The Covid-19 pandemic has brought disruption to every industry in the world: both negative impacts and opportunities. The esports industry is no different.
Covid-19 has fuelled sharp growth in viewers and engagement with esports online, and new opportunities – in the enforced, if temporary suspension of traditional sports – to attract mainstream consumers. At the same time, it has dealt a blow to some of the key revenue streams for the esports business, and concerns about esports future growth.
Covid-19’s silver lining for esports
Start with the positives. A study by PwC earlier this year found that more than two thirds of under-35 year-olds were playing or watching gaming content during lockdown, while more than half were open to watching gaming or esports specifically.
This has been backed by up research from the online video industry. Analytics firm Stream Hatchet studied viewing trends of gaming streams on Twitch, YouTube, Facebook and Mixer in the second quarter of 2020, claiming that ‘watch hours’ grew from 4.8bn in Q1 to 7.6bn in Q2, as many countries entered Covid-19 lockdowns.
According to that report, Twitch alone jumped fromn 3.1bn watch hours in Q1 to 5.1bn in Q2, with its average concurrent viewership growing from 1.4 million people in Q1 to 2.4 million in Q2.
Another study, published by StreamElements and Arsenal.gg in May, looked at total viewing hours (i.e. not just games) on the same four esports streaming platforms: Twitch, YouTube, Facebook and Mixer. It claimed that in April alone, more than 3.9bn hours were watched: up by 99% year-on-year.
“While the industry already had momentum coming into this year, sheltering-in-place definitely gave it an extra boost,” concluded StreamElements. That’s an important point: Covid-19 has accelerated gaming and esports viewing online, but it was already growing well in 2020 before the pandemic struck.
The acceleration is clear though. “By nearly every Twitch measure we looked at, from hours watched and monthly livestreamed channel totals to livestream viewership figures and a language-based teardown of weekly Twitch use, there was a dramatic relative spike starting in March compared with the preceding six months,” said IDC’s research director of gaming and VR/AR, Lewis Ward, in June.
Also encouraging: the initial shutdown in professional sports leagues created interest from those leagues’ organisers in running esports tournaments, and from broadcasters in televising them.
NASCAR averaged more than 1.3 million viewers per event for its series of virtual races in March and April, while football, basketball and Formula 1 all saw popular events, some involving professional sportspeople competing alongside non-sporting celebrities and gaming streamers.
Fox Sports televised the eNASCAR season, while ESPN broadcast a swathe of esports, including the grand final of the Rocket League world championship, to fill the sudden holes in their schedules. Sports and games firm Immersiv has a useful roundup of these and other developments on its blog.
Covid-19 impact on esports: the bad news
The esports industry is not an entirely-online business, however. There has been considerable disruption to its physical-world tournaments and events.
Epic Games is not holding a Fortnite World Cup this year, for example, while planned tournaments for League of Legends, FIFA 20, Hearthstone, Apex Legends, Call of Duty, Rocket League and other key esports games have been postponed or cancelled. Fan gatherings from TwitchCon to BlizzCon have also been affected.
As the lockdown continued, efforts intensified to ensure some of those events could take place entirely online, which brought plenty of challenges to ensure a level playing field for competitors – both in terms of the stability of their internet connections at home, and measures to prevent cheating.
One example: the PUBG Mobile Pro League Americas tournament, which used dedicated servers to ensure parity for players in North and Latin America, as well as software to make sure players were running the right devices – even using cameras to verify their identities.
For its League of Legends European Championship, Riot Games tackled similar issues at very short notice, delivering positive online viewing figures, and a nimble activation with partners Warner Music Group and Kit Kat that reached more than 12 million people on social media, despite the disruption.
The lessons learned with these and many other events during Covid-19 will be useful going forward, helping the esports industry to run more (and smoother) online-only events, even as physical events return in the future.
The financial impact of Covid-19 on the esports industry is still being quantified. Certainly, several companies have reported immediate difficulties. Super League Gaming saw its revenues fall slightly year-on-year, suggesting it was due to a deferral in advertising spending by brands and sponsors in the early weeks of the pandemic. Allied Sports Entertainment saw a similar revenue-dip, as it closed its Las Vegas esports arena when the lockdown began.
That said, esports companies have also been looking beyond their own financial challenges to help with the wider Covid-19 relief efforts. FaZe Clan’s Fight2Fund initiative; Twitch’s Stream Aid; Riot Games’ Mid-Season Streamathon; Team Liquid’s Quarathon and 100 Thieves’ charity jersey sale were all examples of the esports industry doing its bit, and raising hundreds of thousands of dollars in the process.
What is the future of esports?
Research firm Newzoo has been trying to assess the global esports impact of Covid-19. Early this year, it predicted that total esports revenue would grow to $1.1bn in 2020, including $636.9m. However, those sponsorship budgets were immediately put at risk as the pandemic took hold in March.
Newzoo has since adjusted its forecasts downwards twice. First in April, when it suggested that total revenues would be $1.06bn this year, including a hit of $22m to sponsorship revenues for the esports industry, $15.2m to merchandise and ticketing revenues, and $9.2m to media rights income.
“Our revision has nothing to do with decreased demand (the audience is not smaller) or decreased supply (the number of events organizers want to put on is not fewer),” explained the company. “Instead, our revision is based on a temporary cease in esports activity (or a transition to digital-only events).”
Newzoo’s second revision came in July, predicting that global esports revenues will now be $973.9m in 2020, warning that “uncertainty in the market means many companies are decreasing marketing budgets to preserve capital, which will have a knock-on effect on start-of-year revenues for 2021”.
Even so, the company expects the industry to be worth $1.2bn in 2021, growing to $1.6bn by 2023. That’s the key message coming through so far: that the upwards curve both in terms of esports revenue growth and cultural relevance will continue, even if 2020 is a significant blip in the pace of that growth for the future of the esports industry.
“Gaming, game broadcasting, and professional gaming have been growing in revenue, reach, and relevance for years,” wrote investor Matthew Ball, of Epyllion Industries, in April. Ball warned that the Covid-19 audience spike for esports may not be sustainable at that level, but offered optimism about the long-term picture.
“The novel coronavirus will have permanently increased esports’ overall economic and cultural trajectory. As a category, it has been popularized and legitimized in an unpredictable and profound way,” he wrote. “And in 2020, 2021, 2022 and forever after, there will be more revenue, more funding, more viewership, and better distribution as a result.”
PwC’s report agreed with this assessment that the future of esports in 2020 still looks rosy. “A post lockdown esports market is likely to attract increased levels of investment and commercial partners. Some will be new to the industry and desperate to get involved,” it suggested.
“Esport companies should look to demonstrate to investors a maturing market over the next few months, supported by competent and strategic management teams to drive this. Not only will this blow away some misconceptions, but it will also help unlock a new set of investors, brands and sponsors that have not been available until now.”