When 12 million people tuned in to watch Travis Scott perform on Fortnite it became clear that gaming, the growth industry of the last decade, is one of the few industries that is thriving during the COVID-19 crisis.
The development of smartphones has taken gaming from a niche pastime enjoyed by a small minority to a staple of our daily lives and the rise of live streaming platforms like YouTube and Twitch has led to the birth of a whole new industry in esports.
With the lines between gaming, esports and traditional entertainment continuing to be blurred the opportunity for diversification through M&A is greater than ever.
Where did Gaming and esports stand Pre COVID-19
Last year the global gaming market was valued at $152bn, cementing its place as a premium form of entertainment. The success of the Call of Duty franchise, which outstripped the combined box office revenue of the Marvel Cinematic Universe, the most successful film franchise in history, clearly indicates that this is now a mainstream industry.
Mobile gaming, the platform responsible for 51% of gaming consumption, has made gaming accessible to a wide demographic through its diverse offering and low cost. This has brought a new set of gamers into the market from all corners of society and has created an excellent platform for brands and advertisers to reach their desired target. It is no wonder then that the App Store in the UK has nearly 1m gaming apps.
Mobile gaming has seen a growth rate of 23% to 2019 and developers and publishers are likely to follow the lead of BDO client Codemasters, whose acquisition of Slightly Mad Studios solidified their position as the UK’s leading publisher on racing games.
Gaming’s newest offshoot, esports, allows gamers to compete in official tournaments for their preferred games. What was once a highly-specialised industry for dedicated gamers has rapidly become mainstream. Amazon’s $1bn acquisition of Twitch in 2014, followed by Activision’s acquisition of Major League Gaming for $46m in 2016 provided the signal that this was an industry on the rise. Having been valued at $252m in 2015 esports was worth $906m in 2019 and is set to surpass a value of $1bn this year.
It is not just those within the industry recognising the value in esports. Radio station broadcasters Beasley Broadcast Group acquired Overwatch esports team Huston Outlaws and multi-platform gamers Gen.G Esports received $46m in investment from various sources, including Hollywood actor Will Smith, proving that M&A activity in this space has only just begun.
Gaming has also become significantly more lucrative for the top players, predominantly young males. Sponsors and advertisers are recognising the value of connecting with a notoriously hard to reach demographic. Global prize money has gone from only $5m in 2010 to surpassing $1bn in 2017. The 2019 Fortnite World Cup alone provided a prize pot of $30m, with the top prize of $3m being taken home by 16 year old Kyle ‘Bunga’ Giersdorf.
The social reach of gamers at the forefront of esports, also know of E-Athletes, is being recognised by brands. Tyler Blevins, known as Ninja to his 23 million YouTube followers, was recently signed up as a brand ambassador for Adidas, Nike have entered into a 4 year kit deal with the Chinese League of Legends and in 2019 Louis Vuitton provided in game outfits in association with Riot Games.
Followers of E-Athletes are twice as likely to purchase products because of celebrity endorsements compared to other internet sources, so there is a clear opportunity for brands and advertisers alike to capitalise on this engagement.
What does this all mean today?
The number of casual gamers who have picked up their controllers again has increased. James Draper, CEO of Bidstack, claims there has been a 24% increase in time spent on video games in the UK since the beginning of social distancing and Verizon reported a 75% increase in video game related internet traffic in the first week of the US lockdown.
The World Health Organisation have launched their #PlayApartTogether campaign in conjunction with over 60 gaming companies, including major publishers such as Activision Blizzard, Microsoft and Sega. This campaign has seen gaming publishers using their platforms to share the WHO’s health guidelines while targeting new customers by giving away free games.
Esports has been catapulted to the fore with people looking to fill the void left by the cancellation of traditional sports. The largest streaming platform, Twitch, surpassed 3bn hours watched across the first three months of the year compared to 5bn hours in 2019. Global esports company Gfinity’s platform Realsports101 has seen a 400% increase in monthly viewership for February 2020 compared with April 2019. This has led to them entering into a strategic partnership with in-game advertising specialists Bidstack and Venatus to monetise the increased traffic.
Traditional sports are recognising the opportunity to create a new type of engagement with their fans whilst attempting to expand their audience. In Formula 1, Ferrari’s Charles Leclerc beat his usual competition and stars from other sports like England cricket’s Ben Stokes and Ryder Cup hero Ian Poulter, in a simulated version of races from F1’s regular calendar, whilst streaming to his 220k followers on Twitch.
Stars of the Premier League, like Man City’s Raheem Sterling and Liverpool’s Trent Alexander Arnold, have been taking part in a FIFA tournament, streamed live across various platforms. England and Saracens rugby player, Mako Vunipola won a similar FIFA competition streamed on RugbyPass.com. In tennis the Madrid Open has also gone virtual with the Facebook live streaming Kiki Bertens retaining her title and Andy Murray beating rivals such as Rafa Nadal to take the crown.
Manchester City, alongside a number of clubs in Europe and the USA, already have esports teams and if the current level of engagement continues it is likely we will see more sports clubs acquire esports teams to develop their brand.
While it remains to be seen what the world will look like post COVID-19, gaming and esports look set to go from strength to strength. The global audience for esports is expected to grow to 560m by 2021 and Global Web Index have reported that the 77% of millennials who have increased their time spent gaming during the COVID-19 lockdown intend to continue playing once the pandemic is over.
In the short term, the BBC has committed to live stream Formula E’s new Race At Home Challenge, meaning that traditional sports are going to continue to harness the power of esports to create content during the lockdown.
In the longer term, strategic partnerships and M&A activity between complimentary companies are likely to become the norm in the race to the top. Tournament hosts ESL and Dreamhack have signed what is rumoured to be the largest exclusivity deal in history between an esports tournament organiser and a livestream platform, granting Twitch the rights to broadcast their English language tournaments for the next three years. This follows a similar deal worth $90m between Google and Activision Blizzard, who will exclusively broadcast their tournaments though the tech giant’s YouTube platform.
With the International Olympic Committee considering adding esports as an Olympic event as early as 2024, gamers can see that becoming an E-Athlete is a potentially lucrative career option with sponsors and advertisers continuing to invest in this channel.
Although COVID-19 has created an unwanted new normal, it may have changed how we view gaming and esports for the better.
For any further information please contact Greg Leathem.