Esports was already a fast-growing market in Europe, expanding at about 23 per cent a year since 2016, but now COVID-19 is pushing virtual gaming properly into the mainstream.
Esports refers to any competitive game played online with multiple players and has been growing in popularity for the past decade. It’s perhaps best known for fantasy battle games such as League of Legends, Dota 2 and Counter Strike, which have spawned huge global audiences.
Growth has been facilitated by the increased availability and reliability of live-streaming services such as Twitch and YouTube. Deloitte estimates that the European esports market was worth €240m in 2018 and was forecast to grow to €670m by 2023. It was enjoying an audience of about 86 million in 2018 and that was estimated to jump to 105 million this year. Those predictions came before esports got a turbo boost from the COVID-19 pandemic.
Now with stadiums empty and sporting events cancelled across the globe, a second wave of virtual sports, based on real sports, is gaining in popularity. Major sporting leagues, at risk of losing millions in revenue from sponsors and advertisers, have been quick to move their tournaments online. Leading players have lent their star power, bringing on board their ample fan bases. Sports journalists, with nothing else to write about, are covering these online esports events daily. Tom Murray, sports lawyer at Mishcon de Reya said it’s unsurprising that many broadcasters and leagues are turning to esports to fill the content chasm, as “from a club’s perspective, such events provide a perfect opportunity to further monetise their existing assets (their players) and also allow teams to attract a younger more digitally-savvy demographic.”
Spain’s La Liga recently hosted a three-day charity tournament through Electronic Arts’ FIFA 2020 game. The event, which was ultimately won by Real Madrid forward Marco Asensio, was live-streamed and attracted an audience of 11 million through social media platforms.
More significantly, in the absence of live sports viewing, it was also shown by major broadcasters such as Movistar, ESPN and Sky, helping the competition reach numbers of viewers that would have been unheard of before the outbreak.
Formula 1 also raced to replace its regular calendar with a series of virtual events.
“Featuring a number of current F1 drivers, the series has been created to enable fans to continue watching Formula 1 races virtually, despite the ongoing COVID-19 situation that has affected this season’s opening race calendar,” F1 said in a statement.
Current Formula 1 drivers Charles Leclerc, Alex Albon, George Russell, Lando Norris, Nicholas Latifi and Antonio Giovinazzi all signed up for the second instalment of the F1 Esports Virtual Grand Prix in early April, which was aired by the UK’s Sky Sports.
According to the Deloitte study, revenue from media rights was expected to increase by about 500 per cent from 2016 until 2020 in the European esports market. That again was before the pandemic effect was factored in and millions of sports viewers across the continent were deprived of their sporting fixes.
To be fair, many professional sports leagues had already been dipping a toe into a virtual version of their respective sports, even before the current crisis. Advertisers and broadcasters were waking up to the opportunity of reaching a coveted, but hard to target demographic, more inclined to watch games online than on traditional broadcast channels, or in printed media.
More than half of avid esports fans are estimated to be in the 21-35 age bracket and 53 per cent of those are in the higher-income bracket, according to Newzoo research. About 65 per cent are likely to be in full time employment.
In Europe, Germany is the established leader with a share of just under a third of the entire market. Recognising the potential, the government last year became the first country in the world to establish a dedicated visa category for esports athletes, to attract the best and brightest to the industry. The visas were due to take effect from March this year.
Germany is home to well-established brands such as ESL, the world’s largest esports company and SK Gaming and hosts more esports tournaments than anywhere else. It’s also the headquarters of the League of Legends European Championships and the Virtual Bundesliga.
The market’s potential had already captured the attention of investors keen to take a slice of the esports pie, with a growing number of mergers and acquisitions in recent years. With a clear and compelling post pandemic growth story, that trend can be expected to continue.
Recent deals have included a $10 million investment by Joseph Tsai, the co-founder of Alibaba Group in Berlin-based G2Esports. Deutsche Telekom took a 25 per cent stake in SK Gaming in December last year, joining other shareholders FC Köln, Mercedes-Benz, and Alexander T. Müller, who all also hold 25 per cent.
Head of the Sports Group at Mishcon de Reya, Simon Leaf warns that those investing in esports should make sure they are properly protected, warning that they have seen an increase in disputes between parties that have rushed into arrangements. “In particular,” he warns, “parties should be considering important intellectual property provisions that appropriately set out who owns what and what happens to any content that is generated or passed between the parties as a result of the relationship.”
“A number of esports-related companies who have been involved from the start but have grown significantly in recent months are starting to wake up to the realities of the need for them to get their ‘house in order’ when it comes to compliance-related matters. Most issues can be resolved relatively quickly – so it’s important that they stay on top of this in order to attract and retain external investment to further turbo-charge their growth.”
The longer the COVID-19 lockdowns rule out traditional sport, the longer their virtual replacements will have to lock in their audience. However, the real test will come when normality resumes and viewers and players can choose whether they prefer the comfort of their living rooms over the excitement of the stadium. By then, the real and virtual worlds could be co-existing in a far larger sports market.