The growth of Esports investment in Africa

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gg
Nov 14, 2019 · 4 min read

“Gaming organizations are beginning to spring forth across Africa”.

kucheza
kucheza

The Esports market has seen growth at a tremendous pace over the past few years. Total esports revenue jumped from $493 million in 2016 to $655 million in 2017, and total revenue could exceed $900 million in 2018.

Closing in at a billion dollars, with a global audience of over 300 million fans, this industry has dedicated fans following their favorite gamers or persons at any given time. Sponsorships and advertising are the largest contributor to this revenue, however, media rights to streaming is consistently growing at a significant pace with Twitch and YouTube gaming being the biggest players in this space. However, Mixer, Microsoft’s latest streaming platform is trying to encroach on that space that has been occupied by those 2 giants. They recently poached 2 big names — Ninja & Shroud — from twitch to an exclusive streaming on their platforms.

Esports investments are growing on a global scale, with over $4.5B USD invested into the industry in 2018 alone (Deloitte 2018). Interest among traditional investors is indicative of the maturity of the industry and its growing mainstream appeal from an investor perspective. The esports ecosystem offers a variety of different investment opportunities across a range of subsectors. Some are unique to the industry, such as team organization, while others hold similarities to other traditional industries, such as consumer products and event planning, which could be more palatable to investors entering the space for the first time.

The African market is rife with a lot of hurdles that affect the growth of esports as a whole. From the high cost of data to the infrastructural and electrical problems. According to one professional gamer, “We wanted to join global tournaments, but we couldn’t because you have to have a server in your region,” Youssef Mohsen said in a phone interview from Anubis Gaming’s office in Cairo, Egypt. “ The only problem we’ve faced is that there is no support from the publishers.” Many gaming tournaments — like the very popular The International 2017 with a record breaking $24,687,919 prize pool, for its annual Dota 2 tournament — are lacking African contestants. This is not for a lack of skill, but because the entire continent is disqualified from international tournaments due to a lack of game-specific servers, typically run by major game publishers like Activision Blizzard, Valve, and Riot Games.

However, despite these limitations, the opportunities are endless because the continent represents a massive untapped pool of esports talent that will stop at nothing to play on an international level. The rise of competitive gaming hinges on the rollout of more advanced network infrastructure. South Korea, for example, has esports ingrained in society that professional gamers enjoy celebrity status and compete in tournaments live in front of crowds of hundreds of thousands. This has been made possible by some of the most advanced fibre infrastructure in the world. When it comes to gaming, fast and consistent internet speed matters. Even a minor delay or disruption in speed of service can cause a major impact to real-time, multiplayer games.

Financial and infrastructural investments are needed to move Africa to compete with the rest of the world on a level playing field. Until that happens, we will continually be playing catch up, which will make us lose out on the per-capita investments and revenue esports brings. However, the future looks brighter as gaming organizations are beginning to spring forth across Africa, which is slowly attracting the eye of the international community. Broadcast partnerships are also growing as Kwesé Sports partners with ESL to bring the world’s largest esports tournaments to Africa sometime this year. As the African audience keeps growing, more of these publishers will have no choice but to invest in servers around the continent.

Media platforms & advertising investment will need to be focused on fan engagement. This ranges from advertising agencies that support non endemic brands seeking to gain exposure within the space to companies exploring new ways to get viewers more engaged with the influencers and the teams they watch on a regular basis through different streaming services.

With a young, actively engaged and growing demographic, the esports industry will see an increasing number explore different ways to engage with the ecosystem. The African market would need to find ways to creatively and actively engage its audience. This would be interesting to observe as media and advertising has seen significant growth all around within the last couple of years. In South Africa TV advertising spending amounted to 1.2 billion U.S. dollars in 2016; by 2018, it is expected to reach 1.32 billion U.S. dollars. At the same time, television advertising spending in Kenya is forecast to grow from 341.7 million U.S. dollars to 414 million between 2016 and 2018.

Finally, private equity investors aren’t going to be left out of the gold rush as there is a growing worldwide amount in private equity ranging from direct investments to event coordinator companies. As event coordinators become increasingly important in the esports industry and the landscape grows more competitive, coordinators are looking for ways to differentiate themselves.

Kucheza Gaming

A guide on esports in Africa.

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