing plays develop through teamwork and more clearly understand strategies.  In addition, the major players in the eSports supply chain (including publishers, eSports leagues, and content distribution channels) have done an excellent job of driving viewer investment. Merchandise, in-game items that show team support, microtransactions that increase tournament prize pools and team-based tournament betting have all created an ecosystem where viewers more actively participate in the experience.

 

Large companies throughout the entire eSports supply chain are investing significantly in the eSports infrastructure.

eSports is getting the investment that it needs from major companies throughout the supply chain to create a lasting infrastructure.  A recent example of major company investment is the creation of an eSports division by Activision.  Activision Blizzard bringing in an established executive from television and eSports leagues to run their new eSports division is clearly a move to fast track eSports growth in their major titles.

 

eSports viewers are live eyeballs from a valuable consumer segment.

eSports is especially attractive to sponsors because it provides a way to target an especially valuable consumer: the engaged PC gamer who spends more on hardware and software than the average gamer. This is similar to the highly attractive audience that watches golf on television, for whom sports networks are able to command a premium for advertising because golf viewers are a high spend audience.

eSports viewers spend more across gaming experiences, spending more on games across platforms and genres. The following graph shows the annual video game spend across console and PC for PC gamers, segmented by eSports participation.

 



 

In addition, eSports viewers are especially valuable because they are a live viewing audience, which is an attractive audience in the era of DVR and on-demand programming.  eSports viewers are also a different demographic than live sports viewers but still fall into the extremely valuable 18-34 age group.  The graph below shows weekly frequency of eSports activities.  eSports viewers endorse engaging in a broad number of activities but are not heavy viewers of traditional sports.

 



 

In summation, EEDAR believes that eSports is very different than other fads in the games industry.  eSports is providing a valuable, organically growing experience to a passionate fan base that is a valuable target for advertisers.  In addition, major companies are providing the infrastructure support to fuel further growth.  The future of eSports is bright indeed.

 

Patrick Walker
VP, Insights and Analytics, EEDAR

 

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