Esports: A new market for sports teams

By Gordon Agius

March 17, 2023

5 mins read


Esports: A new market for sports teams

By Gordon Agius

March 17, 2023

5 mins read


Can esports really be considered a sport if it doesn’t involve strenuous physical activity? Should the outcome of a football match be decided by a game controller? Can the age-old boxing ring really be compared to the virtual battleground? Regardless of the long-debated link between esports and traditional sports, there’s no denying the massive opportunity esports represents for sports teams.

 

Over the past decade, esports has attracted viewers and investment alike. Skyrocketing from a $130 million market in 2012, to an industry worth $1.22 billion in 2021. Fuelled by increasing online behaviour and virtual social interaction such as live streaming of games, infrastructure for tournaments, and burgeoning investment. The industry is forecast to grow to over $5.48 billion over the next 6 years. 

 

So what is esports?

 

Esports is an industry made up of competitive, tournament-led video gaming, with professional leagues, spectatorship, and sponsors. Competitive games range from first-person shooters to massively multiplayer online role-playing games (MMORPGs). The most popular esports tournaments include League of Legends, Dota 2, Counter-Strike, and Overwatch. Revenues are generated from sponsorships, advertising, publishing fees, media rights, and merchandising and ticketing. Certainly, these diversified streams present a wide array of opportunities for incumbents and adjacents to enter the space.

 

 

 

(Newzoo, 2021)

 

What have sports teams been doing in the esports space?

 

Traditional sports teams have taken note of this rise in popularity, and with increasing investment in the esports space. 

 

Over the past few years, various sports teams have partnered to create entire esports leagues of their own. The NFL launched the Madden esports tournament back in 2017. Over the past few years other sports leagues have followed suit. We have seen the likes of the F1 esports series, the NBA 2K league, and the Major League Soccer eMLS. 

 

While traditional sports teams have largely invested in parallel esports league activities, some have now begun to diversify their investments. Furthermore, sports teams have now created fully-fledged esports teams of their own that compete in global esports tournaments. For example, European football clubs such as PSG, FC Schalke 04, and Galatasaray teams now compete in major non-sports related tournaments.

 

Athletes and sports team executives have made other interesting moves into the space. Axiomatic, an esports-focused investment company, is a prime example of this. Formed through a partnership of the owners of Tampa Bay Lightning, Golden State Warriors, Washington Capitals, and Washington Wizards. The aim of this venture is to bring their combined experience managing traditional sports teams, to the esports world. Similarly, Shaq has invested in NRG Esports, a team to whom he brings not just financial backing, but also marketing and promotion with his own unique brand name.

 

 

 

 

Why enter the esports market?

 

Global reach

 

Alongside the rise in investment and revenue from the esports industry, there has been a parallel rise in viewership. The esports audience has grown from 58 million in 2012 to an impressive 490 million in 2021. In fact, the 2019 League of Legends Championship tournament is reported to have drawn more global viewers than that year’s Super Bowl!

 

The key to this success is the fact that esports is geographically and culturally agnostic – video games are enjoyed by people of various genders and backgrounds all over the world. Viewership is skewed towards younger, digitally native audiences, a prime opportunity for businesses to create a customer for life. More importantly, video games and live streaming are easily accessible globally. This presents a contrast to traditional sports which, by their very nature, are steeped in culture and tradition, and tend to be more regionally popular. For example the NFL; while one of the most watched sports leagues globally, it still draws the vast majority of its fan base from North America.

 

Highly engaged audiences

 

Aside from total reach, esports provides another key benefit when compared to traditional sports: a significantly more engaged audience. Large segments of the esports viewing audience engage directly with their preferred esports games. Likewise, 92% play the esports games they follow for at least 1 hour a week. Additionally, 75% are willing to travel to watch live matches.

 

A crucial element is the accessibility and interactivity of esports streaming platforms (including Twitch and YouTube). These platforms provide not just viewership, but provide an opportunity for community and relationship-building. Indeed video games are simply more accessible to the wider public than physical sports. It’s easier for a consumer to download and play League of Legends than it is for one to pick up American Football or Ice Hockey. So naturally, it’s easier for esports to form more meaningful relationships with audiences than it is for traditional sports.

 

Cheaper and easier to enter

 

Esports market is less established, however it’s less competitive and easier to enter. This comes into play in various aspects, from advertising and sponsoring costs to purchasing players and teams. For instance, the Philadelphia 76ers paid between $5 and $10 million to acquire and merge two esports teams. This may seem like a lot, but is actually a relatively small amount in the sports business, considering the average market value of a football player in the English Premier Leagues is around $20 million. Running costs are significantly lower, with smaller teams and significantly less need for technical and logistical support. 

 

It’s also no surprise that the less established esports platforms are cheaper to advertise on than those of traditional sports. What is surprising though is that esports advertising has proven to be better at maintaining audience attention and emotional response. Whilst further driving higher performance on marketing funnel metrics such as recommendation intent. When you take into consideration the  engaged fanbase, alongside the greater disposable income of video game enthusiasts, this makes for some incredibly successful advertising campaigns!

 

Esports vs sports advertising revenue

 

(Activision Blizzard Media, 2021)

 

 

 

What does the esports market mean for sports teams?

 

The esports business is booming, and projected to grow exponentially over the coming years. Organisations within the industry are diversifying revenue streams and making it more resilient through direct-to-fan monetisation. Also, they finding new ways to tap into increased audience engagement through loyalty propositions. In a world where younger, digitally native audiences are becoming more elusive, esports presents a unique opportunity for sporting teams. Not only to diversify revenue streams, but to reach and engage with new audiences – at a fraction of the cost.

 

However, esports doesn’t come without its challenges. These passionate audiences are extremely protective of the industry and video games they love. Businesses who have gone in with the wrong strategy have failed previously. On top of this, as viewership grows, the industry will become increasingly competitive, expensive, and difficult to enter.

 

Sports teams, however, have the unique advantage of operating in a parallel industry. With many aspects of the business, from running a team, to maximising direct-from-fan revenues, can be transferred to esports. Sponsorships have been the foundation of esports revenues, but digital (e.g. in-game items) and streaming are the two fastest-growing revenue streams. Meaning that a growing number of engaged customers to target, and greater attractiveness for sports teams looking to diversify.

 

When it comes to entering an industry where basketballs are swapped for screens and controllers, are you game?

 

Manifesto Growth Architects are the UK’s leading independent consultancy, specialising in growth, innovation and new business models. We are experts at optimising recurring revenue models and building successful customer experiences with companies across a variety of sectors to drive value at every stage of the customer journey. We help some of the top brands in sports to drive growth, customer engagement, and long-term value. Contact us to find out more.

 

If you want to read more, here’s our take on monetisation within the esports industry.


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