Why investing in sport is a chance for thought leaders
G2 Esports fans during the League of Legends World Cup quarter final match between G2 Esports and Damwon Gaming on October 27, 2019 in Madrid, Spain.
Borja B. goes | Getty Images
For the uninitiated, think of sports as you would any other sport. Instead of baseball, hockey, chess or curling, there are video games such as CSGO, League of Legends, Call of Duty or Fortnite. After all, a sport is just a set of rules, a playing field and a competitive infrastructure that includes players, teams, leagues, broadcasters and the audience. Every game in sport has its own rules. Exchange physical mastery for mental acuity. Replace stadiums and stadiums with virtual arenas and game modes and everything else (infrastructure) is similar if you get to the point. Right down to the throbbing moments when the home team wins a one-in-a-million game to take home the title.
Why is the sport getting so much attention lately? For starters, events like the League of Legends World Championships were comparable to the Superbowl in terms of viewership, and young players in the 18-25 age bracket watch 34% more sport than traditional sports. A big reason for this is that the sport, like its audience, is a digital native speaker. In a world where few millennials watch TV or radio, there is sport everywhere. You can stream it on Twitch, play it on Youtube, discuss it on Discord, watch and share clips on TikTok, Instagram and Twitter.
No wonder the sport is valued at around $ 1 billion in 2019 and is expected to grow 400% to $ 4.28 billion over the next seven years, according to Data Bridge Market Research. Some might say that’s a conservative estimate for the global traditional sports market worth $ 388.3 billion in 2020 alone. With more than 2.7 billion players on earth, we barely scratch the surface of what is possible for sport.
In the past decade, the sport has made great strides, moving from a largely underground culture to a mainstream industry. As a global phenomenon, the sector has attracted notable investors such as Mark Cuban, Alexis Ohanian and Ashton Kutcher. Esports even draws capital from traditional athletes like David Beckham, Steph Curry, Rick Fox and Shaq, as well as musicians like Drake, Wiz Khalifa and Steve Aoki, to name a few. The emerging industry offers tremendous opportunities as its infrastructure, professional athletes and teams evolve.
After taking into account the approximately 100-year lead of traditional sport, there is a lot to discover. As someone who started out (2000-2004) in video game tournaments that were scattered across malls (remember those?), It was eye candy to see the gigantic prize pools of modern titles like Dota 2’s 34.3 million International see or Fortnite’s $ 30.4 million World Cup, both similar to the esports version of the World Series or the US Open. It was events like this, and the maturation of global organizations dedicated to competitive gaming, that got me off the beaten track.
In the summer of 2019, my co-founder Gavin Silver and I took the plunge to launch Allstar, a platform that allows casual gamers and esports enthusiasts around the world to create and share professional highlights. Since then (and with the help of everyone’s favorite shark, our investor Mark Cuban), we’ve seen firsthand the explosive growth of esports that has accelerated during the Covid-19 provoked world of the home. These mega esports events? They are seen by more than 500 million viewers, who make up more than half the audience of an even larger market: Gaming Video Content (“GVC”), valued at $ 6.5 billion in 2019, according to Nielsen’s Superdata. GVC includes services like Twitch, Youtube, and others that increase sales by watching other people play video games, whether competitively or otherwise.
GVC is unique to most media in that it is produced by everyone. Well it can be produced by anyone. But, by and large, it’s still done by the professionals. For example, only 3% of Twitch users stream, which is above YouTube’s 2.5% participation rate but is dwarfed by services like Snap, where nearly 60% of users regularly create content. For this reason, everyone should be very careful: there is an epically undervalued opportunity in esports audiences, not just as content consumers but as content creators themselves.
Unlike traditional sports, almost everyone who watches sports actively plays the games they watch. As soon as a tournament is over, these players start, register and play their own competitive games. They have their own moments of fame. But instead of throwing a soccer ball around in the back yard or playing catch with a friend in the park, it’s like you could fly into Yankee Stadium on the fly and throw your own regulation game, nine innings, pinstripes and everything.
The thing about sport is that the gap between the players and the audience is really, really small. They play on similar devices, they lead similar lifestyles, and they play exactly the same games with little to no difference in the rules and the playing field. The primary separator? The lack of infrastructure. The existing esports infrastructure focuses exclusively on professionals. Top players, top teams, big tournaments, big events. Anyone else who play esports games? You are just the audience.
This is wrong thinking which results in a badly overlooked opportunity. With a global, 24/7 community of players playing highly observable competitive games, performing skills, strokes of luck, funny follies, or glorious triumphs – often on par with the entertainment that the pros provide – there are billions of hours of hyper-social, high quality GVC which is extremely underfunded. While today’s professional esports organizations have their own production studios, both aspiring and casual fans lack the resources to create, personalize, and share their own game content. While TikTok unlocked the potential of crowd-sourced entertainment on the smartphone, the esports audience is still waiting for their turn.
The first to “crack” the code of mainstream game content will open the floodgates of a vast market: new content creators who are predominantly competitive gamers who play and create content from the same esports games they watch.
– From Nick Cuomo, CEO and Co-Founder of Allstar.gg, and an avid gamer
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