The business of Esports is flourishing. Nine of the top 12 Esports companies listed by Forbes value above $100 million each.
The esports industry world over is expanding at a galactic pace and is poised to cross $1.5 billion mark in global revenues with a fanbase of 600 million gaming enthusiasts by 2020, according to an estimate by Deloitte.
The growth drivers of the industry, without a speck of doubt, are esports companies that are constantly buying and selling teams and players to compete in the best leagues around and build audiences on various social media platforms and streaming service,including Youtube and Amazon’s Twitch.
Cloud9, with estimated net worth at $310 million, is the most valuable professional esports company around the world, boasting of 92 players across 12 owned teams and annual revenues crossing $22 million per annum.
The five-year-old company, owned by Jack and Paullie Etienne, has raised $50 million in Series B funding this month. A chunk of that will go toward building a 20,000-to-30,000-square-foot training facility and home base for its operations in Los Angeles, scheduled to open in 2019.
The US-based company is also leading other counterparts from a competitive standpoint as well. Its North American LOL team made its sixth-consecutive appearance this year at the World Championships, the longest streak of any team in the esport. In July, its London Spitfire became the first-ever champion of the Overwatch league. In January its Counter-Strike: Global Offensive team became the first North American squad to take top honours at a major tournament.
Team SoloMid, at $225 million, is the second-most-valuable company and the only one known to be with positive cash-flow. In terms of revenue, the company tops the chart with $25 million raked in annually. It also has the most successful North American team in League of Legends with six titles. Founder and former player Andy Dinh has plans for TSM to be the Dallas Cowboys of esports.
Team Liquid is close behind SoloMid at the third spot with net worth estimated at $200 million. The other companies estimated to be worth over $100 million in the top 12 roster are Echo Fox, OpTic Gaming, Fnatic, Gen.G Esports, G2 Esports and Immortals.
Forbes’s report suggest that player costs tend to exhaust half of an esports company’s operating budget, with the vast majority of gaming organisations still making losses as they continue to spend money to build their rosters and brands.
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With the popularity of esports on the rise, the cost of entering individual teams into gaming tournaments and leagues continue to grow more expensive. Riot Games began selling franchisee license for $10 million for its game League of Legends in the summer of 2017. In a years’ time, the bankers are now valuing the franchisee at $50 million.
Similarly, the value of Overwatch League franchisees, which were sold by Activision Blizzard for $20 million in 2017, have reached an estimated $60 million to $80 million.
According to Newzoo, the number of esports enthusiasts worldwide will reach 165 million in 2018, which translates to year-over-year growth of 15%. Esports revenues will grow 38% this year, to $906 million, and reach $1.65 billion by 2021. Most of the business will come from North America (38%) and China (18%). Sponsorship is the biggest revenue stream ($359 million this year), followed by advertising ($174 million), media rights ($161 million), game publishing fees ($116 million) and merchandise and tickets ($96 million).
With new dedicated stadium and facilities being built for esports, traditional sports leagues and teams cashing in by launching their own esports leagues and teams, and massive increase in sponsorship and media rights value, esports is already close on the heels to reach the inflexion point coupled with impressive growth numbers.
In July, Overwatch League became the first professional esports league on the globe to sign a television broadcast deal with Walt Disney. The multi-year, multi-million dollar deal includes Disney-owned networks including ESPN, Disney XD and ABC. Overwatch is already adding expansion teams, and Riot Games has begun selling franchises for its European league.
The increase in media rights value has been attributed to the expansion of esports leagues across the world to include more franchisees. Overwatch League is already adding expansion teams, and Riot Games has begun selling franchises for its European league. Media rights revenue numbers are growing the fastest and are projected to be more than $320 million by 2021, making it the second-biggest source of revenue behind sponsorships.
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