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GET IN THE GAME HOW TO PROFITABLY ENTER ESPORTS A COMPARATIVE STUDY PRESENTED BY
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SUMMARY OF THE STUDY This study will accelerate any new entrant’s knowledge to the esports industry, both providing the opportunities and risks for them to be aware of, and how to take advantage of the former, and mitigate the latter. This has been done in the context of how esports compares to other entertainment mediums, giving the reader familiar points of reference. Investors, brands, governments, partners, and potential suppliers to this market will benefit enormously from the insights provided by the study. The study itself is broken down into three sections. These provide a framework to view esports through. I use sports as a comparator to the emerging franchise model; the music industry as a comparator to the touring model; and the film & cinema industry as a comparator to the grassroots of esports. Within each of these sections the main commercial levers are investigated, including opportunities in: ticketing, broadcasting rights, sponsorships, digital assets, partnerships with pro players, fan demographics, merchandising, the potential of gambling within the industry, the role of bricks & mortar and other key areas.
Answering the key issues in esports today As well as providing comprehensive guidance to those looking to enter the esports world, the study aims to answer three key questions, namely: 1. Where is the main area of opportunity for commercial growth in esports? 2. Is esports growing the gaming sector or is it cannibalising another part of it? 3. How robust is the esports industry? The study answers all of these questions thoroughly and provides a firm footing for new entrants to proceed.
WHY THIS STUDY? No other study to date has attempted to review the mechanics of profitability of the esports industry, nor provided context around commercial performance of the industry. It is an independent and agnostic study, and so the conclusions reached do not sugar-coat the outlook for those within the system - it just reflects where the data suggests that the industry is at. The study is the result of 18 months of deep industry analysis combined with expertise from the esports and live entertainment industries from David Fenlon and the ESI.
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EXAMPLE SECTIONS FROM THE STUDY To give an understanding of the depth of the research we have provided a couple of snippets below:
The financial profile of an esports fan is highly attractive to advertisers On a very basic level, esports fans should be attractive to sponsors and advertisers. They are relatively high earners, with 61% of US esports fans earning more than $50,000 (c.£38,350) per year. This is in contrast to the average Premier League fan who earns £29,5886 per year, or the average NFL fan’s household, which has an annual income of $49,3017 (£38,038). Esports fans have much more disposable income than fans of traditional sports, and are a hidden goldmine for any sponsor / advertiser who can tap into this disposable income. Per individual, they earn at least 30% more income than their Premier League counterparts, and it could be significantly more as time goes on. This is because esports audiences are skewed towards millennials, but traditional sports have an already aged viewing population. Thus, one would expect the average earnings of an esports fan to rise substantially in the next 5 – 10 years, where traditional sports fans may even see a decrease in disposable income as more and more of them start to retire. Visually, the current contrast in earnings can be seen in the graph below:
AVERAGE ANNUAL SALARY: PREMIER LEAGUE FAN VS ESPORTS FAN VS NFL FAN £45,000.00 £35,000.00
£38,349.44
£38,038.11
Esports Fan
NFL fan household income
£29,588.00
£25,000.00 £15,000.00 £5,000.00 £0 Premier League Fan
Realization of this compelling opportunity, and maximizing profits, is fundamentally dependent upon fan tolerance to commercialization. Find out the implications of this and the challenges of grabbing share of wallet.
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Esports audiences are very cheap in comparison to traditional sports These audiences are extraordinarily cheap in comparison to their football counterparts. The League of Legends BAMTech deal for $350m over 7 years (that never happened), would have been a meagre $500k per weekend of matches. The Premier League receives $15.1m per game. Even Overwatch’s $90m deal over two years with Twitch, the
most lucrative of the esports Leagues by Broadcasting revenue, comes in at less than $1.3m revenue per long weekend. Even if we exclude all Chinese viewing figures, esports audiences are cheap and measurable. When put side by side with other sports the potential value to be unlocked is startling:
AVERAGE MATCH REVENUE IF ESPORTS AUDIENCES TRADED AT THE SAME PREMIUM AS ESTABLISHED SPORTS £28.5M
30 25 20 15 10 5
£1.7M
£3.0M
£5.0M
NFL Broadcasting Premium
Serie A Broadcasting Premium
La Liga Broadcasting Premium
£1.3M
0 Overwatch League
Overwatch Revenue
Premier League Broadcasting Premium
Premium
Explore the commercial trends of this emerging market.
Grassroots is a hidden area of immense opportunity If we consider the journey of an esports fan to the point of becoming a successful pro we can start to see the importance of local infrastructure on their progression. From the point of discovering the game through playing and watching online, and even to their first big event, a fan will have some form of contact with a constituent of the esports industry. This could be a publisher when they are buying skins or digital assets off them, to a broadcaster streaming content from competitions, to the awareness of teams and buying tickets from event organisers when going to their first big event. However, the areas of most potential
influence are around the community and local events, which have been barely touched by investment. Whilst this infrastructure is starting to establish itself, it is very much in flux in contrast to the film & cinema industry, whose local model is firmly entrenched (especially in the West). As we shall discuss below, how the local community operates is clearly different when comparing the West to the East. The dynamics of these local communities are important to understand as there are large areas of opportunity waiting to be cultivated.
FROM “JOE TO PRO” - ESPORTS FAN AND PLAYER JOURNEY TO PROFESSIONALISM Discover game
Play game
Play and watch online
Engage in community
Play & watch local esports events live
Qualifiers / Scout games
Professional Player
Regional Champion
World Champion
Unadressed area of esports Both the film & cinema and esports industries are dominated by online visual streaming, and this feature in itself is worth further investigation. Far more people watch content from both industries online than go the event itself and the streaming edge to both industries makes for a different dynamic than the sporting or music industries. Unlike the music industry, the onset of digital platforms and distribution has not been destructive to the revenues of the industry as a whole. For clarity we have defined the film industry as inclusive of cinema and box sets found on streaming platforms. Given how long the event side of the industry (cinema) has been in place vs. personal consumption it provides three very interesting perspectives:
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1. What to expect revenue-wise from events whose audience essentially watches a screen for 3 hours; 2. The dynamic between technology products in flux against a wellestablished event medium; 3. A genuinely successful subscription service to consume content which continues to grow. Find out how to harness the enormous opportunity in the grassroots part of the market.
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David Fenlon David is a commercial consultant by background, having advised dozens of multinational brands on key strategic investment decisions across various sectors. He specialises in the entertainment industry, working with some of the largest global brands. He has worked with two of the largest global video game publishers on their events (esports and game launches); the largest music label group in the world; and has also worked in the gambling sector.
David Fenlon
Director David Fenlon ltd
Esports Insider Based in London and founded in 2016, Esports Insider is the leading esports business news site, consultancy group, media and events company. On EsportsInsider.com, we feature the latest stories alongside opinion pieces and interviews with those making waves in esports business. We offer B2B and B2C content services (editorial, podcast and video), which can be via ESI channels, or it can be fully whitelabel, and we have the print magazine The Esports Journal, which we run with our partners LMG. We are also known via our esports industry focused events and have produced more esports business events than any other, globally. These have included events such as the ESI Forum Series, ESI London, the annual ESI Hall of Fame (London and Los Angeles thus far), and ESI New York. We also offer whitelabel events services. Via our connect and advisory services we help create lasting business relationships in the industry by sitting in-between the current rights holders (teams, tournament organisers etc.) and companies (brands, suppliers and investors) seeking to do business in esports the right way, without all the hassle.
For further information: David Fenlon, Director – davidfenlonltd@gmail.com Sean Carr, Sales Manager – sean@esportsinsider.com
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davidfenlonltd@gmail.com
info@esportsinsider.com
+44 (0) 785 234 8692
www.esportsinsider.com Riverbank House 1 Putney Bridge Approach London SW6 3JD
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