How to drive esport passion into profit 
As Saudi Arabia hosts a historic Esports World Cup, how can this event and other actions help the industry drive monetization on a global scale?
Esports is one of the world’s most popular activities, watched by hundreds of millions of people annually. Already, some GCC countries have established themselves as hubs for the sport.
A notable example is Saudi Arabia, which will host more than 2,500 players during the first world cup, competing for an unprecedented $60 million prize pool.
However, despite its popularity, now is the time for esports to take the next step by developing a more coherent, compelling offering that provides the industry with a secure and financially sustainable future.
Global revenue from multiplayer video game competitions, also known as esports, is tipped to reach $1.86 billion by next year, growing at a forecast compound rate of 13.4 percent annually from 2020 to 2025.
Yet the value of many teams has fallen recently, reflecting general economic challenges and problems unique to esports that may threaten its growth trajectory.
Unlike other sports vying for viewer attention such as America’s NFL or Formula One, esports is fragmented. Players compete across multiple game titles and leagues, and each video game has different rules, characters, and play strategies.
Audience growth has been fueled in part by the use of free-to-access media, which reflects a belief among some in the video game industry that esports is fundamentally a marketing vehicle for game publishers.
However, multiplayer video game competitions are much more than that. The sector has an opportunity to be monetized more effectively, to become one of the world’s most popular and profitable sporting competitions.
That is because it can develop from a position of strength: the global audience for esports, as measured by people who watch at least one event per year, already exceeds 500 million people.
And esports fans are youthful and technology savvy relative to those of major traditional sports. The challenge is converting their enthusiasm into revenue.
While sports properties such as the NFL, England’s Premier League or Germany’s Bundesliga generate individual viewer revenue of about $51, $32 and $11 respectively, the average video game competition watcher contributes little more than $2.
Global revenue from multiplayer video game competitions is tipped to reach $1.86 billion by next year.
How do more mature sporting leagues generate superior returns? Through a circular process: the growth and monetization of audiences in turn funds key activities such as marketing and innovation, which further fuels the expansion of the sport’s ecosystem. Esports can develop in the same manner.
However, doing so requires bold action on two fronts: unlocking the value of sports and expanding its audience.
Unlocking the value of esports requires action from both the bodies overseeing competitions around the world and the companies developing and publishing video games.
A more cohesive governing structure would create alignment around the most popular game titles and produce a consistent competitive landscape and approach.
It would also present the possibility of growing audiences in key geographies outside of the Asia-Pacific region, such as the Middle East, the US and Europe, where broadcasters and sponsors are willing to invest more.
Simultaneously, a more coherent global platform for competitions may help video game publishers pursue the potential of esports as a profit center, rather than just regarding them as marketing vehicles for community building.
Game publishers have long been hesitant to outsource esports to third parties, worried about losing control over their intellectual property and potential reputational risks. That approach prevents specialized esports leagues and event organizers from fully exploiting their expertise for growth and monetization.
Increased collaboration among game publishers and esports organizations would facilitate better regulation of competitions — such as optimizing games for esports. It would allow for the pursuit of brand integrations, in-game experiences, exclusive content, and other revenue-sharing deals that would promote financial viability.
The fact that esports has built a substantial audience, despite structural and operational hurdles, underscores its potential if more is done to strengthen the engagement of existing fans and acquire new ones.
Measures could include increasing the number of fan events and elevating the profile of individual players to promote fan loyalty and collaborating with traditional sport teams to bring fan bases together.
To drive broader interest, national federations could cooperate with government entities and other sports federations at national and community levels to provide gaming infrastructure and programming to residents.
One important move to boost esports’ credibility, status, and global exposure would be to make them part of the Olympic Games. That could be facilitated by stronger administration and international support for esports.
More could also be done commercially to reach new audiences, such as taking the lead from F1’s Netflix series “Drive to Survive” by producing original content showcasing esports and its personalities.
This would allow viewers to understand better and experience fully the competitive multiplayer video game experience.
With bold action, esports can go from being one of the world’s most popular sports to one of its most lucrative.
• Jad El Mir and Johnny Yaacoub, partners, and Vincenzo Musumeci, principal, with Strategy& Middle East, part of the PwC network.
