What's Next for Esports Startups

TL;DR

The esports industry is poised for significant growth, with over 450 million global viewers and expectations to reach 650 million by 2022. While revenue per fan is low at $4, it's predicted to increase as media rights and sponsorships currently account for 65% of total revenue, making this a prime opportunity for startups aiming to innovate in the esport ecosystem.

Transcript

thank you for tuning into a 16 Z's discussion on the future of eSports my name is Benna Kuroshio I'm a partner in the consumer investing team in andreessen horowitz and before we tune into a conversation on eSports with my colleagues Frank Chen Andrew Chen and Darcy coolican I will first be introducing you to this exciting global phenomenon so if y... Read More

Key Insights

• 💗 The global audience for eSports has been rapidly growing, reaching over 450 million viewers in 2019.
• 👾 Battle arena and battle royale games like League of Legends and Fortnite are driving the popularity of eSports.
• ✋ eSports is a global phenomenon, with Asia Pacific having the highest concentration of fans.
• 😘 Revenue per fan in eSports is currently low, but the industry is expected to grow and monetize more effectively in the future.
• 🗯️ Media rights and sponsorships account for the majority of revenue in eSports.
• 🌐 eSports offers unique opportunities for global participation and audience engagement.
• 🍉 Traditional sports leagues are lagging behind eSports in terms of audience size and global appeal.

Questions & Answers

Q: What is the current global audience base for eSports?

The global audience base for eSports is over 450 million viewers as of 2019.

Q: What types of games are driving the growth of eSports?

Battle arena and battle royale games like League of Legends and Fortnite are the most popular games in eSports.

Q: How does the audience size of eSports compare to traditional sports leagues in North America?

eSports audience size is already comparable to the four largest North American sports leagues, such as Major League Baseball and the National Hockey League.

Q: How does revenue per fan in eSports compare to traditional sports leagues?

Revenue per fan in eSports is currently around $4, while revenue per fan in traditional sports leagues is around $50.

Summary

This video discusses the future of eSports and its rapid growth in popularity. It highlights the increase in viewership, the global nature of the industry, and the potential for monetization. The conversation explores the reasons for the rise of eSports, the engagement and spectatorship of gaming, and the opportunities for startups within the eSports ecosystem.

Questions & Answers

Q: How popular has eSports become?

In 2017, there were 335 million known viewers of eSports content worldwide. By 2019, the global eSports audience base grew to over 450 million viewers. Based on a conservative estimate, the number of global eSports viewers is expected to reach around 650 million by 2022.

Q: What are the main reasons for the rapid audience growth?

The main reasons for the rapid audience growth in eSports are the global nature of the phenomenon and the ability to participate without any physical limitations. eSports is not confined to specific physical spaces like traditional sports and can be accessed and enjoyed by people anywhere in the world. Additionally, the social aspect of gaming and the ability to spectate and engage with others online has contributed to its popularity.

Q: How does eSports compare to traditional sports in terms of viewership?

While eSports still lags behind traditional sports in terms of overall size, its viewership is already comparable to major North American sports leagues. The League of Legends Championship alone drew in more viewers than the World Series, NBA Finals, and NHL Stanley Cup Finals in 2017, second only to the Super Bowl.

Q: What is the current level of monetization in eSports?

Currently, eSports monetization is still relatively low compared to traditional sports leagues. In 2017, the top four North American sports leagues generated $54 of revenue per fan, while eSports only generated $4 per fan. However, revenue is expected to continue growing, with global revenue projected to reach over $1 billion in 2019. The main sources of revenue in the industry are media rights, sponsorships, advertising, merchandise, ticket sales, and publishing fees.

Q: Where is the revenue coming from in the eSports industry?

Currently, a significant portion of the revenue in the eSports industry comes from media rights and sponsorships, which account for around 65% of total industry revenue. Media rights primarily come from selling broadcasting rights to major media outlets, while sponsorships involve non-endemic brands sponsoring eSports leagues and teams. Other sources of revenue include advertising, merchandise sales, ticket sales, and publishing fees.

Q: How do game design and technology contribute to the rise of eSports?

Game design has become more social and engaging, making it more enjoyable and suitable for spectating. Technological advancements have made it easier for gamers to stream and engage with audiences, as well as accelerate the iteration cycle for game developers. The proliferation of video platforms also plays a role, as it allows for easier accessibility and viewing experiences.

Q: How do demographics play a role in the growth of eSports?

Demographics, especially the age of players and viewers, have contributed to the growth of eSports. Unlike traditional sports, which have specific age groups as their main audience, gaming has a broader appeal across various age groups. Younger generations who grew up playing games are now entering adulthood with gaming as their primary form of entertainment, leading to increased engagement and viewership.

Q: How are traditional sports leagues adapting to the rise of eSports?

Traditional sports leagues are trying to adapt to the rise of eSports by embracing gaming and integrating it into their operations. Some leagues are exploring partnerships and sponsorships with eSports teams and players, while others are leveraging gaming content and streaming to connect with their audience. However, traditional sports leagues face challenges in aligning their existing content and production approaches with gaming preferences.

Q: What are the opportunities for startups in the eSports ecosystem?

Startups have various opportunities within the eSports ecosystem, particularly in infrastructure and picks and shovels plays. These opportunities include platforms that facilitate engagement, communication, and team management; analytics tools for teams and leagues; and innovative monetization models. Other opportunities lie in developing games and content that cater to specific aspects of gaming and eSports, such as competitive play, streaming, or user-generated content.

Q: How do game publishers play a role in the monetization of eSports?

Game publishers currently capture a significant portion of the value in eSports through their control over game design, rules, and league operations. However, the future dynamics between publishers and eSports leagues are uncertain, as the success of leagues may challenge the control of publishers, leading to potential shifts in power and revenue distribution. The outcome will depend on how the relationship between publishers, teams, and leagues evolves.

Q: What is the potential for future growth and development in the eSports industry?

The eSports industry is still in its early stages and has immense potential for growth. With increasing engagement, viewership, and monetization, the industry is expected to experience exponential growth in the coming years. The key to future success lies in building infrastructure, improving engagement and monetization strategies, and expanding the range of games and content offerings to cater to the diverse interests of the gaming audience.

Takeaways

The future of eSports appears promising, with its global reach and growing viewership attracting attention. The industry is experiencing rapid growth and development, with monetization on the rise. The rise of gaming and eSports is a cultural phenomenon, with gaming becoming a core component of the cultural zeitgeist. Opportunities for startups exist in various aspects of the eSports ecosystem, from engagement platforms to innovative monetization models. The relationship between game publishers and eSports leagues is a crucial factor in the monetization and development of the industry. The future holds significant potential for growth and development, but it rests on the ability to adapt, engage, and monetize effectively within the gaming and eSports landscape.

Summary & Key Takeaways

• eSports has seen significant growth in viewership, with over 450 million viewers globally in 2019.

• Battle arena and battle royale games like League of Legends and Fortnite are driving the rapid audience growth.

• eSports is a global phenomenon, with North America only representing 12% of total enthusiasts.