Australia - You Should Be Paying Attention to eSports

By Jake McGaw

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Ten years, even five years ago, could you imagine a world in which people would pay to watch others play video games? Did you ever think there would be a future in which your children can be classed as a professional athlete for playing their most beloved video game?

The simple answer to both these questions is no, you probably wouldn’t.

For everyone who can’t possibly imagine that reality, if you take a look at the facts you’ll come to realise that this is real. eSports is making this real, and it is definitely on the rise. It’s an ecosystem experiencing near-exponential worldwide growth. This is spreading and evolving in Australia and as all predictors indicate, this will become a major player within the Australian sporting economy.

The Global Expansion of eSports

eSports in a global context generated a total revenue of $906 million US dollars this year alone (2018), had a worldwide viewership of 380 million people and is projected to reach $1.65 Billion US in total revenue by 2021. Considering that this is an industry that just 6 years ago generated an approximate revenue of around $130 million US, this is quite substantial in itself.

With revenues and growth of this magnitude, you would expect there to be a decent sum in it for the players - and you would be right.

According to esportsearnings.com, the largest prize pool for any eSports event goes to “The International 2018” for the game “Defense of the Ancients 2” (DOTA 2), which had a total prize pool of $25,532,177, beat last year's prize pool of approximately $24.7M. And yes, this wasn’t paid in any form of crypto or in-game currency - this was some of that good ol’ paper money.

And if we have a look at how this compares to other traditional sports in terms of prize money in 2017, we can see in the space of less than 10 years, eSports competitions are already contending with traditional sports, which have been around for a substantial period of time.

In a viewership context, we have seen this grow alongside the revenue numbers. According to NewZoo, eSports is set to go well beyond this years viewership number of 380 million, with an expansion at the Combined Annual Growth Rate (CAGR) of 14.4%, which is set to push viewership numbers to approximately 557 million unique viewers by 2021 - that’s a lot of eyeballs.

When we also take into consideration that Twitch.tv, a video game streaming platform which was purchased by Amazon in 2014 to the tune of almost $1 Billion US, watched a total of 6 billion hours of content on their platform in 2017 - that gives considerable amount of evidence to suggest that people are into their eSports.

Australia has some catching up to do...

As with all things tech related, Australia is ‘there’, but ‘not quite there yet’. PwC’s Australian Entertainment & Media Industry Report 2018 recently indicated that the Australian eSports industry totalled $8 million in revenue last year, and is forecast to grow to $21 million by 2022. By all means, this is an indicator of major growth. But when you compare it to the global forecast of $906M, you’ll see that the Australian eSports industry really is a small fish in a big pond.

Although the numbers are considerably lower here at the moment in the land down-under, the eSports community is definitely growing. At the 2017 Intel Extreme Masters (IEM) hosted in Sydney, 7000 physical attendees and 8 million online viewers watched 8 teams battle it out on CS:GO. This year, TEG reported that over 12,000 people attended the Melbourne eSports Open.

To get to this stage so far, significant investment has been put into the industry.

You may have seen Guinevere Capital become a major investor in LG Dire Wolves in 2016 - from all reports this was the first eSports team purchase in Australia. Then the Essendon Bombers & Adelaide Crows bought their first eSports teams in 2017, and more recently the AFL announced a joint venture with Riots Games to bring an Oceanic League of Legends tournament to Melbourne.

So what’s next for eSports in Australia?

The F Word… Franchising

It could be wagered that the fact that a traditional sporting franchise, such as the AFL's entrance and investment into eSports, will garner and propel the industry forward in Australia.

You only need to look at the investments made by larger sporting franchises in the US and UK to see how these companies have positively affected the reach of eSports. And what an investment by sporting franchises could mean for the industry in Australia.

In the US, Ted Leonsis and Peter Gruber, co-owners of the Golden State Warriors, Los Angeles Dodgers & Washington Capitals bought the esports franchise ‘Team Liquid’ in 2016. Then in 2017, the New England Patriots (NFL) and New York Mets (MLB) bought eSports teams in 2017, with both eSports teams set to compete in the Blizzard's Overwatch League.

Over to the EU and we have seen prominent football clubs, such as Manchester City, FC Copenhagen and PSG buying into the eSports clubs, fielding teams that not only compete on the physical but also the virtual pitch. The list goes on.

With traditional sporting franchises in more advanced markets acquiring teams to add into their own franchise, not only can it be shown that eSports is starting to gain mass adoption in their economies; eSports are not just starting to look a lot like professional sporting leagues, they are truly becoming one.

So is this next for Australia?

Looking at the trajectory of the eSports ecosystem globally, you would see that this is a similar progression overseas as there are in Australian markets - there is a peak of interest, then teams are bought, traditional sporting bodies invest, finally more events and sponsors enter to bring the industry to the next level.

Currently, Australia is at the start of that journey. Who knows what the future will bring, but with the right companies, investors and national talent entering the industry one thing is for sure - eSports is a thing that you should be paying attention too.