The emergence of electronic sports, most commonly known as eSports, has been one of the most influential disruptions to the entertainment industry. Its dominance has contributed to its increasing popularity that is expected to grow to 495 million viewers worldwide in 2020. eSports is becoming the new way of gaming during these unprecedented times. This industry has seen an emergence of viewership throughout quarantine which has helped their operations to remain largely unaffected and support their success in generating revenue. Despite the downfall of numerous industries, eSports will continue to thrive amidst the growing concern of the COVID-19 pandemic which will further promote the growth of this billion dollar industry.
Background and history
ESports has been one of the fastest growing sports in the world in recent years despite being around for decades. Since the 1990’s, eSports has been recognized as one of the most observed games in the world. ESports are video games that are played in a highly competitive and organized environment, varying from team-oriented online battle arenas, first-person shooters, real time strategy, and sports-oriented games that mimic traditional live sports.
There are many reasons contributing to the rise of eSports within the past few years, the most notable being that traditional sports’ viewership has been declining at a rapid rate. Major League Baseball viewership has fallen by 7% since 2015 due to the presence of similar leagues around the world and because the lengthy duration of the games takes away from the excitement of the audience. League of Legends (LoL) has become one of the most established eSports communities and the largest spectator sports in the world with over 100 million players in 2017. In 2013, the International Olympic Association (IOC) confirmed that League of Legends would officially become an Olympic sport. Overall, the popularity of eSports has been exemplified through the growth of its global customer base which is expected to gain another 200 million viewers by 2023.
Normalization in Mainstream Media
The eSports industry has been continuously thriving amidst the COVID-19 pandemic and is projected to grow exponentially within the next few years. The pandemic is leading to the adoption and normalization of eSports as it is driving younger demographic groups towards eSports for entertainment rather than traditional sports. According to a survey conducted by Deloitte, 56% of the people ages 13 to 21, found that they were more receptive to non-traditional sports like eSports, as they were more relevant to their generation. Educational institutions have even begun to integrate eSports as universities like the University of California-Irvine and Kent State University are offering eSports scholarships for students while some high schools are offering eSports leagues as part of their physical activity programs.
Likewise, the University of Waterloo has implemented eSports intramurals as part of their recreational sport opportunities. Globally, this would represent tens of millions of new consumers for the industry. Overall, the pandemic has allowed eSports to continue to attract a young, high-income audience that appeals to advertisers and content creators.
According to Goldman Sachs, the online audience for eSports, is larger than HBO, Netflix and ESPN combined. The global video game market is forecasted to be worth $159 billion by 2020, almost quadruple the amount of box office revenues with $43 billion in 2019 and triple the amount of music industry revenues with $57 billion in 2019. With over 2.5 billion gamers worldwide and predicted growth to over $300 billion by 2025, the eSports market was bound to surpass their competitors in the entertainment industry. Now that cinemas are closed, many people are turning to home entertainment through eSports during this period of self-isolation. The growth of the eSports market further indicates how the normalization of eSports is evolving to the point of becoming more popular than mainstream media.
The global video game market is forecasted to be worth $159 billion by 2020, almost quadruple the amount of box office revenues with $43 billion in 2019 and triple the amount of music industry revenues with $57 billion in 2019.
The Endless Potential of Video Game Streaming
The normalization of eSports is evident in the success of video game streaming, an Internet exclusive marketplace that provides an interactive online platform for audiences to engage with their favorite gamer personalities. Twitch TV currently dominates as it provides a unique form of entertainment by broadcasting live eSport competitions to mass audiences. They have been successful in growing their fanbase and attracting potential sponsors which lead to their acquisition by Amazon for $970M in 2014. As of May 2020, they were considered one of the world’s biggest streaming websites with over 7.4 million active streamers according to Statista. The increasing popularity of online streaming has allowed players to pursue a career and make a living in playing video games, an option that did not exist a few years back. Players participate in competitions where they can win prize money and generate income from sponsorships, coaching fees, and ad revenue from their live streams. The introduction of Twitch Prime in 2016 allowed users with Amazon Prime to directly subscribe to streamers, increasing revenue for broadcasters. Live streaming platforms have also introduced a number of changes to benefit streamers such as microtransactions through the streaming platform’s currency, Bits, as another method of providing monetary compensation. The pandemic has only accelerated the success of pro video game streamers who have seen a 25%-30% increase in viewership since the beginning of quarantine and 13,000 viewers per game. During the peak of the COVID-19 crisis, 43.27 million hours of the top 50 games were viewed on Twitch in a single day on March 21st, increasing by 31% within two weeks. Video game streaming provides viewers with the opportunity to interact with their favourite gamers by offering a real-time chat feature. This allows fans to chat with each other as well as the streamer during the live session. In addition, followers cast their votes on polls to help the streamer decide the next game to be played or a specific path the streamer should follow in the game. These valuable interactions and user-generated content provide a unique social atmosphere for spectators and are one of the many reasons why people enjoy watching eSports. Just like how one would watch traditional sports at a competitive level, eSports fans support their favourite players who have spent countless hours perfecting their gaming skills. By doing this, viewers are also watching to develop new skills and strategies by observing pro gamers perform highly complex and reflex-intensive stunts.
With more people working from home and students learning online, live streaming platforms will continue to see an increase in viewership as eSports is becoming more normalized across the globe.
The COVID-19 pandemic has kickstarted an economic recession, severely impacting many industries with a lack of digital infrastructure. The future of these industries is unknown as the pandemic has reshaped the workplace to accommodate working from home and remote learning. Digital connectivity is critical to business continuity. The retail industry has suffered disruptions to their supply chain operations which continues to hinder their productivity. eSports was already well-positioned in the video gaming market before the pandemic as seen through its strong infrastructure, promoting easy access to connect with people across the world. Their business operations can occur online by relying on Internet connectivity as the foundation of their business model. With over 4.57 billion active internet users as of April 2020, eSports can easily utilize their network infrastructure to facilitate purchases, run live gaming tournaments, connect players with one another and immerse fans in the gaming experience. The COVID-19 pandemic has further perpetuated this through mandatory lockdowns and temporary lay-offs. According to Statistics Canada, almost 20% of Canadian businesses have laid off more than 80% of their staff. With more people working from home and students learning online, it is a natural byproduct to see an increase in web traffic. A report by Statista also indicates that since the COVID-19 outbreak, average daily in-home data usage has increased significantly by 38% from 12 gigabytes since March 2019 to 16.6 gigabytes as of March 2020.
This was observed across all device categories with gaming consoles and smartphones increasing the most. There is a clear correlation between the number of people staying at home and the increase in online gaming. According to a March 2020 survey conducted by Statista, video gamers reported that they spent 45% more time online gaming during quarantine. Likewise, an April 2020 survey confirmed 37% of young adults between the ages of 18-29 expected to spend more time on video games due to the lockdown. Given the circumstances and the restrictions set in place due to the coronavirus, the eSports market can anticipate to see these trends increase even more.
From Courts to Consoles
Professional sports leagues have suspended all their live games to prevent the spread of the virus, the most notable event being the 2020 Summer Olympics which have delayed their activities until 2021. As a result, sports leagues around the world have capitalized on the growth of virtual technologies during the pandemic by turning to the digital sector to find new ways of engaging fans. NASCAR recently replaced its live racing events with a virtual iRacing Series, attracting a peak of 1.3 million viewers. This simulation platform allows their professional NASCAR drivers and game enthusiasts to navigate and race on a digital track from the comfort of their own homes while establishing a lively environment for their viewers. Their eNASCAR Coca-Cola iRacing Series hosts the world's best simulation drivers competing for more than $300,000 in prize money. By doing this, NASCAR is able to retain viewership and fill the void of a live event while viewers can gain a sense of normalcy during unpredictable times.
Likewise, traditional sports have suffered major financial losses ranging from salary cuts for their athletes to competition cancelations. Major sporting leagues like the NFL, NBA, NHL, and MLB have been partnering with eSports to offer online competitions. For the first time, since the Boston Marathon bombings in 2013, The National Basketball Association (NBA) has postponed all scheduled games until July 30th, Occurring just moments after star player, Rudy Gobert, tested positive for COVID-19. The NBA was also the first major sports league in North America to suspend play. Instead of hosting live games, they have made the switch to virtual gaming with their eSports NBA 2K Players Tournament, a collaboration between the NBA, NBA Players Association and 2K publisher Take-Two Interactive Software. The virtual NBA 2K20 game featured their most distinguished NBA players such as Kevin Durant competing head-to-head on Xbox One consoles. Fans and enthusiasts can stream the tournaments on the ESPN App, NBA.com, the NBA App, and 2K and NBA social media platforms including Twitter, Twitch, YouTube, and Facebook. In the wake of the coronavirus, sports leagues are leveraging the strong digital infrastructure and low-cost marketing of eSports to recreate the excitement and quality of a live event remotely.
The COVID-19 pandemic has also temporarily delayed the production of gaming hardware as a result of factories facing supply chain disruptions. Consumer electronics companies are unable to effectively manufacture their video games as more and more people are working from home. Nintendo has issued a warning that a situation of prolonged remote working will impact its processes as this will create a shortage of their physical products.
However, they have noticed a shift in their business model from physical to digital sales as Nintendo sold nearly half of their games online within the first few months of 2020. They managed to achieve 48.5% of their software sales as downloads as schools, workplaces, and electronics stores and outlets remain closed. In addition, Nintendo has been making huge headlines from the successful release of their new “Animal Crossing: New Horizons” eSports game during the pandemic. They have sold over 13.5 million copies since March, making it the most popular Switch game since the initial release of the console. Nintendo’s stock has gained nearly 7% on the year while Japan's benchmark Nikkei 225 has dropped around 17%.
Likewise, game developers like Epic Games, can still work remotely in creating quality games that their users will enjoy. They have been regularly making updates and patches to their Fortnite game to ensure their users can stay engaged during the pandemic. This is mainly because of the innovative gaming experience approach Epic Games has set for users. Developers are continually updating the game to perfection as they are mixing in new features. In addition, Fortnite’s free-to-play model has allowed them to generate over $1 billion in revenue from in-game purchases.
To conclude, the entire world has been brought to a standstill by the COVID-19 pandemic. Many expect it may take years until even a semblance of normality can be re-established. However, the rise of eSports will accelerate the overall market back to its original point because of the normalization of eSports, the potential of video game streaming, and digital continuity even amidst a global pandemic. Live video game streaming provides interactive and social aspects for the eSports community that traditional broadcasting cannot offer. Overall, the innovative and agile infrastructure of the eSports industry has helped them to pursue profitability and become commercially sustainable while providing a solid platform with long-term business strategies.