The Business of Esports

While we weren’t looking, video gaming grew into something called esports—a professional sport complete with well-paid players, huge fan followings, sold-out arenas, lucrative sponsorships and hefty tournament payouts. For video game developers and publishers, esports functions as both marketing expense and operating income. Esports can keep the general public engaged in video gaming and willing to spend more on games. Today’s dominant video game, League of Legends (LoL), was developed by Riot Games, which was purchased by Chinese tech giant Tencent in 2011. LoL uses five-player teams who control characters with differing abilities and attributes The goal is to push into the opposing team’s base and destroy it. Because each game takes place on the same map, fans can easily follow what’s going on and every game offers a balanced playing board. Live tournaments fill huge stadiums like the Staples Center in LA and Seou

l’s World Cup Stadium. Prize pools often reach eight figures, and big-name sponsors like Samsung, Red Bull and Coca Cola, pony up for advertising. Esports tournaments also attract tens of thousands of fans, and millions of online viewers. To lead off this special luckbox leans in report, the editors joined forces with Newzoo, a leading global provider of esports analytics, to provide an introduction to the opportunities that lie ahead in the fast-growing world of competitive electronic gaming.

Newzoo: Amsterdambased Newzoo, a leading global provider of games and esports analytics and research, provides esports market insight and data to the world’s largest entertainment, technology and media companies. The firm specializes in daily consulting on investment, marketing, sales and product development.

SPECIAL SECTION Electronic Gaming & The Business of Esports

Companies ..... 15 Investors ....... 16 Audience ....... 18 Prizes . . . . . . . . . . 19 Valuations ..... 20 Players ........ 21 Fortnite ........ 24 Stadia ......... 26 Glu Mobile ...... 28

The final match up at the Mid Season Invitational of League of Legends 2015 Season, held in Tallahassee, Fla.

KEY TERMS

Esports: Professional-level competitive gaming in an organized tournament or league with a specific goal, such as winning a championship title or prize money.

Streaming: One person, or sometimes a group of people, streaming live video via a streaming platform to enable viewers to see what’s happening at that moment.

Media Rights Revenues: Revenues generated through media property, including all revenues paid to industry stakeholders to secure the rights to show esports content on a channel. It includes payments from online streaming platforms to organizers to broadcast their content, foreign broadcasters securing rights to show content in their country, or copyright costs to show video content or photos of an esports competition.

Sponsorship Revenues: Revenues generated by teams and organizers through sponsorship deals. This includes all deals relating to sponsoring an event, including product placement, sponsoring teams, and payments by brands for the use of team, event or game-specific IP rights in their marketing communications. Any advertisements sold as part of a sponsorship package are also included in sponsorship revenues.

Game Publisher Fees: Revenues paid by game publishers to independent esports organizers for hosting events. This excludes investments or spending by game publishers on their own events because that is considered part of their regular marketing effort.

Wagering On Esports

Esports betting resembles traditional sports wagering, which has long been a fundamental part of that industry. In particular, esports betting in the United States is on track to grow significantly because some states are legalizing betting for certain sports, including esports.

Fantasy drafting is gaining popularity with fans, and Riot Games offers it for free in connection with its major leagues and World Championship event. Esports organizations appear ready to provide incentives for fantasy drafting by offering rewards, such as in-game currency and cosmetics. In addition, betting operators will continue to expand their sponsorship and will offer more forms of esports betting, such as liveaction betting on results (bookmaking).

Newzoo predicts fans’ collective spending on esports betting will soon surpass their spending on esports merchandise and tickets.

As the Esports Audience Grows, So Do Valuations

To illustrate the rapid and widespread adoption of esports, luckbox provides analysis and investment perspectives from Konvoy Ventures, a venture capital firm that invests in earlystage companies in esports and video gaming

By Josh Chapman

The DreamHack 2015 tour drew a massive crowd at a stop in the Romanian city of Cluj-Napoca.

Video Gaming: The Next 1 Billion Players

The cost of gaming via PC or console is decreasing, which should fuel adoption and boost esports

Video gaming is heating up around the world. In fact, more than 2.3 billion people are playing and more than 380 million watch esports. Consumers are spending more discretionary income on digital entertainment while the price of video gaming equipment is decreasing. It’s a combination of trends that should result in continued consumer adoption and accelerating monetization of the global video gaming industry.

Meanwhile, video gaming is becoming more socially acceptable for players in a variety of age groups. That not only includes today’s teenagers and millennials but also the “Atari Generation.” About 43% of mobile gamers are parents who continue to play as adults. Additionally, it’s not only men that play video game—women account for 45% of gamers and 30% of esports viewers in America.

At the same time, the lower cost of playing seems likely to entice more people into taking up video gaming.

PC and console costs

Players have two hardware options