Like any other sport, eSports, or electronic sports, have a long and storied history that has seen them rise from basement-dwelling hobby to international sensation, with colossal prize pools and even bigger audiences.
But just how has this less-than-traditional sport risen to the world stage, and why should more investors and business owners take notice?
A brief history
The first official video game competition was held at Stanford University in 1972, with students competing for high scores in the game Spacewar!, with the first place prize being a monthly subscription to Rolling Stone Magazine. While this may seem overly primitive and almost comedic in retrospect, this tournament would be the first of many throughout the 70s and 80s, setting the scene for what the medium has now become.
However, the true birth of eSports is often attributed to the release of Street Fighter 2 in 1991, which allowed opponents to directly fight each other virtually, rather than competing for high scores. This paved the way for the fighting game genre to be the primary avenue through which eSports would grow and flourish, with prize pools increasing in size and some events, such as Nintendo’s 1994 PowerFest being televised.
In 1997, online gaming began to be more commonplace, with shooting games such as the pioneering id Softwarre’s Doom and Quake opening the floodgates for players to compete with strangers around the world. This culminated in the first online eSports tournament, Red Annihilation, with 16 finalists being flown to a specially built arena to compete in Quake.
This event was watched online by thousands of fans, though exact figures are unavailable. The winner of said tournament was awarded a Ferrari by one of the game’s developers.
The big players prevailing around this early era of the medium were those focussing their efforts on the aforementioned shooter genre. Id Software was not only influential in the mid-to-late 90s, but is still a highly revered studio to this day, and was an instrumental factor in Microsoft’s acquisition of its parent company, Bethesda.
This deal was struck with a mind-boggling £7.5bn price tag on the publisher through which id Software still releases its games.
Becoming a true spectator sport
In the early 2000s, eSports began to take form as a more organised affair resembling more traditional televised sports such as football, particularly with the founding of Major League Gaming. MLG was founded in 2002 by Sundance DiGiovanni and Mike Sepso and transformed the landscape of eSports, with their 2006/ 2007 broadcasts of Halo tournaments in particular being formatted and branded like any other spectator sport.
This arguably began to dissolve much of the stigma surrounding eSports, as it was, until that point, seen as too niche and not “athletic” enough to be considered a real sport. The brand was so successful, in fact, that it was purchased outright in 2015 by gaming publisher Activision Blizzard for an immense $46m (£33.8m).
(L - R): Councillor Graeme Miller, leader of Sunderland City Council, Chester King, chief executive officer at BEA and Patrick Melia, chief executive of Sunderland City Council.
The centre of attention
As things now stand, eSports is an international phenomenon with an extraordinarily large audience. However, why should investors and business owners pay attention? Simply put, the sport’s growing popularity has conjured significant investment in regional economies where eSports are seen to be flourishing.
For example, as recently as January 2022, The British Esports Association (BEA), the national body for esports, announced it is set to open a performance and education campus at Riverside Sunderland, which will “nurture and support the next generation of talent, as interest and engagement in esports grows in the UK”.
This multi-million pound investment has the potential to stimulate the local economy in a profound way, as attention is drawn to the region from brands and companies that, perhaps, would not have taken notice previously.
The National Esports Performance Campus (NEPC) is set to open in the summer of 2022. The NEPC will host regular esports events, community tournaments, summer camps and be used as a training base for the Great Britain esports team, which recently took part in the Global Esports Games in Singapore.
Chester King, chief executive officer at BEA, commented: “The UK is Europe’s second biggest video game market and ranked sixth globally – this speaks to the potential of esports which will capitalise on gaming’s popularity, with talented competitors emerging and a growing audience keen to spectate and enjoy esports as a leisure activity. This is a market that we know will explode in the UK and we want to support its growth.
“Sunderland is a hugely ambitious and future-focused city and that aligns very much to BEA and esports, which has vast growth potential and ties into Sunderland’s strengths in gaming, digital and sport.”
A skillful investment
Another area of significant investment in relation to esports is the skill training market, with dedicated facilities and online academies proving a lucrative market for those clued in enough to take the plunge.
SwiftSkill, the digital platform that allows aspiring eSports professionals to assess, track and improve their performance, has raised a £150k pre-seed round from Jenson Funding Partners.
The funding will allow the business to expand its team and provide its service to additional esports game titles, to help gamers build their skills to become professional esports players.
Founded by Anil Kumar Peri of Cranfield University and Shankha Subhra Dutta from Lancaster University, SwiftSkill was created after the pair recognised the lack of advice available to aspiring esports players.
SwiftSkill aims to reach the 400 million aspiring esports professionals around the world with its platform, democratising the opportunities for different regions to build its talent in the sector.
SwiftSkill works by providing a digital analysis tool that gives player’s an insight into their performance. The platform analyses data from matches, providing insight, heat maps and a breakdown of their performance. Players can then identify trends and skills that will succeed in future matches.
Anil Kumar, co-founder of SwiftSkill, commented: “Every gamer plays differently and there can’t be a one-size-fits-all training for those eager to become esports professionals. At SwiftSkill, we’re giving aspiring professional gamers the insight they need to play better.
With major global eSports having the potential to generate 238 full-time equivalents (FTEs) of employment and £12m in Gross Value Added (GVA) for the UK economy alone, providing more opportunities for gamers to compete on a professional level will strengthen the sector.“
Jeffrey Faustin, CIO of Jenson Funding Partners, added: “The gaming sector has consistently grown in recent years and the pandemic escalated the lucrative investment opportunities present in the industry.
“Esports presents a huge opportunity and innovative businesses such as SwiftSkill are driving the growth of the industry. SwiftSkill creates an opportunity for aspiring gamers to become professionals, honing their skills in the same way that traditional athletes compete.”
High scores of cash
eSports as a collective whole has become an industry with a monstrous amount of money involved. For example, the International, an eSports tournament centred around the game Dota 2, began in 2011 with a prize pool of $1.5m (£1.1m). However, only 8 years later in 2019, the prize pool had inflated to $25.5m (£18.8m), thus demonstrating just how far eSports has come in recent years.
According to the numbers gathered from eSports Earnings, the annual eSports prize money haul was $201m (£148.3m) in 2021. The company analysed the numbers from the last five years, and in 2017, the figure stood at $117m (£86.3m). The amount of money increased by 42.7 per cent in 2017, and eSports players won a total of $167m (£123.2m).
The growth rate was sustained in 2019, and the yearly prize increased by a further 44.1 per cent. In total, $240.7m (£177.5m) was awarded in eSports tournaments. However, that has stayed the best year for the eSports industry so far.
In 2020, the amount of annual prize money went down to $124.9m (£92.1m), a 48 per cent dip from the 2019 numbers. The industry made a strong recovery in 2021, but it was still not at the 2019-level.
DJ Khlaed performing during EA Sports’ 2020 Superbowl Party in Miami.
Game over? Not by any stretch of the imagination…
The eSports industry was on a steep upward curve before Covid-19 hit in 2020. The annual prize money up for grabs in eSports increased by 106 per cent from 2017 to 2019. This was a significant growth as the annual amount of prize money more than doubled in two years. In 2019, the future couldn’t have looked brighter for the entire industry.
However, the entire industry took a big hit from the pandemic in 2020. Due to lockdowns and restrictions on live events, the number of tournaments and events dried up, which is reflected in the amount of prize money won in the year. As per the numbers presented in the report, the entire disruption caused due to the pandemic sent the industry a couple of years back, to the levels of 2017.
Vyom Chaudhary, an editor at SafeBettingSites, commented: “The eSports trends in 2021 looked much better than the year before, but it would be wrong to say that a full recovery has been made. The annual prize money in eSports was doubling every two years before the pandemic, and it would take some time to reach that level of growth.”
The recovery being made by eSports is apparent in all facets of the industry. For example, a number of eSports-centric betting sites have begun to flourish once more as the global economy recovers from this period of instability, with the betting market only set to expand further in the coming years.
Fun facts
The Association for UK Interactive Entertainment published a document in 2020 detailing the scale and growth of esports as a medium in the UK. Of course, this research was conducted before the advent of the Covid-19 pandemic. However, in this writer’s opinion, this makes the research applicable to the future of esports as it continues to recover from the damage it has been dealt over the past two years.
The research of which the UKIE document is comprised found the following:
The 18 leading companies and organisations comprising the UK’s esports services industry directly employed an estimated 328 FTEs in 2019, and generated direct GVA of £47m. Including indirect and induced economic impacts, the esports services industry generated a total of 915 FTEs of employment and £84.4m in GVA for the UK economy in 2019.
Therefore, it is safe to assume that UK eSports will support even more jobs and represent an even larger share of the global market in years to come as the medium shakes off the effects of the pandemic and begins to flourish once again.
The big players
Despite recent knockbacks, eSports has served as something of a marketing goldmine for the past 10 years or so, being initially funded by the most expected brands such as energy drinks like Mountain Dew and Red Bull, as well as suppliers of computer components like Intel. However, as the sport has become more mainstream in recent years, more mainstream sponsorships and advertising campaigns have emerged.
For example, Japanese automobile company Honda, who has a net worth of over $50bn, became an eSports sponsor last year, and even hosted a widely covered tournament in Thailand, providing a substantial amount of exposure.
Additionally, the US Air Force declared its interest in eSports by partnering with competitive team Cloud9, who play the game Counter Strike: GLobal Offensive for enormous audiences, both in stadiums and online. The US Air Force invested over $1m in the industry and had its logo proudly displayed on the official Cloud9 team jersey.
Essentially, what this demonstrates is that eSports is an open field in respect of sponsorship and advertising, with brands of all sizes and types finding wild success in their respective ventures. Whether it be supporting smaller local teams or getting your logo on a stage being seen by millions, eSports can provide significant exposure opportunities for those willing to break into the market.
Reaching the final level
The future of eSports is certain in a few key aspects. For example, the prize pools are only likely to grow larger as the medium becomes more mainstream. However, the truly interesting developments that are likely to emerge are the range of investments being made into the sport’s future, as more dedicated centres and stadiums are built both nationally and internationally.
Moreover, the investment into companies which tackle the minutia of eSports development is a burgeoning market with substantial potential. Much like how training facilities receive scores of funding in more traditional sports like football, digital platforms which allow players to build their skill are being injected with cash on a more frequent basis with each passing month.
Simply put, eSports is a venture worth paying attention to on the part of investors and business owners, as its ability to stimulate regional economies and involve all manner of businesses and brands is unifying in a way typical of any global competitive sport, and thus is just as deserving of the time, money, and effort that is poured into such sports.
By Matthew Neville, Correspondent, Bdaily
