eSports is Taking Over the Entertainment Industry?

The world championship finals for the online battle arena video game ‘League of Legends’ draws in more viewers than the Super Bowl 52 in 2018. The eSports fan base is enormous!

In 2019, the video game market raked in $83 billion in revenue, according to GoldenCasinoNews.com. It is now earning more than movie and music industries do - global box office generated $42.5 billion in 2019 whereas music industry hit a record of $19.1 billion. eSports is now the world’s favourite form of entertainment. The market is booming! There are now more than 2.5 billion gamers around the world. With the growth of mobile gaming and innovative offerings, GlobalData believes it will reach over $300 billion by 2025.

While the market is growing fast, the revenue source of eSports is shifting lately. The gaming industry used to make most of its money by selling games but today its revenue is coming from a different perspective: The Free-to-Play Model (Ilker Koksal, 2019).

Some might think that free games could not make much money since it is completely free to register and play. However, the free-to-play model has proven to be one of the most profitable types of video game models in the modern age, and the revenue is mostly from the sales of in-game items, such as cars, weapons, or character outfits.

Fortnite had $2.4 billion total revenue in 2018. Of this, over one billion was generated through the sale of in-game items. Many online games are now shifting to the free-to-play model with a focus on thousands of dollars that get traded through in-game items.

In-game skins is becoming one of the main options for game developers to keep and entertain players, at the same time monetize their games. Either the game developers build in-game items themselves, or they hire a third parties to provide that for them. Currently, there are only a few third-parties that offer this solution. For example, DMarket founders claim to have 10+ years of experience in virtual item trading and building in-game economy from scratch. According to their website, the company provides both, a toolset to build in-game economy and a place to buy, sell, collect or exchange a wide variety of in-game collectibles.

In 2019, mobile games sparked 60% of global game revenue, according to GoldenCasinoNews.com. Mobile platforms have driven growth in "hyper casual" games that appeal to people who don't consider themselves hardcore gamers. The number of hyper casual games surged 170% in 2019 from a year earlier, more than three times the gaming industry average. And downloads jumped 150%, according to an AppsFlyer study. In-game advertising is the major funding source for free-to-play mobile games. Developers sold ad space to monetize their content. In other words, players have to watch an ad in order to unlock the game content.

With the free-to-play model, third-party in-game item markets and mobile platforms, the industry may grow bigger in the future. In fact, Newzoo forecasted consumer spending on games will grow at a CAGR of +9.0% between 2018 and 2022. Other factors that might also act as contributors may include cross-platform titles, more smartphone users, and improvements to both mobile hardware and mobile Internet infrastructure, including the rollout of 5G networks.

So is eSports taking over the entertainment industry? Not yet but is fast gaining ground!

Reference:

1. Ilker Koksal, Video Gaming Industry & Its Revenue Shift www.forbes.com

2. Robert Williams, Mobile games sparked 60% of 2019 global game revenue, study finds www.mobilemarketer.com

3. 2019 Global Games Market Report, Newzoo