The Relevance of eSports for Todayâs Businesses
For the citizens of Katowice in Poland, it is nowadays a familiar sight: tens of thousands of young people visit their city to watch people play video games. It may still seem strange for some inhabitants, but what they experience are enthusiastic fans extensively cheering for their respective teams. It was a bit of luck that the tournament organizer ESL chose Katowice in 2013 as one of the leading managers has his roots in Katowice, but the tournament became the most entertaining event in eSports quickly. The polish crowd and many international visitors show every year how great eSports tournaments can be. The competition in Katowice is a prime example of how far eSports came in its short history. If people ask me what makes eSports great, those tournaments are the best example for itâa global and digital phenomenon that lures people away from their digital devices actually to go into an arena and celebrate with other eSports-nerds.
The term âeSportsâ is a portmanteau of âelectronicâ and âsportsâ and is sometimes described as competitive gaming. The idea of playing games is profoundly entangled with human society: indeed, Huizinga (1949) considers play to be an existential part of humanity, describing it as Homo Ludens . Technological development allowed this ludic drive to expand into the digital world, creating video games. It is important to highlight that the first games were already focusing on the competitive aspect and, more importantly, creating an environment in which people could watch the competitors play. The first game for entertainment purposes was the Tennis for Two by William Higinbotham in 1958: this already had a competitive aspect as well as the inherent potential to let others watch the game (Wolf 2012).
After 1958, video games grew exponentially in line with technological progress and gained extreme momentum through developments like the personal computer, the internet, and, today, the smartphone. The market for video games consists of 2 billion people who play at least casually (Skaugen 2015). Furthermore, the aspect of competition, as in traditional sports, is essential for the growth of video games. People want to watch professional players show their skills, and this is one explanation for people watching other people playing video games. For example, over 80 million individual viewers watched the 2017 League of Legends World Championship between SK Telecom T1 (South Korea) and Royal Never Give Up (China) (Riot 2017). Although viewership numbers are difficult to measure in both traditional media and online media, and the numbers are often criticized for being inaccurate (Hetsroni and Tukachinsky 2006), they give a hint as to the potential of eSports. Beyond the human motivation to play and watch play, eSports, like any other traditional sport, is big business.
However, eSports is not comparable with sports like American or European football, as eSports is more an umbrella term for any video game that can be played competitively. A prominent definition of eSports was offered by Wagner: âESports is an area of sport activities in which people develop and train mental or physical abilities in the use of information and communication technologiesâ (2006, p. 3). Arnaud complements Wagnerâs definition: âPassion, training, reflex, intelligence and teamwork ⊠if itâs not sport it really has its tasteâ (2010, p. 11). It is observable that eSports is still an emerging market and its potential growth seems limitless. Based on its rate of growth, analysts predict that eSports may become âthe next big thing in media and entertainmentâ (Takahashi 2015), with some concluding that âresistance is futileâ (Casselmann 2015). The CEO of Logitech Darrell even predicts that âitâll be the biggest sport in the worldâ (Darrell 2018). Examples are Amazonâs acquisition of the video game live streaming service Twitch for $970 million (Amazon 2014) and the investment of traditional sports teams in eSports. In 2017 and 2018, sports organizations spent $400 million on franchise fees alone (Wolf 2018). Sponsoring ranges from endemic companies like Intel to non-endemics like DHL, Mercedes-Benz, and even WĂŒstenrot (a German home purchase savings company).
Still, eSports is an emerging and growing market moving toward $1 billion market revenues in 2018 (Newzoo 2018), and the market is observably increasing; however, being part of a growing industry and hoping for a solid return on investment is not the only driver to join the eSports industry. There are five important reasons for people and companies to get involved in eSports.
Firstly, eSports reaches a digital and international audience. Being an industry based on a digital product like video games, it becomes evident that the product and the industry are highly digital. Furthermore, because of the growth of the internet, eSports are highly international, and people from various countries play together. The eSports industry is, therefore, a highly compelling case, as it is born global and born digital, turning analog and localâquite the opposite to every other industry that is generally born local and analog first. Companies, in general, can learn from eSports and try to incorporate these lessons in their digitization and internationalization strategies.
Secondly, the player base and fan base in eSports are exceptionally young compared to other traditional sports. Traditional sports are struggling with the situation that their viewership is going gray. For example, the NFL has an average age of 50 years in its viewership, moving up from 46 in 2006. Even football has an average of 39 years, moving up from 35 years in 2006 (Lombardo and Broughton 2017). Some statistics declare that the average eSports audience is aged from 18 to 34 (Bathurst 2017; Nielsen 2017). Consequently, while organizationsâespecially sports organizationsâstruggle to reach a young audience, eSports represents a significant portion of this young audience. Any investment in eSports that turns into a spillover effect, slowing or reversing the going gray effect, will amortize the investment quickly.
Thirdly, in terms of maturity, the industry is still emerging. Structures are still growing and evolving; new companies are entering the market, and both the market entry barriers and the market exit barriers are low. Although this is slowly changing, and we can already observe that companies are being increasingly cautious, it can be stated that a company entering the eSports industry now can be categorized as an early adopterâor, more precisely, a lagging early adopter. However, this may not be the case for every aspect of the industry. For example, sports organizations have moved massively into eSports. At the end of 2017, around 50 sports organizations were investing in eSports; today, there are over 250 sports organizations involved. However, it is still possible to have a top professional eSports team with an investment of $5 million. It is observable, though, that the eSports industry is leaving the early adopter phase, and many companies are stating that the...