Global esports revenues will grow 38 percent to $906 million in 2018 and further grow to $1.65 billion by 2021, according to a new annual report on esports by market researcher Newzoo. North America will account for 38 percent of the 2018 revenue, or $345 million, while China will be 18 percent, or $164 million.
Esports will continue to be smaller in revenues than traditional sports, but it is rapidly gaining in terms of numbers of spectators. Once those spectators start spending like traditional sports fans, then advertisers will shift more money to esports and the industry will continue to gain momentum. And that’s why we’re seeing so many new investments in esports startups.
Newzoo said brands will be responsible for $694 million of the revenues in the esports industry, or 77 percent of the total market in 2018. This will grow to $1.4 billion by 2021, representing 84 percent of total esports revenues in that year.
The number of esports enthusiast fans will grow 15.2 percent from 143 million in 2017 to 165 million in 2018, while the number of occasional viewers will grow from 192 million in 2017 to 215 million in 2018. By 2021, the esports enthusiasts will reach 250 million and the occasional viewers will reach 307 million. That represents growth from a total of 335 million in 2017 to 557 million in 2021.
And Newzoo said the global average annual revenue per esports enthusiast will be $5.49 this year, up percent from $4.58 in 2017.
“As a consumer phenomenon, esports continues to grow its huge base of passionate fans across the globe,” said Peter Warman, CEO of Newzoo, in an email. “As a business, esports is now entering a new and critical phase towards maturity. Big investments have been made, new league structures have been launched, sponsorship budgets have moved from experimental to continuous, and international media rights trade is starting to heat up. At the same time, player salaries have soared and the esports ecosystem and viewership hours still very much rely on a select number of globally operating teams and game franchises. Profitability and return on investment is, for many organizations at the heart of the esports economy, a challenge.”
In 2017, there were 588 major esports events that generated an estimated $59 million in ticket revenues, up from $32 million in 2016. The total prize money of all esports events held in 2017 reached $112 million, breaking the $100 million mark for the first year.
The League of Legends World Championship was the most watched event on Twitch in 2017 with 49.5 million hours. It also generated $5.5
million in ticket revenues.
“An industry survey performed by Newzoo late last year found that the majority of respondents from teams expect esports to take another five to 10 years to mature fully as a business,” Warman said. “The same research showed that brands and agencies expect the ecosystem to be fully professionalized in three to five years. This illustrates the current status of the market: great expectations from outside and more conservative views from people within. This year will be pivotal in determining the pace at which esports becomes the global multi-billion-dollar business we all envisage. This year, we anticipate global esports sponsorship and advertising revenues to surpass half a billion dollars. Considering the media exposure esports has created, this is still a relatively small amount.”
Newzoo started surveying the esports market with data on six countries in 2009, and it now covers 28 countries and more than 60,000 consumers to generate its annual report. Newzoo defines industry revenues as the amount the industry generates through the sale
of sponsorship, media rights, advertising, publisher fees, tickets, and merchandising. The revenue numbers exclude prize pools and player salaries, which are both considered costs of doing business. Newzoo also doesn’t count revenues from online gambling and betting related to esports (via companies such as Bwin or Unikrn). And it doesn’t count investments in esports startups.
Sponsorship is the highest grossing esports revenue stream worldwide, contributing $359.4 million in 2018 compared to $234.6 million in 2017. Growing with a compound annual growth rate (CAGR) from 2016 to 2021 of 49.8 percent, media rights is the fastest-growing revenue stream. By 2021, media rights revenues will more than double compared to 2018, making it the second-largest generator of esports revenues globally, Newzoo said.
Game publisher fees will remain the slowest-growing revenue generator for esports toward 2021, with a CAGR (2016-2021) of 3.5 percent. The segment will see some increase in 2018, up $11.5 million compared to 2017, but is expected to drop entering 2020 and 2021, making it the smallest revenue stream.
The number of people who are aware of esports worldwide will reach 1.6 billion in 2018, up from 1.3 billion in 2017. China will contribute most to global esports awareness, with 468.3 million people. The increasing exposure of esports as a mainstream entertainment industry is driving the growth in awareness in most regions.
Newzoo identified 10 areas as important for the development of esports. The first area is franchising, such as the creation of the leagues for League of Legends and Overwatch. Another area is the importance of winning the hearts of local fans through regional team competitions. Newzoo also sees important scouting opportunities with the development of collegiate esports. It also views the creation of profitable teams as a necessary part of industry maturity.
The market researcher also wants to see mobile esports develop a real identity, and it foresees game-changing technology for esports in the form of blockchain and cryptocurrency. Esports also has a chance to expand viewership through new formats and franchises, such as new takes on competition such as battle royale, popularized by PlayerUnknown’s Battlegrounds.
And Newzoo expects power to shift within the esports economy among teams, organizers, and publishers. It expects media and telecom companies to move in through acquisitions, and it expects associations and governments to eventually play a role in governance.