The Geek Economics: Making Sense of eSports Industry

  • 16/11/2016
  • Category: Commentaries
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In the late 1990s, National Geographic made a documentary about the millennium life. One of the segment in the documentary mentioned that the “geek” will take over the world. Everything the geek indulges in; including comic books, games, computer, and fantasy world will become global culture. This prophecy seems has its ground on today’s context. Marvel Comics books adaptation to silver screen and intergalactic wars are the hallmark of this prophecy. Like other global trend, the main measurement used in classifying global culture is the magnitude of its profitability. In the last half decade, movies about Marvel universe and intergalactic war surpass the all-time highest gross movies worldwide. The Avengers grossed $1,519,479,547 worldwide and Star Wars Ep. VII: The Force Awakens that reached the top three in the list of the all-time highest gross movies worldwide generated a revenue of $2,058,662,225.

Like its comic books counterpart, online competitive games also become a global trend. Online competitive games such as DoTA 2 and League of Legends, or widely referred to as eSports, have been growing unprecedentedly these past years. Deloitte Global announced that eSports will reap global revenues of $500 million in 2016, up 25 percent from about $400 million in 2015. The audiences of regular and occasional viewers are expected to increase to about 150 million people. In addition, there were 112 major eSports events in 2015 and they generated $61.0 million in value, 70% increase from previous year. Analyst from North America predicts that eSports in the US alone will leap in value from $85 million in 2014 to $1.2 billion in 2018, a 94 percent compounded growth rate, which is three-time larger compared to the projected growth in 2015.

Despite gaining an unprecedented growth this year, eSports revenue is still far away from what conventional sports have gained. Compared to the NFL revenue, eSports industry only made 5% of the total revenue of NFL that was of $11 billion in 2015. However, revenues for e-Sports are predicted to grow about 25 percent in 2016 and it will keep increasing three times by 2018, which is better than most mature sports, many of which have been around for a century or even centuries.  In addition to its promising growth, eSports appeals to a narrow and desirable demography. 75 percent of this demography are millennials aged 18-34, of which 82 percent are men. This opportunity was seized by major digital venture capitals, such as Amazon that acquired Twitch, a platform and community for gamers, for just under $1 billion in 2014.  Non-digital company is also taking part in this conquest. Take the example in 2015 when Swedish media company Modern Times acquired a majority stake in ESL, the oldest eSports company, for $87 million.

Seeing these unprecedented growths of eSports industry, it reminds the world that “geek” culture is now part of the global economics. Its growth is on par with the ageing “geek” millennials that used to play board games, classic computer strategy games, and fantasize on killing dragons. Crave for technology and more complex games or sports by the generation Z is also contributing in this growth. ESports might not surpass the traditional sports anytime soon, but conventional sports revenue gained most parts of its revenues from sponsorship, TV rights, and non-online commercial sources. These revenues pattern are not aligned with the growth in digital trend. Imagine how much eSports will grow once baby boomers and generation X are no longer around and half of the conventional sports revenue sources are funneled to it.

References:

Deloitte, eSports: Bigger and Smaller than you think, London, 2015.

Heitner, D., ‘Why 2016 Should Be A Year Of Tremendous Growth For eSports,’ Forbes (Online), 31st December 2015, < http://www.forbes.com/sites/darrenheitner/2015/12/31/why-2016-should-be-a-year-of-tremendous-growth-for-esports/#577006892b96>, accessed on 12th November 2016.

Newzoo, Global Esports Market Report: Revenues to Jump to $463m In 2016 as US Leads the Way (online), 25th January 2016, < https://newzoo.com/insights/articles/global-esports-market-report-revenues-to-jump-to-463-million-in-2016-as-us-leads-the-way/>, accessed on 12th November 2016.

The Numbers, All Time Highest Grossing Movies Worldwide (online), < http://www.the-numbers.com/movie/records/All-Time-Worldwide-Box-Office>, accessed on 12th November 2016.