Esports Is Not Flourishing As Expected

Esports has been a growing industry over the past few decades and has grown at a healthy rate. The popularity of esports started internationally in South Korea and China in the late 90s. By the early 2000s, its popularity reached the United States. With the addition of Twitch, a streaming service built around video games, the popularity of esports went international by the early 2010s. Investors were enticed by the esports industry and expected a fruitful market in the upcoming years. In 2022, many investors not seeing a return on their investments, not due to a lack of popularity, but rather a difference in markets.

The popularity of esports is as high as ever. The League of Legends 2022 championships took place in front of a sell-out crowd at the Chase Center, an NBA arena. The event was a spectacle and the winning team, DRX, was given diamond rings for winning the championships, similar to other pro-sports leagues. In 2021, the LoL championships reached a max viewership of 73.8 million viewers. The industry has also grown as personalities like Tyler “Ninja” Blevins have helped Twitch become the streaming platform it is today. Ninja helped spread popularity for esports by streaming himself playing video games and gaining sponsorships with Red Bull and Uber Eats. Twitch averaged 2.78 million concurrent viewers in 2021. Although esports popularity is strong with the support of these events and platforms, the industry is having trouble making money in ways that traditional sports leagues do.

One factor that the esports industry lacks is regional fanbases. Unlike other leagues, esports teams do not have home games, and most events are held in Los Angeles. Without differing sites, esports teams lose the ability to make money from having sites to host games and fan bases from a particular region. The NFL and other sports leagues use regional fan bases and divisions to heighten the importance of games and create rivalries between neighboring teams. Activision, the creator of popular games such as Call of Duty and Overwatch, tried to launch leagues to form regional teams, but Covid-19 struck down all plans as the idea started gaining traction.

Another issue esports is working through is viewership and media rights. The industry became popular on free streaming platforms like Twitch and Youtube, and most of the audience remains on these platforms. Other professional sports leagues can license their product to media companies and receive most of their revenue with media rights deals. The USA’s five largest sports leagues include the NFL, NBA, MLB, NHL, and MLS, which make a combined $210 billion from their media rights deals. Esports has not been able to do the same as viewers have grown accustomed to watching their events for free. If esports were to license their products away from free streaming services, the viewership and interest levels would likely be too low to be profitable. 

Although the esports industry is not hitting the jackpot that investors expected it to, there are still positive outlooks within the industry. For one, esports has capitalized on targeting a younger audience with 73% of its viewers in the 18-34 age range. The market is also expecting growth from $1.178 billion to $5.743 billion by 2030. The gaming industry is very profitable and expects to reach a revenue of $197 billion in 2022, indicating potential for this form of sports gaming. The esports industry is not a lost cause but is aiming to increase profitability in the same ways as traditional sports leagues. This shift in strategy may make esports too similar to sports leagues, perhaps shifting their fanbase; however, this change may be necessary to satisfy investors, streaming services, and the esports providers themselves.