While popular streamers such as Tyler “Ninja” Blevins have dominated the public discourse on esports and gaming over the past year, an indication of the staying power of the industry and its future potential is the underlying story of investment dollars into the space. The rise of esports investments report 2019 by Deloitte and The Esports Observer examines this in more detail.
For esports, 2018 was a record year in both numbers of investments and investment dollars. Over $4.5B USD was invested in the industry in 2018 alone. While this headline number is certainly significant, it is the composition of these investors that also offers interesting insights.
For the first time, traditional private equity investors have gotten involved in a meaningful way. From 2014 to 2017 there were only nine disclosed investments into esports businesses from private equity firms, relative to the eleven that took place in 2018. Interest among traditional investors to explore different ways to gain exposure to the industry is indicative of the maturation of the industry and its growing mainstream appeal from an investor perspective.
The esports ecosystem offers a variety of different investment opportunities across a range of subsectors. Some are unique to the industry, such as team organisations, while others hold similarities to other traditional industries, such as consumer products and event planning, which could be more palatable to investors entering the space for the first time.
A key merit of the industry is the core demographics. In 2018 the esports industry had a global fan base of 380M with 37% representing males aged 21 to 35, and 16% representing females ages 21 to 35. In addition, in the U.S., 61% of esports viewers earn more than $50,000 per year. year. Investment offers exposure to this demographic that is increasingly averting its attention away from traditional media.
With increasing focus by investors and an attractive industry profile, this thought leadership seeks to explore the current state of the industry from an investor perspective. In doing so, this report is divided into three parts: the rise of esports investment, the potential rewards (and risks) of investment, and the dynamics of an esports investment.
The rise of esports investments
The first section examines the history of investment into the industry up to today. More specifically it explores how different investor types have engaged with the industry, such as venture capital and private equity, before ultimately analyzing the current state of the industry through five major subcategories.
These subcategories (team organisations, developers, event coordinators, media platforms & advertising, and consumer products) are examined through an investor lens with a focus on several key specific valuation considerations.
The potential rewards (and risks) of investment
After establishing the investment landscape in the prior section, this section explores the potential benefits and hazards of partnerships for both investors and companies alike.
Through a series of articles written by The Esports Observer contributors, this section presents examples of some of the nuanced issues to consider as one explores esports for investment potential.
Dynamics of an esports investment
Finally, the publication offers companies in the space an overview of the positives and negatives of partnering with different investor types and a breakdown of key questions and diligence areas they should consider exploring before agreeing to a deal.
Overall, as the industry continues to grow and mature, investment interest from outside players is expected to be in lockstep. The goal of this thought leadership is to provide a starting point for the discussion; offering both traditional investors exploring the space for the first time, and esports companies that are considering raising capital or exploring a sale, some factors to consider when contemplating an investment in this dynamic, fast-growing industry.
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