Sports industry losses from COVID-19 can be rescued by esports

Finding touchpoints between esports and traditional sports for new sponsorship opportunities

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Key Insights:

  • The coronavirus spurs major event cancellations and negative impact on revenue.
  • Lack of growth in the sports industry has been only spotlighted now due to the pandemic.
  • Some teams and leagues have already been successful in implementing an esports shift while the pandemic continues.
  • The esports community expands amid the pandemic while opening new avenues for brand partnerships and exposure.

With the onslaught of the COVID-19 pandemic, new shelter-in-place constraints, and social distancing measures, many industries have taken losses these past 6 months. Throughout sports, the pandemic’s effect is seen in all branches of the industry: from ticket sales, media relations, sponsorships, television networks, and even the game itself. Major league and minor league sporting events were forced to reschedule, or outright cancel, this year. The International Olympic Committee announced last March that they would be postponing the 2020 Tokyo Olympics until July 2021, a date that is subject to change as the coronavirus pandemic evolves.

Analysts estimate that the fallout of coverage, gameplay, and all other factors in sports will cause a $12 billion loss of revenue this year. Furthermore, 3 million American jobs are known to be in danger due to the cancellations of sporting events. This blow in revenue is seen across all sports. The NBA/WNBA has almost half of its $9 million in total revenue resting upon purely media fees and coverage rights, something vastly endangered by reduction of events and programming. The NCAA receives $1 billion in revenue in television and marketing rights fees, while the NHL, MLB, MLS, MLWS, as well as tennis and golf, have most of its revenue in ticket sales — which will be little to none in their upcoming (or ongoing) seasons.

Sponsors are also expected to take a large loss due to the pandemic. Global sports sponsorship rights fees are expected to fall $17.2 billion, suffering a 37% year-over-year decrease, dropping from $46.1 billion in 2019 to $28.9 billion in 2020. With increased broadcasts of games played with no fans in the stands, sponsors are battling for screen time in traditional and live streaming broadcasts. Sponsors are actively looking to create new revenue generation channels as earnings have started to decline.

The coronavirus has only spotlighted the lack of growth in the sports industry.

Traditional sports have been lagging behind esports and other entertainment industries in the market and viewership growth for many years now. Although sports broadcasting has the largest amount of viewership worldwide (soccer, alone, has an estimated 4 billion viewers globally), estimated projections showcase that sports will grow very minimally in the next decade.

Although it is well known that the sports industry itself is much larger than the esports industry, the accelerated growth projected for esports showcases some of the challenges that traditional sports face. From 2012 to 2018, esports viewership grew from 134 million to 395 million (at an astounding 195% growth rate). By 2022, esports is expected to grow another 63%. The questions for sports broadcasters and sponsors are: how can they shift their methods of broadcasting, sponsorship opportunities, and games to not only sustain losses taken from the pandemic but to broaden their reach and gain market share? Some sports leagues and teams have already taken steps toward shifting their revenue models.

Some teams and leagues have already been successful in implementing an esports shift while the pandemic continues.

Methodologies introduced since the pandemic began:

  • NASCAR has introduced their drivers to compete with esports gamers in a virtual racing competition using the video game iRacing.
  • The NFL hosted their own Madden 20 tournament played by star football players and hosted on various FOX Sports Network channels.
  • Formula E Racing started the “ABB Formula E” racing series featuring top drivers and gamers in partnership with UNICEF.
  • The NBA has created a $100,000 tournament participated by pro-basketball players with the sports videogame NBA2K20 for a coronavirus relief efforts.

The postponement of the Cup, Xfinity, and Truck Series have inspired NASCAR to shift its focus to esports. Esports athletes and NASCAR drivers alike competed in several races mimicking the ones that would have occurred during the normal season, filling up time slots lost due to in-person race cancellations, while keeping televised sponsorship opportunities intact. In addition to managing a major loss of revenue, NASCAR has utilized the pandemic to promote the iRacing game and its Coca-Cola eRacing series (one of the longest esports competitions, entering in its 11th season) toward both the racing and gaming communities.

After the success of the iRacing tournament, FOX Sports followed suit by implementing their esports tournament for the NFL, integrating their pro-football players, commentators, and analysts with EA Sports’ Madden NFL 20. BBC Sports also successfully broadcasted two digital sporting events — the fourth and fifth stages of a 37km cycle race over a virtual representation of the Schallenberg mountain known as the Digital Swiss 5, and the first leg of the Formula E Race at Home Challenge.

Other leagues took the coronavirus and the increased interest in sports-esports partnerships as both a chance to promote their sports videogames, and to bring relief to those affected by the pandemic and economic recessions while promoting social distancing. Due to the NBA season being indefinitely postponed, 16 NBA players were invited to compete in an NBA 2k20 tournament for a chance to win $100,000 for an organization involved in coronavirus relief efforts. This tournament was exclusively broadcasted on NBC Sports channels. Similarly, FIFA recently launched the Stay and Play Cup in April, which marked a unique moment in video gaming. Players from 20 of Europe’s biggest football clubs, such as Atletico de Madrid, Chelsea, and Manchester United, played together virtually on Twitch, introducing many of their traditional sports-minded audience to a more esports-oriented online platform.

With the spotlight on esports, college athletic programs have promoted their esports teams more than ever before. The Big-12 Conference launched their first-ever Madden NFL 20 conference this summer, bringing in broadcasting rights to showcase their games on the ESPN+ streaming service. According to Karla Carney-Hall, Vice President of Student Affairs at Illinois Wesleyan University, esports is helping her school recruit higher-caliber students.

For instance, Division I schools such as Boise State, UCLA, and UC Irvine were able to compete in a Rocket League tournament in April.

Esports/Gaming community expands amid pandemic, opens new avenues for branding and exposure

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Traditional sports moving to esports platforms reveals the appeal of esports potential. Twitch, an online gaming/esports streaming platform, has doubled its monthly viewership from December, reaching 1.7 billion in May. This is just a small example of the macroscopic changes resulting from a world that is becoming increasingly digital. As eCommerce and online retail grow, digital entertainment booms and the surge of online streams are sure to follow. Esports and gaming companies are riding the crest of this wave, which is bolstered by the pandemic and stay-at-home orders and led to increased online socializing. U.S. gamers reported spending 45% more time playing video games during quarantine compared to previous weeks.

With large tournaments lasting up to several hours and a sizable viewership per stream, streamers and their audiences have created a culture around both participating in and appreciating games — each encouraging the other. Live chatroom features bring a sense of community that pay-TV and broadcasts have been unable to replicate. Furthermore, among young adults, gaming now has higher penetration than Pay TV, according to Deloitte’s Digital Media Trends. With in-game purchases and merchandise generating revenue for game creators, other brands ranging in industries from fast food to automotive have reaped the benefits of the esports/gaming hype.

As more people join the gaming and esports community with higher engagement times, opportunities are opening for innovative advertising and sponsorship campaigns.

Trends for esports sponsors

  • Greater support for brands in esports: Streamers are more tolerant of advertising and esports fans support brand involvement
  • New stakes for traditional sports: Traditional sports owners and players are investing in esports, while brands target similar audiences with ad integrations applicable to both the esports/sports communities
  • Social good movements bring increased traction: support from government-owned organizations and strategic partnerships set precedent for cross-platform collaborations

Set to grow at a CAGR of 17.72% from 2020 to 2023, the global esports market is expected to reach 2.17 billion by 2023. Brands have sponsored major esports events and forged meaningful bonds with teams and fans. For instance, popular Fornite gamer Tyler ‘Ninja’ Blevins partnered with Red Bull in 2018, bringing Ninja Red Bull cans into U.S. stores and creating backstories of the gamer and the drink. Making headlines across the esports community and popular news networks, the Red Bull stunt trailer gained 1.7 million views on Twitter and 78K likes. Other notable examples include Cloud9 and BMW, Team Liquid and Honda, and League of Legends and Louis Vuitton.

Beyond viewership, engagement, and excitement from brand sponsorship and partnership deals, the esports community and its respective streaming sectors are known to support brands. Vice President of Ogilvy’s Sports Network, Brad Silber, states that “over half of esports fans and viewers have a positive attitude about brand involvement in their games.” Furthermore, Deloitte reports that streamers tolerate more ads compared to their TV counterparts. Audience responses to ad campaigns often determine their success or failure, impacting brand perception. Though ad blocking has increased and consumer contempt for large ad loads are evident, esports audiences seem to have the opposite reaction. For the nascent esports community, authentic brands are appreciated and seen as drivers for their growth.

Though cancellations of in-person events and tournaments have resulted in lower revenue from sales and merchandise, Newzoo’s adjustment of expected revenue from esports for 2020 only decreased by 3% from a projected $1.1 billion to $1.06 billion, reporting a $40 million deficit. Compared to the large losses in traditional sports, the online nature of esports has kept revenue channels relatively robust.

Even leaders in the traditional sports industry are recently seeking new stakes in esports. For instance, Patriots owner Robert Kraft bought Boston Uprising, an Overwatch League team, and Magic Johnson purchased ownership of Team Liquid back in 2016. The interest in esports opportunities is especially noteworthy for traditional sports as the overlaps in sponsor categories indicate similar target audiences. Coca-cola, Red Bull, Pepsi, and Ford, among others in the food, tech, transportation, and entertainment industries, are seen to be cross-sponsors of esports and traditional sports. Methods of implementing ads are likewise transferable between the two industries, including placing logos on player jerseys, adding designs onto arenas, and displaying products on banners.

The interest in esports extends far beyond the sports/esports sectors, as health and government organizations have recently backed major gaming platforms to incentivize individuals to stay at home. In the World Health Organization’s Play Apart Together campaign, major platforms such as Activision Blizzard, Amazon Appstore, Youtube Gaming, and Twitch participated, teaching consumers about health guidelines while keeping them engaged at home. The movement for collaboration and social change is bolstering esports popularity in the short term and is helping set a precedent for similar cross-platform movements in the long term.

As digital sporting events become the new normal amidst COVID-19, traditional sporting event cancellations have curbed revenue generation, pushing many teams to integrate esports platforms to preserve a sense of community. This movement throughout traditional sports is contributing to the recent gains in esports popularity fueled by streaming culture. Brands should be aware of potential ad campaign opportunities to transfer traditional sports sponsorships to their electronic counterpart.

Written by

Founder and CEO of 4D Sight, working on deep video monetization across various mediums. To learn more please visit www.4dsight.com

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