The Explosive Growth of eSports

THE EXPLOSIVE GROWTH OF ESPORTS AND WHY IT MATTERS TO EVERYONE

C A SUAL G AME S SEC T OR REP OR T 2016

CGA. CGA.

THE EXPLOSIVE GROWTH OF ESPORTS Rapid Growth in Revenues & Audience Continues Global Esports Audience Growth 2014-2019 +11.2%

OCCASIONAL VIEWERS

CAGR

ENTHUSIASTS

2014-2019

+11.2%

+13.3% YoY

YoY

114

111

90

MILLION

125 MILLION

MILLION

MILLION

115

165

131

180 MILLION

MILLION

MILLION

MILLION

2014

2015

2016

2019

Key Facts • The global esports audience was 226 million and the number of Esports Enthusiasts reached 115 million in 2015, a YoY growth of 27.7% • Global revenues in 2015 reached $325 million, a growth rate of 67.4%. North America accounted for $121 million of this.

• In 2019, esports revenues will have surpassed $1 billion and the audience will have grown to 435 million worldwide.

• Trends behind esports are redefining the DNA of future successful games and provide new opportunities for game companies big and small.

Source: Newzoo 2016 Global Esports Market Report

Esports Trends Are Redefining The DNA of Games The combination of increasingly sophisticated and immersive gaming experiences, streaming technologies and social media platforms is transforming the video games industry. The personal gaming experience is being supplemented or even replaced by a community experience, and moving from personal entertainment to spectator sport.

This shift in consumer behavior is creating new and exciting opportunities all along the gaming value chain, from the way games are developed and commercialized to enabling gamers themselves to monetize content streamed via their own channels and to their own audiences.

These underlying trends that are driving the growth of esports are redefining the DNA of games and digital media as a whole and accelerating the disruption of traditional media.

THE GROWTH OF ESPORTS

Six Trends Behind Esports Growth

BUSINESS 1. Games as a service 2. Cross-screen entertainment

TECHNOLOGY 3. Creator & live streaming tools 4. Video platforms & communities

CONSUMER 5. Creation & Involvement 6. Consumers entertain consumers

Esports Revenue Growth 2014-2019 | Global

+40.7%

MEDIA RIGHTS, MERCHANDISE & TICKETS, ONLINE ADVERTISING, BRAND PARTNERSHIPS, ADDITIONAL GAME PUBLISHER INVESTMENT

CAGR 2014-2019

+42.6% +67.4%

$1072 MILLION

YoY

YoY

$463 $194

$325

MILLION

MILLION

MILLION

2014

The coming year will see the Esports Economy grow to $463 million, a year-on-year growth of 43%. North America will strengthen its lead in terms of revenues with an anticipated $175 million generated in 2016.

China and Korea together will represent 23% of global esports revenues, totaling $106 million in 2016.

2015

2016

2019

The market will continue to experience rapid growth, crossing the $1 billion mark in 2016.

Source: Newzoo 2016 Global Esports Market Report T H E G R O W T H O F E S P O R T S | CA S UA L G A M E S A S S O C I AT I O N   3

Average Spend Per Fan Grows

38%

Comparing esports and traditional sports makes sense to a certain extent. As the Esports Economy matures, draws more advertisers and increases its merchandise and ticketing revenues directly from consumers, the average annual revenue per fan will continue to rise toward that of traditional sports.

Of global revenues in 2016 come from North America with 23% from China & South Korea

This coming year, we anticipate $3.5 per fan, still almost five times lower than that of basketball ($15 per year) but up from $2.2 in 2014. Using a conservative scenario, we estimate the annual average spend per esports fan will reach around $6.0 by 2019.

44% Of the esports audience In 2016 comes from APAC

ESPORTS GROWTH Esports Revenues PerSCENARIOS: Enthusiast |REVENUE 2012-2020PER ESPORTS ENTHUSIAST Based on Annual Average Revenue per Enthusiast

$20

>$2Bn

The average annual revenue per fan of the NBA

$11

$15

TOTAL ESPORTS REVENUES

$1.0Bn

The average annual revenue per fan of basketball

2013 GLOBAL NUMBER OF ESPORTS ENTHUSIASTS

$3.5

$2.2

$0.46Bn

4

© 2016 Newzoo

90M

REPORT SCENARIO

>$1Bn

AVERAGE REVENUE PER ENTHUSIAST

2014

$6.0

$7.6

TOTAL ESPORTS REVENUES

$0.19Bn 2012

ALTERNATIVE OPTIMISTIC SCENARIO

2015

2016

131M

2017

2018

2019

2020

180M Source: Newzoo 2016 Global Esports Market Report

Source: Global Growth of Esports Report Premium | January 2016 | www.newzoo.com/esportsreport

NUMBER OF MAJOR EVENTS & TICKET 2% 4%REVENUES Split Per Region | 2015

NUMBER OF MAJOR EVENTS & TICKET 2% 4%REVENUES

8%

Split Per Region | 2015

NUMBER OF MAJOR EVENTS & TICKET 2% 4% REVENUES Split Per Region | 2015

NUMBER OF MAJOR EVENTS & TICKET 4% 2%REVENUES

8% 8%

Split Per Region | 2015

Events at the Heart of the Esports NUMBER OF MAJOR EVENTS & TICKET REVENUES 2% 4% Split Per Region | 2015

8% 8%

11%

8% 8%

THE GROWTH

112 37% 2%

OF 11% ESPORTS

112 37% 0%

events

0%

10% 5% 18% 11% NUMBER OF MAJOR EVENTS & TICKET REVENUES 4% Region | 2015 10% events 2% Number of Major Events & Ticket Revenues | Per 12% 11% 5% Split Per Region | 2015 8% 8% 18% 37% 11% 0% 10% 2% events 2% 4% 12%5% 11% 8% 8% 35% 18% 37% 11%0% ticket reve 10% events 2% E-EU 12% 2% 4% 11%NAM 35%W-EU 5% 8% 8% 18% 37% 11% ticket revenues events W-EU E-EU CHINA 12% 10% 11% NAM 8% 35% 5% 18% 36% 8% 11% 37% ticket revenues events W-EU E-EU CHINA S. KOR 12% 10% 11% NAM 18% 36% 8% 11% 35%W-EU ticket revenues events NAM E-EU CHINA S. KOREA RE 37% 12% 18% 11% 36% NAM W-EU E-EU CHINA S. KOREA REST APAC 12% 11% ticket ticket revenues major events 18% 36% revenues events NUMBER OF MAJOR EVENTS & TICKET REVENUES 2% 4% Split Per Region | 2015

NAM

18%

NAM NAM

NAM

W-EU

1120% 2% 37%

2% events

$21M $21M

12%

$21M

$21

$21M

112

12%

112

112

112

112

112

8% 8%

E-EU

W-EU

W-EU

CHINA

E-EU

W-EU

E-EU CHINA

S. KOREA

E-EU

CHINA

CHINA

S. KOREA

S. KOREA

36%

S. KOREA

REST APAC

REST APAC

LATAM

REST APAC

LATAM

LATAM

MEA

MEA

Source: Newzoo LATAM MEA2016 Global Esports Market Report

REST APAC

There were 112 major esports events in 2015 and they generated an estimated $20.6 million in ticket revenues. In terms of the number of events, North America dominated by hosting 37% of all events. This amounted to 42 events throughout 2015. Western Europe followed, hosting 18% of all events. MLG, ESL and Blizzard were the organizers behind the majority of North American events. Dota 2 and CS:GO are the most played games at tournaments.

Once again, the biggest prize pool belongs to The International, which topped $18.4 million, with just $1.6 million coming from Valve. The Frankfurt Major, also Valve’s event, awarded Europe’s largest prize pool: $3 million.

$61.0M

Global Growth of Prize Money | 2005-2015

+70%

REVENUES

YoY

$36.0M 31%

SHARE MOBILE REVENUES

$19.8M

$3.6M

$4.4M

$6.1M

$6.4M

2005

2006

2007

2008

Source: Newzoo 2016 Global Esports Market Report

$3.5M

2009

$5.2M

2010

$9.7M

+3.1%

$13.1M REVENUES CAGR 2014-2018

2011

2012

2013

2014

2015

T H E G R O W T H O F E S P O R T S | CA S UA L G A M E S A S S O C I AT I O N 5

Reaching a Valuable Audience Age/Gender of Esports Enthusiasts | Global | 2015

50%

F51-65

Of Enthusiasts have a high income vs. 34% of the total online population

1%

F36-50

7%

M10-20

23%

F21-35

62%

16%

115

F10-20

7%

M51-65

of Enthusiasts participate in team sports vs.

47% of Occasional Viewers

MILLION

65%

M36-50

1%

11%

M21-35

38%

of Enthusiasts participate have a full-time job vs. 48% of the total online population

Source: Newzoo 2016 Global Esports Market Report

Spending on Mobile Games | Global | 2015 Esports entertains a young and desirable demographic with males aged 21-35 representing 38% of the Enthusiast audience. The majority of the audience has a full-time job and a higher average income.

56%

43% 39%

38% 26%

29%

27% 16% 12%

8% 3% 3%

Nothing ONLINE POPULATION

6

Minor Spenders

Average Spenders

OCCASIONAL VIEWERS

This group is also more likely to be spending big on mobile games with 8% of Enthusiasts classed as big spenders. Proof that the esports is a trend relevant to all segments of the games industry.

Big Spenders ESPORTS ENTHUSIASTS

Source: Newzoo Consumer Insights

Mobile Esports: China Leads Surge

THE GROWTH OF ESPORTS

China boasts both the largest esport audience and the largest mobile games market in the world.

Perhaps unsurprisingly then, it has become a leader in the mobile esports or competitive gaming scene.

Chinese game companies launched more than 30 competitive mobile titles last year and in December 2015, 24% of top 100 grossing mobile games on Chinese Android stores were esports games. Many mobile esports tournaments were organized throughout the year with millions participating both on and offline, making mobile esports the most discussed topic in Chinese game industry last year. The highest prize money so far was recorded as 1 million RMB ($150k) for the national champion of Tencent’s League of Kings.

Top Android Esports Titles in China by Downloads | Dec 2015 Game Titles Happy Lord GunZ Dash League Of Kings Speed Up Wefire Quan Min Chao Shen Thunder Fighter Tian Tian Xuan Dou We Shoot King of Fight Long Craft You Long Ying Xiong

Genre Cards Casual (Parkour) MOBA Casual (Parkour) FPS MOBA FPS Action FPS Action Action Action

League of Kings holds #1 on Android’s Top Grossing Ranking.

1.3 million

Viewers of the final of Netease’s Fantasy Westward Journey 2 tournament.

Mobile Esports Games by Publisher | Android | Dec 2015

24% Other companies

42%

Tencent is the dominant esports publisher

Tencent

50%

of Top 100 Grossing mobile games on Android in Dec 2015 were esports titles

Netease

8%

Source: Newzoo/TalkingData China Mobile Games Market Monitor

T H E G R O W T H O F E S P O R T S | CA S UA L G A M E S A S S O C I AT I O N 7

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About Newzoo Newzoo is an innovative global market research and predictive analytics firm with a primary focus on games. Newzoo provides its clients with a mix of market trends, financial analysis, revenue projections, consumer insights, data modelling solutions and predictive analytics services across all continents, screens and business models and works for the majority of top 25 public companies by game revenue.

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