Billions of Dollars in Esports Investment: Where is it Going?
Esports investment activity has skyrocketed in the past few years according to TEO’s investment data, doubling from 21 investments in 2016 to 47 in 2017, and they are on track to double once again in 2018. Growth in major industry sectors corresponds with notable developments in the esports ecosystem as a whole, while investment trends over the past few quarters hint at its future direction. Here’s an overview of the sectors to keep an eye on:
Investment Developments
Teams: 17 team investments have taken place since June 2017 — more than twice the number of those in all previous years. This upsurge in team investments coincides with the rise of franchised leagues and the stability and predictability of permanent partnerships. Teams such as G2, Cloud 9, and Immortals applied for franchise buy-ins for Riot Games’ North American League of Legends Championship Series (NA LCS), while the latter two secured spots in Blizzard’s Overwatch League. Funding for the teams was used to help cover the $10M-$20M NA LCS and $20M Overwatch franchise application fees. Starting in 2019, the NA LCS’s sister league, the EU LCS, will be the next major league to begin franchising. Current partners Splyce and Vitality have already received funding this year, with Vitality confirming its intention to vie for a permanent spot.
Developers: Game development has been a major sector for esports investments since 2015. Last year saw the most overall investments in this sector, a third of which were targeted at the mobile games market. Mobile games are a rapidly developing area in esports and have been largely successful in China, where King of Glory’s King Pro League peaked at 20 million online viewers in its Fall 2017 season. However, mobile gaming popularity hasn’t yet taken off in the West despite Newzoo’s projection that mobile game revenue will account for 51% of the global gaming market in 2018. Vainglory — King of Glory’s Western counterpart — saw only a fraction of King of Glory’s success in its December 2017 World Championship, which peaked at 56 thousand viewers. Mid-2017 investments in North American developers like META Games and Vainglory’s Super Evil Mega Corp indicate attempts to foster growth and interest in the Western scene.
Streaming: The rise of streaming services has enabled massive growth in esports and remains a dominant medium for reaching fans. With esports audiences expected to grow to 245 million on Twitch alone by 2019, it is no surprise that streaming continues to be a strong focus for investors. In August and September of last year, Western streaming companies like Sliver.tv, an immersive platform utilizing 360° video and VR, and Znipe.tv, an upcoming premium events coverage platform, received $9.8M and $30M in funding, respectively. Gawkbox, a donations-based platform, also received $3.7M. Recent funding in the Chinese streaming market, however, far exceeds that of the Western competition. Earlier this year, Chinese platform Chushou raised $120M in funds from notable investors such as Google, while Tencent pooled nearly $1.1B into competing Chinese services Huya TV and Douyu TV.
2018 and the Future
The growing number of investments in esports reflects a huge potential for further industry growth. As esports becomes increasingly more developed and mainstream, the future will likely see more funding committed to support fan engagement and activation. Esports’ infrastructure is already improving, with event organizers and communities drawing 14 investments by Q2 of 2018, and both sectors doubling their respective number of investments from last year. Likewise, media has hovered in and around the top five esports investment sectors since 2015, and continues to do so in 2018 where it accounted for 7% of all deals. A Slash 2 study found that 92% of fans consume esports content beyond just competitive play, suggesting that media is a powerful avenue for engaging the growing esports audience. Consequently, organizations like Team Liquid have developed production studios that grow their fan bases and integrate sponsors into the esports scene through branded content. As esports continues navigating its way into the Fortnite-era mainstream, 2018’s investment growth is likely only a small taste of what is to come.
