If the business of sport is, above all, a business of content, it is little wonder that eSports has garnered so much attention in recent months. Not only is the rapidly growing sector coveted as an ideal platform through which to reach a captive, youthful digital community of global gamers, it is also recognised as a content-rich marketing opportunity and a lucrative potential revenue stream at a time when the value of sports content in general is rising and the distribution and consumption of it is moving increasingly online.
For all that, competitive gaming remains a largely untapped market, however. Projections regarding the future growth of the sector vary greatly depending on the source. According to Newzoo, the research firm generally accepted as the industry standard for market statistics and trends in eSports, the global eSports economy is projected to grow to US$696 million this year, with year-on-year growth of 41.3 per cent set to take the overall figure above US$1.8 billion by 2020.
Globally, the eSports audience is expected to reach 385 million this year. North America, where several of the world’s biggest leagues and tournaments are held, is currently the planet’s largest eSports market, with estimated revenues of US$257 million in 2017 – although industry experts expect Asia to come to the fore in the coming years. Newzoo also projects that eSports ‘enthusiasts’ will soon outnumber occasional viewers, with the number of those deemed more engaged than their peers expected to grow by another 50 per cent towards 2020.
Much of the eSports sector’s growth to date has been driven by a handful of dominant players, namely the video game publishers who develop the titles and organise leagues and tournaments for those who play them. Riot Games’ League of Legends, a multiplayer online battle arena, is the planet’s most-played and most-watched eSports property, with around 100 million monthly active players and viewership running into many millions. Other dominant titles include Counter-Strike: Global Offensive, or CS:GO, and Activision Blizzard’s Overwatch, a co-operative first-person shooter which is the subject of a city-based franchise competition, the Overwatch League, set to launch in September. Some industry observers believe Overwatch will be the next big eSport, particularly since it generated some US$767 million in digital revenue in 2016, and franchise licences in the new league are understood to be going for up to US$15 million apiece.
Another prominent player in the eSports space is ESL, the most established event organiser in the business. Founded in 2000, it is the company behind the Intel Extreme Masters (IEM), the industry’s longest-running event series which has hosted dozens of eSports events around the world, including in New York, Kiev and Shanghai. Its flagship event, the season-ending IEM World Championship, is held in Katowice, Poland and attracts well over 100,000 attendees.
Yet the ongoing growth and surging interest in eSports has brought new entrants to the market. In recent months, the established players have been joined by a host of organisations and individuals from traditional sports. The Philadelphia 76ers became the first North American professional sports team to take ownership of an eSports team when they acquired Team Dignitas last year, and since then the National Basketball Association (NBA) has itself taken a major step into the eSports space. Next year, in partnership with video games developer 2K Games, the league will launch the NBA 2K eLeague, a competition that will eventually include representative teams owned by each of the NBA’s 30 franchises.
This trend of inward investment only looks set to continue, particularly given the relatively low cost of entry and the similar business models between traditional sports and nascent e-gaming properties. A recent report published by Deloitte’s sports practice predicted that major sports organisations will continue to look to diversify their businesses and seek new ways of unlocking greater value from their assets, driving more and more to invest in areas with significant growth potential outside of their core business, including mixed-use venue facility developments, startups and, increasingly, eSports.
Though live competitions are already big business, the practice of developing specialised arenas for eSports events remains in its infancy. Dedicated venues have been cropping up over the past two years but it is possible that many event promoters, particularly traditional teams and leagues with operating rights and access to their home arenas, will look to adapt existing sports facilities. Reports suggest the NBA, for example, will host the final of its eLeague at a league arena.
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Without doubt the best known media outlet for eSports content is Twitch, the social video platform and hub for online gamers that was acquired by Amazon for US$970 million in 2014. Twitch, which spawned out of Justin.tv to become its own entity in 2011 – a move deemed a game-changer for the eSports industry – is a community that enables users to view and stream event content, interact with others and follow their favourite gamers.
Having established itself as the leader in eSports broadcasting – with more than 100 million monthly unique users and more than 2.5 million broadcasters – Twitch has added social, e-commerce and revenue-sharing components to its business model. Twitch Pulse, a Twitter-style tool for broadcasters to engage with their audience, has already launched, and from this spring game developers will be able to sell game content to viewers of their products, while streamers will be able to earn a small cut of any income from games sold on their channels.
Other prominent players in eSports broadcasting include YouTube, which launched YouTube Gaming in 2015, and BAMTech, Major League Baseball’s video streaming and technology services company, which agreed to pay at least US$300 million to Riot Games until 2023 for the streaming rights to League of Legends in December. As part of that deal, which includes an exclusive tech development arrangement, BAMTech will launch a streaming app for the game this year, while the company will also monetise the service through advertising and sponsorship and manage distribution of some content to other streaming platforms.
Where traditional sports have trended from TV towards online streaming, the digitally native gaming industry continues to move in the opposite direction. While the eSports sector grew up online and has developed a robust audience without the reach of established broadcasters, eSports rights holders know that the key to achieving mainstream success in the long run will be in distribution and accessibility – even if few industry experts believe linear broadcasts will ever be a major part of eSports’ future.
Until 2015, virtually all eSports action was shown via the internet by endemic operators like Twitch and YouTube, yet the traditional media networks like ESPN in the US and the UK’s BT Sport have begun to muscle in. This trend has helped turn media rights into eSports’ fastest-growing revenue stream, with Newzoo predicting that content licences will generate US$95 million this year on a global scale, up 82 per cent from 2016. Much of that has to do with the size and commercial appeal of the sector’s young and engaged audience, not to mention the fact that viewership for certain tournaments is already surpassing that of some major offline sports.
Other broadcasters, meanwhile, have opted to create their own events, primarily as a way of controlling content production as well as distribution. Perhaps the best known example of this approach is the Eleague, which was launched in late 2015 by US broadcaster Turner Sports and the WME | IMG agency. Alongside the arrival of major broadcasters, it was only a matter of time before the big beasts of the social media world would invest in eSports, too – both Facebook and Twitter are now snapping up streaming rights as they continue to pursue their respective video-led growth strategies.
In concert with the arrival of mainstream media – and, to some extent, the promise of future interest from the growing number of over-the-top (OTT) services coming to market – it is anticipated that eSports properties will continue to move away from a dependency on sponsorship from endemic companies. Non-gaming brands like Coca-Cola, Red Bull and MasterCard have already invested but it is likely that a broader range of companies will look to get in on the act. Newzoo projects that brands will invest US$517 million in eSports in 2017, with overall investment set to double by 2020 – even if over-supply and a perceived lack of organisation is still a barrier to entry for some potential investors.
Indeed, the cluttered nature of the eSports industry, not to mention the lack of a coherent global calendar of events and regulatory framework, has given rise to a Wild West characterisation, while integrity concerns remain despite attempts to instil better governance and structure to the space. Looking ahead, it is likely that the need to address such concerns will only heighten as the eSports industry continues to mature and evolve – and, of course, receive incremental inward investment.
Taking inspiration from competitive gaming, drone racing is fast becoming both an attractive spectator sport and a compelling broadcast product. Organised drone racing competitions such as the Aerial Sports League and Droneworlds are nothing new and have amassed strong followings, but it is the Drone Racing League (DRL), launched in 2015, that has emerged as a leading player in the space.
With professional pilots flying custom-designed aircraft through labyrinthine circuits at speeds of up to 90 miles per hour, the DRL is touted by its chief executive, Nicholas Horbaczewski, as “the sport of the future”. Pilots wear goggles that display a real-time video feed from an onboard camera, providing an immersive first-person view (FPV) that can be accessed by spectators on site and online.
In recent months, commercial interest in drone racing has surged. In January, insurer Allianz agreed to title sponsor the DRL, which has staged events at major sports venues across the US. Under that deal, which will run for an initial two years and is reportedly worth over US$10 million, the six-event Allianz World Championship will launch in June, with a stop in Munich and a season finale slated for London’s Alexandra Palace.
As well as Allianz, the DRL is sponsored by the likes of Toy State and Bud Light, while it has also secured broadcast coverage in 75 countries, including on Sky Sports in the UK and ESPN across the Americas. About 28.2 million viewers tuned in on ESPN during the league’s first season in 2016, according to CNBC.
Drone racing has grown, for the most part, out of the burgeoning market in unmanned aerial vehicles, but it has also arrived hand in hand with the proliferation of consumer drones sold at retail outlets and, more broadly, the growing popularity of eSports. ABI Research predicts that the global drone industry will grow by an average 32 per cent annually over the next decade to reach US$30 billion. China’s SZ DJI Technology and France’s Parrot SA are the first and second largest makers of non-military drones respectively, but other companies like GoPro have recently entered the market and the DRL itself plans to release of a consumer version of its drones later this year.
It is in the commercial arena, however, that it is assumed drone technology will have the most profound impact. While venture capital funding for drone startups slowed in 2016, numerous deployments for drones were showcased at this year’s Consumer Electronics Show (CES) in Las Vegas in January, spanning everything from construction site surveillance to specialised craft that can help fisherman locate shoals of fish.
Besides racing in organised leagues, an obvious application for drones in sport is in live event presentations and ceremonies. Perhaps the most widely publicised glimpse yet of the creative possibilities for drone technology came during this year’s Super Bowl, where 300 of Intel’s Shooting Star LED quadcopter drones – a swarm of which can be controlled by a single operator and a computer – were used to create a dazzling airshow as part of Lady Gaga’s halftime performance.
Since its launch in 2014, the FIA Formula E Championship, the world’s first all-electric racing series, has been trumpeted as both a catalyst for technological innovations in the automotive industry and a test bed for alternative energy solutions. With new, potentially revolutionary technology at its core, the series aims to foster meaningful collaboration among key industry stakeholders and to attract and educate society to the merits of electric vehicles (EV). That explains why, at a time when concerns over carbon emissions and poor air quality in city centres are on the rise, Formula E has come to be seen as a champion for the sports greening movement and an incubator for intellectual property relating to sustainable urban mobility.
Formula E is, by design, a showcase for the latest advancements in EV technology, but the ultimate goal of the series and its automotive industry partners is to help turn new-age concepts into viable consumer products – the logic being that technology developed for racing and tested under competitive conditions can eventually be applied to production cars.
With mass market adoption a key driving factor behind its creation, the series has set out to allay concerns over the limitations of EV such as short battery life and a lack of charging infrastructure. As well as encouraging its host cities to install more charging stations, the series supports the development of wireless chargers and promotes its commitment to double battery life in its cars in the coming years. It has also relaxed powertrain rules this year to encourage its team constructors, including major auto manufacturers like Jaguar, Audi and Renault, to develop new solutions for road-going cars.
Additionally, Formula E seeks to influence consumer perception and raise awareness of EV through the use of technology-based fan engagement initiatives such as Fan Boost, where three drivers are given additional power via an online vote, and the Roborace, a driverless electric race series that accompanies the main Formula E circuit. That effort is supported by the series’ corporate partners, who associate with Formula E in part as a means of showcasing and developing their own green credentials.
Logistics firm DHL, for example, is working to implement an environmentally conscious approach to the series’ shipping requirements, while Qualcomm uses its association with Formula E to promote its wireless charging technology. CMC Capital Partners, which joined Formula E’s stable of investors in February, plans to use its involvement in the series to promote sustainable mobility across Asia and mainland China – a market that is set to play a leading role in EV manufacturing and production in the coming years.
Whilst Formula E continues to forge its niche, the next evolution of EV technology is widely considered to be in flying transportation that marries autonomous electric cars with drone technology. At the recent Geneva Motor Show, ItalDesign and Airbus unveiled their Pop.Up concept, a futuristic self-driving ground vehicle that is also capable of taking to the skies by way of a self-piloted multi-copter. The technology is seen as a way of alleviating traffic congestion in future cities, and its makers envision it one day being integrated into urban transportation networks.
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