Many experts in the esports industry have been debating whether the esports market has evolved into a bubble. With money pouring into esports and related companies at a rapid and increasing rate, some have begun to question whether these investments are justified.
Are these investments sustainable? Are the majority of companies overvalued? Are investors sticking to fundamentals when evaluating their opportunities, or are they simply speculating and gambling on a get-rich-quick scheme? Is the market bound to collapse? These are some of the questions that many have sought to answer.
On October 13, 1994, Netscape launched Mosaic Netscape 0.9, its first web browser. By February of the following year, the company had acquired roughly three-quarters of the web browser market. To capitalize on this success, Netscape made a historic initial public offering (IPO) on August 9, 1995. Within the first day of trading, its stock price doubled.
Netscape’s IPO marks the beginning of the dot-com bubble, a situation that was caused by excessive speculation in internet-based companies. During this period, a frenzy of investment took hold of the market, as investors were lending overwhelming amounts of money to dot-com startups. As the number of these companies began to expand, the internet craze intensified.
While some dot-com companies could justify the amount of capital they were accumulating, the majority of these startups failed to establish reliable business models. Consequently, they were often overvalued. The rapidly growing demand for dot-com stocks inflated share prices, leading to the formation of a bubble.
The question then remains, has the esports market turned into a bubble? Is esports on the same path as the early 2000s dot-com industry? Are investors simply gambling when they pour millions of dollars into esports organizations?
According to an article from Sports Business Journal, “esports insiders are increasingly convinced that many team organizations are overvalued and a market correction is coming.” Data provided by Forbes on the most valuable esports companies in the world reveals a sizable gap between the value and revenue of these organizations.
The numbers from 2020 show that the average revenue multiple, the extent to which value exceeds revenue, of the top 10 most valuable esports companies lies around 9. As an example, the current value of T1 exceeds its revenue by a multiple of 10, while Cloud9’s value exceeds its revenue by a multiple of 11.7. There has been a shift in these numbers, as a Forbes report on the 12 most valuable esports companies in 2018 shows that the average revenue multiple once lied around 14.
“I think this shows that investors don’t expect immediate profits, but are investing in esports aiming towards the long-term future, 15-20 years from now…P/E ratios in esports are nowhere near the value we see for example in the electric cars industry,” said Guilherme Arten-Meyer, Co-Founder and CMO of DraftBuff, a rising fantasy esports platform. “Yes, the evaluations are high, maybe a bit too high, but considering the current status of the entire stock market in general, we shouldn’t be surprised.”
An article by Josh Chapman of Konvoy Ventures reveals that sports franchises are typically worth five times more than their revenue, while for tech companies the multiple is 10. Based on this, Chapman believes “that to sustain these multiples, esports organizations will have to shift their underlying business models away from traditional sports monetization strategies and towards scalable and technology-driven revenue streams.”
This shift seems to be occurring slowly, and a great example is Team Liquid. In addition to having teams and players competing across 17 different titles, such as League of Legends, Fortnite, and Dota 2, the esports organization runs a video production studio, 1UP Studios, an influencer management media agency, Liquid Media, an esports wiki, Liquipedia, and a fan-engagement platform called Liquid+.
Another example of a company that has diversified its business is 100 Thieves. On its website, the organization describes itself as “a premium lifestyle brand and gaming organization.” They recently launched an apparel collection, Enter Infinity.
FaZe Clan, one of the most popular gaming and esports organizations in the world, claims to hold “an unrivalled position at the epicentre of gaming, sports, culture and entertainment, driving how the next generation consumes content, plays and shops”, according to their Linkedin page. Its roster of 85 personalities is made up of “world-class gamers, engaging content creators and a mix of talent beyond the world of gaming.” FaZe Clan also states that it “has become a sought-after fashion and lifestyle brand through an inspired apparel line and limited-edition collaborations with partners including Champion, NFL, Manchester City FC, Lyrical Lemonade, Kappa, CLOT, LA Kings, and more.”
If esports companies are able to diversify their business strategies and take part in other ventures, not just competitive gaming, it seems that their valuation numbers could be justified. According to Omri Wallach, a writer at Visual Capitalist focused on tech and business trends, “it’s this greater ability to diversify, and the still-increasing size of esports fandom, that continues to grow esports valuations.”
Investments in the esports industry are not about the short- or medium-run. Instead, the potential winnings provided by the majority of these ventures lie in the long run. This should soothe some who are worried that a major correction is coming to the esports industry. Additionally, market corrections should be expected for new and developing markets and do not necessarily indicate that the industry is set to collapse in the long run. Although a bubble may have already formed within the market, the effects of it bursting should only have a temporary impact.
Sports Business Journal interviewed Josh Swartz, president and co-founder of Catalyst Sports & Media, a firm that provides strategic advice to investors and brands looking to enter the esports industry. In the interview, he stated that “you don’t care what happens in the next three years, you care what happens in the next 30 years.” Swartz also claimed that “these are not structural long-term problems, just from a valuation perspective, some teams grew way too fast.”
Although the esports industry features an ecosystem that encompasses a variety of different game titles, leagues, and organizations, the unraveling of a particular franchise or company should not spell doom for the whole industry. There may be enthusiasm in the market, but not all esports companies are built, valued, or hyped in the same way.
In an interview hosted by Esports Insider, Mike Sepso, co-founder of MLG and CEO of Vindex, shared some of his thoughts regarding the existence of an esports bubble. He believes that “part of the problem with this idea that the entire industry is unsustainable is that you can’t really correlate between teams and other startups; plenty of startups are doing just fine.” Sepso also claims that while “valuations of some esports teams are definitely ambitious, it’s not necessarily reflective of the space as a whole.”
The financial mismanagement or overvaluation of certain esports organizations and leagues should not indicate a point of instability for the entire industry. Esports titles each have a specific niche audience with varying demographics. Not all leagues are franchised, and each one operates in a particular way.
One way to illustrate the issue with generalizing esports ventures is with traditional sports. It would be hard to say that financial, legal, or viewership issues in the NFL would bleed into the UFC. While some may argue that Blizzard Entertainment’s management of its competitive Overwatch scene has induced a bubble, as massive investments have been pouring into Overwatch League, such as the $50 million Fusion Arena, many agree that Riot Games has run its League of Legend esports scene quite smoothly.
With all of this in mind, it seems that there are pros and cons surrounding the state of esports and different ways of gauging the extent of the industry’s shortcomings, but the massive long-run potential offered by the ecosystem provides reasons to lean towards optimism.
Newzoo is a renowned provider of data and analytics related to esports and games. The company describes itself as “the world’s most trusted and quoted source for games market insights and analytics”, and they “help some of the world’s largest entertainment, technology, and media companies to target their audience, track competitors, spot opportunities, and make strategic and financial decisions.” The following are some key takeaways from their 2021 Global Esports & Live Streaming Market Report:
With esports’ global revenues and audience rapidly growing, it is easy to see why many are keen to become involved with the industry. Several investors have turned their heads to esports as they see room for growth in the market. Consequently, venture investments in esports are rapidly growing. Quantum Tech Partners revealed that esports companies raised $2.3 billion in 2020. The current ecosystem is currently in the process of development, and many are betting that it could evolve into something more stable.
With growing audiences, positive revenue growth, and rising viewership numbers, it seems that there is certainly untapped potential within the industry. The key to whether the esports market continues to thrive lies with these trajectories, and the esports landscape in China offers some hope for the future.
China hosts the largest esports market in the world and could hold the key to unleashing the potential of the esports industry. According to a report from Newzoo, the number of esports enthusiasts in the country will grow to 92.8 million and “will generate more than a third of worldwide esports revenues” in 2021, making it the largest esports market in the world in terms of revenue.
Another positive trend in China’s esports market is the government’s increasing interest in the industry. In December of 2018, The Esports Observer reported that “the Xi’an government announced its plans to reward a maximum of ¥100M RMB ($14.52M USD) to esports relevant companies, in order to support the industry in the city.” According to Jerome Heath of Dot Esports, in January of 2019, “China’s Ministry of Human Resources and Social Security (CMHRSS) announced 15 new professions…including ‘esports professional’ and ‘esports operator.’”
It should come as no surprise then that China’s esports industry is currently seeing an influx of capital. Although the majority of the money lies with game publishers, there are also leagues, teams, livestream platforms, and facilities that make up a portion of the Chinese esports ecosystem.
A diverse set of ventures are coming to fruition that emphasizes the growing interest of esports in the country. In particular, the rapid rise of investments into esports venues emphasizes the robustness of the Chinese esports ecosystem. These projects seem to be justified by the demands of a growing audience and are set to raise the industry to new heights.
The League of Legends Pro League (LPL), the country’s premier League of Legends competition, currently hosts its matches across six different venues. Five of them belong to different teams, while another one is owned by the LPL itself.
The country has also seen investments into massive esports centers. In 2018, the Zhongxian E-Sports Stadium, a sports venue built exclusively for esports that can hold 20,000 fans, opened its doors to the public. The city of Hangzhou built a $280 million “esports town” which spans 3.94 million square feet. Hangzhou’s government also announced its goal to construct 14 different esports facilities by 2022, including an esports academy, hotel, theme park, business center, and hospital.
A more recent development, which was announced in January of 2021, is the Shanghai International Culture and Creative Esports Centre. The project was established by SuperGen Group, the parent company of Chinese esports organization Edward Gaming (EDG). SuperGen Group expects to complete the project, which will require a total investment of $1.55 billion, by 2023. It will contain, among other things, EDG’s offices, a venue, an esports-themed hotel, and an indoor skydiving attraction.
On April 7, Bloomberg reported that Tencent Holdings, a multinational conglomerate that has fueled China’s esports boom, is set to invest in a billion-dollar arena. “The world’s largest games publisher has invested billions of dollars in talent agencies, streaming sites and tournament organizers to create the infrastructure necessary to turn pro gaming from a niche into an instrumental part of its growth strategy.”
China will certainly become the hub of esports, if it is not already. Its esports ecosystem, with support from the government, a growing audience, and a rise in investments, is set to flourish within the coming years.
There are also other actors in esports who are optimistic about the industry. With the arrival of the COVID-19 pandemic, esports betting experienced a boom in 2020. As a result, new companies and investors hoping to expand the esports gambling sector have made their way into the market.
The number of esports betting startups and traditional betting companies becoming involved with esports has increased within the past year. Esports betting companies amassed a total of $1.80 billion in 2020. Some of the key actors in this sector of the industry include DraftKings, Esports Entertainment Group, FansUnite Entertainment, Skillz, Luckbox, and Golden Nugget Online Gaming. Newzoo states in their 2017 Global Esports Market Report that this market has tremendous potential to grow and that “it’s possible that esports betting alone is larger than the esports economy itself.”
FansUnite Entertainment is one of the rising companies in the esports betting industry. They describe themselves as “a sports and entertainment company, focusing on technology related to regulated and lawful online sports betting and other related products.” Donnie Mitchell of The Sports Geek stated that “from March to September 2020, Euros wagered through FansUnite’s B2B solutions have increased 650% from the same period last year.”
Another rising leader in the market is Esports Entertainment Group (EEG), an esports and online gambling company. They claim that “from traditional sports partnerships with professional NFL/NHL/NBA/FIFA teams, community-focused tournaments in a wide range of esports, iGaming and casinos, and boots-on-the-ground LAN cafes, EEG has influence over the full-spectrum of esports and gaming at all levels.” On March 25, they announced a deal with the Denver Broncos. Using EEG’s Esports Gaming League platform, the company will run esports tournaments for the team. They also recently expanded their efforts to Latin America, where their VIE.bet brand partnered with Infamous Gaming, Peru’s largest esports organization.
With esports betting on the rise, it seems that the esports ecosystem is beginning to expand its roots. Although some of these gambling companies, such as DraftKings, have offerings outside of esports, the others have focused specifically on this market and are confident that esports will flourish for many years to come. Some may consider this a risky move since they are betting on an industry that seems to lack professionalism, has yet to mature and is built around organizations and companies that have yet to establish a reliable business model.
The question then remains, is the rapid growth of the esports market sustainable in the long run? Are there clear signs that the market is overheating?
The question of whether an esports bubble exists is ultimately hard to answer directly. To put it frankly, we simply do not know. As was shown by the dot-com bubble, investors and companies only realized that the market was set to collapse after it was already too late.
With rising revenues, a growing audience, and increased investment. The esports industry continues to grow each year. Streaming platforms have seen substantial growth in total hours watched, with an 83% increase from 2019 to 2020. Esports organizations are diversifying, establishing better business models, and seeing their revenue multiples decline. Franchised leagues are becoming more common, allowing for better opportunities. Esports betting companies are sprouting. A variety of multi-purpose esports centers and venues are coming to fruition. As China has shown, even governments have begun to jump on the esports hype.
Is esports currently a bubble that will burst and topple the industry? Will organizations, companies, and leagues who make poor business decisions and unjustifiable investments spoil the fun for the rest of the market? Can they sustain their business models in the long run? Are the projections from analytics firms inflated or misleading?
Only time will tell if a strong market correction is on its way, and even if this is the case, it should not spell doom for the entire industry. In the end, it seems that the data and recent developments point to the fact that there is a bright future ahead of esports.
Genshin Impact Eula Release Date: When is it?
Eula is one of the new cyro characters in Gehshin Impact that has been released this Tuesday.
As of May 18, Eula has been available in Genshin Impact. It has been a while since the character has been announced but as usual, miHoYo never gave players an exact release date until two days ago.
Born of the Ocean Swell is a special wish that boosts the drop rate of Eula, the five star cyro character. It is also currently the only way to obtain her. Some four star characters such as Xinyan, Xingqui, and Beidou will also receive a drop rate boost. The event will last until June 7 on 11 p.m. ET. The official announcement with more details can be found here.
Although it has only been five hours since the wish has opened, some lucky players have already got a hand on Eula. Good luck to those who are on their way to wish!
What time does the World of Warcraft: The Burning Crusade Classic pre-patch go live?
The pre-expansion patch for World of Warcraft: The Burning Crusade is slated to launch today.
Blizzard expects WoW: Classic servers to be down for maintenance from approximately 9am CT to 5pm CT. Once server maintenance concludes around that time, The Burning Crusade will be implemented on Classic servers and the live version of WoW: Classic will move forward to the game’s next expansion.
Keep in mind that 5pm CT is merely an estimation of when server maintenance could end. Make sure to keep an eye out for any official announcement from Blizzard once the scheduled time for the end of maintenance approaches.
With the launch of the pre-patch, players will be able to try out some of the new features coming to the game, including the addition of two new races—Blood Elves and Draenei—as well as the tuning changes coming to each class. The Dark Portal won’t be opened until the launch of the actual expansion on June 1, meaning players won’t be able to reach level 70 for a few weeks.
But players will still get the chance to level up any new characters to 60, giving those who want to make the swap over to Blood Elves and Draenei two weeks to catch up with the pack.
WoW: The Burning Crusade Classic will officially launch on June 1 at 5pm CT.
Kiyan Prince debuts in FIFA franchise 15 years after tragic murder
Kiyan Prince, a former England soccer prospect, has been featured in a FIFA game for the first time in FIFA 2021, his former club Queens Park Rangers and EA Sports announced today.
“On the 15th anniversary of his death, Kiyan Prince returns to life as the professional footballer he should have been,” QPR wrote on Twitter. The English club has officially re-signed its former player and given him the number 30, which is how old Prince would be now if he was still alive. Prince will also be a part of QPR’s roster in FIFA 21. EA used images of him at the age of 15 and combined them with images of his father at age 30 to “create an accurate portrait of what Kiyan would look like today.”
Prince was a highly-rated youth player at QPR when he was murdered in 2006 at the age of 15. He was sitting outside the London Academy gates, his school, when he went to assist a friend who was being bullied and ended up receiving a single fatal stab wound to the chest. Some of his coaches at the time said he had the talent to become a successful soccer player.
He was also known as “The Bullet” due to his speed and natural ability on the pitch. “Kiyan was known all around North West London for his obvious football talent, but also his character and positive energy for all the people he crossed paths with,” an EA Sports statement reads.
This is a creative way to keep Prince’s legacy alive. His father, Dr. Mark Prince, is likely particularly happy with this. In 2008, he established the Kiyan Prince Foundation to educate young people about the consequences of knife crime. And now, he’ll be able to see a likeness of his son playing for QPR again.
Supercell not limiting teams in Clash of Clans World Championship May pre-qualifiers
The proposed limitations to the number of competing clans in the Clash of Clans World Championship May pre-qualifiers will not be take effect. Now, all clans who placed between Champion one to three in the Clan War League earlier are eligible to participate.
The revision was announced after the company proposed last week that it could limit the number of teams competing in the Clash of Clans World Championship pre-qualifiers. The exact reason behind this move wasn’t revealed, though.
Registrations are open for the Clash of Clans World Championship May pre-qualifier until May 20 at 5am CT. The pre-qualifiers will happen on May 22 and 23 between 5am and 1pm CT. The top six teams will advance to the May monthly qualifier to decide the clan that gets a ticket to the World Championship Finals.
If you’re the leader of a clan that placed in Champion one to three, you can register a team for the World Championship pre-qualifier. The registrations can be easily done in-game by clicking on the tournament hub icon on the right side of the home screen.
Each team has to have five members who are at Town Hall 14. Only the clan leaders can select the players they want on their teams. Once a player is selected, they will be able to register themselves through the tournament hub. Players will be required to enter their date of birth at the time of registration.
The Clash of Clans World Championship 2021 has a total prize pool of $1 million. The year will consist of six monthly seasons from May to October. The winner of each season will book a slot at the 2021 World Championship Finals. There will also be the last chance qualifier after the six seasons which will decide the last two teams at the World Finals.
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