The word gaming brings an array of emotions to many. Wasted evenings. Broken controllers. Carefree times. Personally, I recall the late nights I would stay up when I was much younger and play on my PlayStation Portable (PSP), and my parents would walk into my room and I would drop dead, fast asleep. Since then, times have changed.
Now, the stage is different - young kids are even encouraged to game. Money is at stake. We are seeing children in their early teen years winning millions of dollars from gaming, whether that be through commercial deals, prize money, or salaries. With this injection of cash emerges interest, and that is the current state that the esports scene is in.
In addition, we are seeing scientists write papers on the benefits of gaming – communication, reactions, hand-eye-coordination, or strategy, to name but a few. And the esports market has stepped to the forefront of the sporting sector, as an emerging multi-billion dollar per annum player.
The Turning Point
Up until now, the esports world has generated a lot of buzz, but perhaps has had less substance. There have been lots of big wins, but no large acquisitions like the Manchester City takeover.
This is all about to change with David Beckham’s esports team, Guild Esports, planning to raise £20 million via an initial public offering (IPO). Only set up a year ago, the team is aiming for a £50 million valuation, and plans to recruit up to 20 more professional gamers by the end of the year. Not only is this exciting for gamers - the IPO will also be an indicator of investor appetite within esports. Do they see this as a game? Or is it the real deal?
How Has This Happened?
Those who believe that esports have only been around for the last decade, or last couple of years even, have been misinformed. In 1972, the first esports tournament was held, with 24 players competing in Spacewar!, whereby the winner was awarded with an annual magazine subscription. This was followed by a number of classics such as Space Invaders and Pinball in the decades to follow.
Then, without boring you too much on the history of esports, the 2007 Championship Gaming Series in the U.S. finally brought esports into the spotlight and attention of mainstream media. The competition offered over $1 million in prize money and was by far the most lucrative tournament to date. Many often cite the 2007 competition as the true birth of esports – the moment that gaming became more than just a hobby. In truth, since that moment, esports has gradually evolved over the years from a small, niche market, to the multibillion-dollar industry that it is today.
However, the most prominent catalyst for the rise of esports in recent times is Covid-19 (surprise, surprise!). With millions around the world confined to the boundaries of their homes for a seemingly endless period of time due to social distancing measures, the number of gamers has grown, and so too has the online audience of those who watch gamers stream their gaming sessions. The Q1 and Q2 results for some of the largest global gaming companies were fantastic – you can read our Equity Focus report on Electronic Arts (EA) here. No wonder David Beckham has sought to capitalise on this growing market opportunity!
How Do Esports Compare With Normal Sports?
Taking a further look at esports, we can see the level of popularity that the industry currently has around the globe. According to Deloitte, the worldwide esports audience grew by 12 per cent in the year 2019, reaching 443 million people. One can be certain that this number has skyrocketed this year. The hotspots for such gaming activity were principally in Europe, Asia, and North America.
However, these viewing figures are tiny compared to real/normal sports. 3.4 million people watched a recent televised football match between Manchester City and Arsenal. This was one of hundreds of televised matches in England each season, and didn’t even feature the two most popular U.K.-based teams. Furthermore, taking into account that football only represents a small proportion of the global sports sector, one can already see the sheer difference between esports and normal sports. Nevertheless, the growth potential of the esports sector is clear, and within the buzz that the industry has generated recently due to Covid-19, it is evident that the viewing figures for 2020 will be much higher than last year. But let’s not get ahead of ourselves – for the time being, it is probably a step too far to consider esports to be on a level playing field with the English Premier League or the NBA.
In addition, over 2018 and 2019, there has been a record-setting 5.3 billion euros in global transaction volume within esports. This backs up the fact that the sector is not just held up by viewing figures - there is capital involved in the sector as well. The 2019 Fortnite winner, a 16-year-old, who became $3 million richer overnight, only emphasises this point. And with David Beckham pushing for an IPO valuing his esports team at £50 million, it is clear that money is being poured into the industry, and does not look like it will stop any time soon.
The Future Of Esports
With the likes of Mercedes, McDonald’s, and Coca Cola pushing into the industry, world renowned law firms such as Bird & Bird advising clients on multi-million-dollar deals, and David Beckham intending to make an esports team public, the upward trajectory of the industry is inevitable.
The question is, how far can esports go? The issue that the industry will face its target audience. Older individuals do not have the time to watch the Fortnite World Cup or the ePremier League Invitational Tournament. For us students, gaming and watching gamers can be considered a social occasion. But for the older population who like sports, this isn’t generally a viable option or preferred pastime. Who knows what the future holds for esports? Perhaps, FIFA tournament (the video game) will be shown live on the BBC and Sky, as they already are on YouTube and Twitch. Only time will tell!
In the meantime, watch out for the Beckham IPO. It could just be the start of something very special.