Despite having established teams, large tech sponsors, and players who have millions in earnings, once you scratch beneath the surface of the esports industry, you find a market struggling to come to terms with the fact that it needs to mature.
Join us as we look at the incredible blossoming of this niche market, how over-inflated prize pools and unreal expectations hobbled it, and why sports betting and online gambling could be its only hope moving forward.
What Does Local Esports Growth Need?
Building on the concept of competitive esports gaming as a sport, several factors come into play when ensuring it has a solid foundation.
For any sport to flourish, it needs the following:
- A well-funded local tournament scene.
- A media network to gain local and international viewership and support.
- A robust selection of organisations to begin managing star teams and players.
- Acceptance as a viable “sport”, allowing it into educational centres.
- Government approval and oversight to legitimise it for investors.
With the above critical steps in place, esports can become a way for youth, marketing specialists, deal brokers, and more to see the activity as a profit centre and invest their skills and resources into developing it.
Establishing this tech-facing industry in a country can lead to massive job creation and the establishment of a thriving licensed sports betting sector, all of which are a boon for local government coffers.
Too Much Money Too Soon
One of the significant challenges facing esports today is centred around the first of the above five points. Due to how esports first became popular, there needs to be a more balanced view of how much individual players and competitive teams are worth, but who is to blame?
Gaming tournaments have existed since the early days of arcades, with one of the first recognised tournaments taking place in 1980, where over 10,000 gamers battled it out to win an Asteroids machine.
Counter-Strike Led The Charge:
In 2001, the Cyberathlete Professional League Winter Championship offered Counter-Strike players the chance to compete for a total prize pool of $150,000. As viewership and the potential to monetise the event grew, the 2017/2018 prize pool would grow to a lip-smacking $1 million.
Fortnite Took Things Too Far:
That gaming versus money mentality came crashing down in 2018 when Epic Games, the creators of gaming megalith Fortnite, poured $100 million into their first year of competitive tournaments. The battle royale was already a mega success, but this level of prize money saw it become the top live-streamed, casually played, and profitable game of its ilk ever.
High-value esports mania crescendoed in 2019 when a relatively unknown 16-year-old Fortnite player, Kyle "Bugha" Giersdorf, won the solo event and took $3 million for this trouble.
The Esports MIMO Problem
With this level of prize money on the line, esports pundits looked to a future of non-stop growth and investment. This mentality flowed down through all of the layers of the now corporatised growing esports sector with players, managers, marketing teams and more all demanding outrageous sums of money as soon as a negotiation mentioned ‘esports’.
The world’s top 10 esports stars in prize money alone are worth more than $55 million, and that does not consider the value of sponsorships, merchandising, or any income from gaming streams on platforms like Twitch.tv or Kick.com.
The challenge this presents is that, in most cases, top-tier esports stars receive enormous paychecks and signing bonuses from their organisations. They keep all their winnings and the lion's share of any deals negotiated for them by their orgs.
This type of payout structure works when a lot of money flows into the top of the funnel. However, once Fortnite had captured the market, the big-money tournaments stopped, but competitor expectations stayed high. This money-in, money-out (MIMO) paradox left esports teams struggling to stay afloat.
2023 kicked off with American esports organisation eUnited announcing that it had officially shut down operations. Again, in April 2023, globally recognised org TSM announced it was selling off its spot in the League of Legends Championship Series and was evaluating which esports it could afford to continue to compete in.
The Pandemic False Flag
The esports sector did receive a short reprieve during the pandemic as the global gaming community was forced indoors. This literal captive audience resulted in gaming live streams and online tournaments achieving incredible viewership numbers.
Nielsen Games Video Game Tracking (VGT), North America saw a 46% increase in gaming, followed by France with 41%, the UK with 28%, and Germany with 23%. This blossoming interest naturally extended to consuming video game content, which included esports events.
However, with market saturation and entertaining personality-driven gaming streams by Nick Mercs, Dr Disrespect and Tim the Tatman, gamers have access to an overabundance of gaming content without watching several hour-long events or waiting months or weeks for the next event.
Even the most aggressive viewership projections for esports only have the market growing its global presence by 50% over the next five years. While this might sound good on the surface, it is not a strong showing for a vertical with its costs and potential.
The Esports Gambling Lifeline
While most of the developers of the video games associated with esports are not too keen on the idea, one of the last remaining lifelines for competitive esports is the online gambling sector.
As the market matures, investors and sponsors begin looking for a return on their investment, which reduces the revenue pool and strains the revenue potential even further than lower prize tournaments already do.
However, esports online betting is a thriving market. A recent Business Research Insights (BRI) report predicts that the global esports betting business will be worth more than $28 billion by 2030, representing a nearly 14% year-on-year growth.
This data means that sports betting sites, crypto casinos and other gambling venues are some of the few remaining industries that can track exponential growth paths for esports and would, therefore, be willing to invest heavily in its development.