How eSports has become a $1 Billion Industry

It is just insane when you compare what's happening with today's tournaments, to those that were happening nearly 20 years ago. For example, the winning moment and awards ceremony of the 2002 CPL Winter Counter-Strike tournament the underdogs winning $30 thousand dollars.

There are a few different start dates for eSports, depending on what you think of as eSports. In 1972, Stanford University held a tournament for a game called Space War, where two opponents operating space ships basically hurdle around a black hole trying to shoot one another, and the prize for that tournament, with only 24 players, was a subscription to Rolling Stone magazine. Also in 1980, you had a tournament for Atari's Space Invaders game, with around 10 thousand competitors, although obviously, that wasn't exactly head-to-head play, but a high score tournament. And the prize there was a cabinet, or a sit-down version of the 1980 game, Missile Command. And then in the late 90's, we started to see things pick up. You have the 1996 Street Fighter Alpha 2 tournament. In the San Francisco Bay area with 40 competitors and a grand prize of $91 dollars.

The next year, there was the Quake Red Annihilation Tournament with two thousand entrants, and an interesting side-note here is that the winner, Dennis Fong, is actually the guy who popularized the W-A-S-D movement method for first-person shooters. If you didn't know, now you know. It's just a random interesting fact that you can act like you already knew, that you can show off and also interestingly enough, the Ferrari of John Carmac, a lead developer for that game right around this time,

The internet was spreading far and wide, allowing for more than just single-player games. Right, and so that meant playing online with people around the world, and that was really one of the first triggers for eSports explosion.

You had the Cyber Athlete Professional League, formed in 1997, and they actually hosted the tournament we talked about at the start of this article, and soon after this, a couple of games have became long-lasting successes for eSports were released.

StarCraft was released in 1998, Counter-Strike 1.6 was officially released in 2000, in fact, some competitive teams that we still see around today were formed around this time. You had SK Gaming in '97, Evil Geniuses and KT Rollster in '99, Team Liquid in 2000.

The line between eSports in 2000 and the $1.1 billion dollar revenue stream that we're seeing today was not inevitable. In fact, global eSports didn't exactly take off until the beginning of this decade.

For example, even in 2007, there were only around 500 eSports tournaments and around $7.4 million dollars in prize money across all games, with some of the top games at the time being Counter-Strike, StarCraft, Warcraft III and Halo 2. And there were a couple of developments that really influenced just how big eSports is today.

The first being that eSports was massively popular in South Korea long before North America and Europe and some gaming executives likely noticed. In the late 90's, the South Korean government invested heavily in telecommunications and internet infrastructure. By around 2000, this had caused many internet cafes to pop up, which in turn, helped produce gamers and competitions.

With the South Korean government even founding the Korea eSports Association in 2000 to help regulate the emerging industry.

If you're even remotely familiar with South Korea, or gaming, StarCraft was the game of choice. In fact, it was so popular, all the way back in 1999,

KT, the Korean telecoms company, was sponsoring a team, and many more would follow, including Samsung, and the Korean conglomerate, CJ. By the mid-2000's, multiple companies were sponsoring teams to live in communal houses, something fairly common today, and all the way back in 2004, the finals of the StarCraft Sky Pro League attracted 100 thousand fans to watch live. There were even live television broadcasts, and entire channels dedicated to eSports. This wasn't something that even Blizzard, the company that developed StarCraft, had expected. The South Korean eSports scene basically showed what eSports could be global, in the words of Grubby, and former professional Warcraft III and StarCraft 2 player, "Pro gaming exists in it's current form and size in large part thanks to the people who made it possible in South Korea.

Other countries took years to catch up and are to this date, trying to mimic some of their successes." Keep in mind, there were attempts to bring eSports mainstream elsewhere in the mid-2000's. For example, the finale of the CPL World Tour in 2005 was broadcast live on MTV, in 2006 and 2007, the USA TV Network broadcast recordings of MLG's Halo 2 Pro Circuit. But ultimately, when eSports really started taking off worldwide was when we all got Twitch.

In 2010, according to esportsearnings.com, there were 964 eSports tournaments and around $6.2 million dollars in prize pool money up for grabs. The next year, when Twitch launched, the number of tournaments and prize pool money both nearly doubled 1,644 tournaments, and almost $10.5 million dollars. Those numbers kept growing and growing, and by 2014, the number of tournaments had almost doubled again, to 3,062, and the prize pool money had nearly quadrupled, to $37 million dollars.

Not only that, Twitch is beginning signal growth in the eSports industry. It also continues to propel a lot of the eSports industry to this day. For example, the January 2017 final of Counter-Strike's Elite, carried about 228 thousand total viewers on television.

On Twitch, the same event broke Twitch's record for concurrent viewers at that time, with one million viewers.

But what made Twitch such an important part of eSports was the fact that it was live, right? Arguably, one of the biggest reasons that traditional sports events like football, basketball, whatever, can be so captivating, is you're seeing it develop in real time, it's happening live. Of course, not only that with Twitch, it's not just a watching platform, you can also engage with the stream itself or with one another in the chat, even if at times, live chats can be horrible, horrible chaos. Along with Twitch's explosion, the top three games that are the most popular, long-lasting, and carry the most prize money today, were released around the same time. League of Legends in 2009, Counter-Strike: Global Offensive in 2012,and Dota 2 in 2013.

Last year, tournaments for those three games alone made up half of the $159 million dollars available in prize pools. When you look at some of the most important tournaments for those games since Twitch came out, it really just shows how much eSports has taken off in recent years.

The audience has grown, events become huge productions, both computer and non-computer brands alike are investing in and sponsoring tournaments, for example, this was the League of Legends world championship back in 2011. – A hundred thousand dollar tournament held by League of Legends and Riot Games, with the Pay Safe card, HD stream is what you're viewing, Steel Series helping out with some of the peripherals, and as well as the Alienware computers, taking these guys all the way to the finish line. Ok, there are some computer and non-computer brand sponsorship, there's a commentator team, but that tournament also wasn't held in a massive convention center.

Fast Forward to 2018

Now, fast forward to the 2018 League of Legends Championship between FNATIC and Invictus Gaming. Which, by the way, pulled 99.6 million unique viewers, and 44 million concurrent viewers at it's peak. The sponsorships at the bottom of the screen, they're not just computer brands, you've got State Farm, and MasterCard, you've got a very professional looking commentator team hosting the games in a huge stadium in South Korea, and the awards ceremony is very pumped up, too.

Riot Games, the game's developer, also told us that besides the world championship, there are sponsors in other leagues include: Nike, Mercedes-Benz, and Gillette, and that's hugely important because that means that not just computer or game relevant companies are paying attention.

It's past the small bubble, and when you have these kinds of household names that you would see on legacy sports properties, it helps legitimize the newer things, and with eSports, it also allowed bigger prize pools which actually, on that note, the prize pool for last years League of Legends Championship was about $6.5 million dollars, with the winning team taking home almost $2.5 million dollars.

You can look at the contrast between Dota 2's tournament, the international, and 2012, and 2018, and it really makes some things clear. The prize pool back in 2012 was $1.6 million dollars, the audience didn't quite fill up the auditorium for the event, and then we fast forward to the 2018 event, and the growth is incredible. One thing, the prize pool was $25 million dollars, the most any eSports tournament ever, and for Dota 2, the way that the prize money was raised, is unique. Fans have the option, and I apologize for the gamers out there.

Fans have the option to buy something called a battle pass. Right, it features various perks, features, cosmetic items for fans, for example, this year there are different levels of battle passes ranging from 10 to 45 dollars, and you can buy an unlimited number of those since they just give you more items. The key here is that a portion of the money for the battle pass goes directly into increasing the prize pool. In other words, the prize pool is somewhat related to the popularity of the game. Looking at the prize pool, as well as just the production of the broadcast, you know there was a lot of money involved.

There were 3D animated characters, a sleek commentator stage, even in-field reporting, everything you'd expect from a major sports event. Of course, the branding and the sponsorships, the reason sponsorships and how the audience engages are so important is because companies are very interested in reaching the eSports audience, especially because they're considered far more difficult to reach than non-eSports audiences.

Nielsen, the marketing analytics company, probably best known for the rating system on broadcast television, they sum up why that's the case in their eSports playbook for brands, writing: "Interest in professional competitive video gaming is growing, with one in five fans globally beginning to follow eSports just within the past year”

"eSports fans around the world include some of the hardest to reach consumers for brands, because of their cord-cutting and ad-blocking tendencies."

How big is eSports now that it's convincing some of the biggest household names to sponsor teams and events?" The top three games in the space each carry more than 250 million watch hours in 2018, and keep in mind, that is just eSports, that's not Let's Play videos, that's not causal gaming streams, it is an audience that is dedicated, it's interesting, it is engaged, it's large, and it's growing. Last year, there was an estimated audience of 395 million people, or just so you understand the growth, here, about a 17% increase from the year before.

When making comparisons, if you're looking at just American men aged 21-35, eSports popularity is on-par with baseball, and ice hockey the money just seems to be pouring in. Total eSports revenue was projected to jump to $1.1 billion dollars by the end of this year, with sponsorship and ad revenue alone making up more than half of that, and while these numbers are significant, they look even larger at the individual level.

Top Earning eSports Players

The top-earning eSports professional, Kuro, has made $4.2 million dollars in lifetime earnings from Dota 2 tournaments. The top 50 eSports pros have made at least $1.3 million dollars each, and the top 500 are said to have made at least $200 grand during their careers. Understand, that's not even including: signing bonuses, sponsorship deals, the money made during streaming, and so unsurprisingly, these numbers have made it so that those on the outside have become very attracted. For example, FNATIC, who has teams across Counter-Strike, Dota 2, League of Legends and more, has attracted venture capital investment from places as far as London and Hong Kong, we've also seen people like Drake, and Scooter Braun investing in 100 Thieves, you have the likes of Steph Curry and Andre Iguodala getting in on a $37 million dollar investment with TeamSoloMid, and the names getting involved, it just goes on and on, right, you have the likes of Shaq, Alex Rodriguez, Mark Cuban, Jennifer Lopez, and as of right now, everything is still projected to get bigger, and bigger.

Analytics groups are projecting continued growth of audience and continued growth of revenue. NewZoom, market analytics group, even openly shows where brands can get involved in different eSports leagues, there's still tons of opportunities in League of Legends Leagues and the Overwatch League, which actually, in recent days, Overwatch League has been a particularly unique success.

Blizzard, who owns the game, struck a deal to broadcast Overatch League on Disney XD, ESPN, and ABC.

Overwatch League and Twitch have also introduced a new way to make eSports tournaments even more engaging with their audience. Last year, Twitch introduced a viewer rewards system, where Overwatch League fans can earn in-game skins, and exclusive emotes, but how they showed their support, was a bit different, by using Twitch currency, known as bits, they could share with specific emotes, that would go towards unlocking skins and emotes for the entire Overwatch community. Fans ended up spending about $150 thousand dollars on those bits, and that is the kind of engagement, of course, that an advertiser would be interested, right?.

The more the audience participates, the more likely they're going to see sponsorship spots, the more likely it's going to stick. The thing is, this is not a win for everyone. The future of individual eSports titles can seem a lot more uncertain if you compare them to traditional sports. The unique thing about eSports is that games aren't quite as static as say, basketball or soccer, right? It's not like the fundamental mechanics of playing soccer are going to change so much that, they have to make like a soccer two. Whereas with video games the technology and game engines are constantly advancing, while some of the still major eSports titles have been around for years, like the Counter-Strike: Global Offensive, the Dota 2, to the point that they almost look graphically low-quality, you still have to be on the lookout for the new stuff taking over, kind of like a game cycle.

Now let's talk about Fortnite?

Last year, for example, Fortnite tournaments offered the third most when it came to prize pool money, with $20 million dollars, which put them behind Dota 2, and Counter-Strike, and behind Fortnite, you had Overwatch and PUBG, relatively newer games, followed by the 10-year-old League of Legends. This is signaling a potential change in the top eSports titles, and in case you're wondering, how this year's shake up in terms of prize money. Epic Games, the developer of Fortnite, is putting up, and we talked about this on the show when they announced $100 million dollars in prize pool money, it's incredibly likely they're going to take that number one spot in the category this year.

One of the big things to understand is that is this year, and anything could change. Maybe Fortnite and the battle royale game style will fall out of popularity, I think that it's not likely, any time soon. I mean you're talking about a genre, and specifically games that have lowered the bar as much as you can, and I mean that in a positive way, they're free to play, it's on PC, consoles, you can get it on your phone!

I don't know how people effectively play the game, on their phones, although I see kids doing it, and I think that, specifically, is only going to get bigger, and bigger with the introduction of 5G. Maybe a change is, maybe people start finding the genres stale, and they want to go back towards narratives, it's hard to predict the market. With all that said, in the meantime, eSports as a whole, will almost certainly continue to grow and it's really going to be up to the big stakeholders in the community to figure out the best way to push the eSports industry forward.

Twitch, as you probably already know and I'll also say YouTube Gaming, have a responsibility, need and benefit, from figuring out how to keep viewers engaged, kind of like with the partnership that we saw with the Overwatch League, and developers will be tasked with creating and definitely updating games that are competitive.

What do you think? Comment and let us know how eSports will do in 2019 / 2020