‘If the esports bubble bursts, it will simply slow down, not grind to a halt’
Esports grew considerably in 2020 as people found themselves confined to their homes with time on their hands. Brands duly poured hundreds of millions of dollars into the ballooning industry. As part of our deep dive into all things gaming, we take a look at how exactly people are consuming this content, and whether it is a bubble that will eventually burst.
Over the past year, Activision Blizzard reduced its global workforce as players increasingly choose to connect with its games digitally due to the impact of the Covid-19 pandemic on live events.
The developer saw its free-to-play title Call of Duty: Warzone downloaded 80m times in the nine months following its March 2021 launch, affirming its efforts to transition its non-development workforce to a full outsourcing set-up.
Mathieu Lacrouts, chief executive of esports agency Hurrah, says consumers are seeing the wide range of options to consume content that gaming organizations and businesses are offering – especially compared with traditional sports.
“Over 3.2 million people applied for a seat at the 2020 League of Legends World Championship Finals in Shanghai,” he says. ”Second-tier events often reach attendances of around 10,000 in markets such as France and Spain. The demand for live events is undeniable. But most fans who attend live events are often also online viewers.
“The focus for brands and companies interested in esports should not be the split between online and offline, but the myriad of benefits that highly engaged audiences represent for them in a multi-platform ecosystem.”
With 30% to 40% of the population in South East Asia watching streamed esports events, Divya Acharya, the head of solutions and innovation strategy for Xaxis in Asia Pacific, says it is a form of entertainment likely to remain anchored online.
“Streaming eclipsed in-person events this past year due to the pandemic. According to a recent report in Q4 2020 by Newzoo, global gaming revenues saw a positive re-forecast by almost +17.8 billion that can be attributed to lockdown measures in almost every country."
Will the esports bubble burst?
Pre-pandemic, consumer goods brands spent more than $21.8m on sponsorships within the esports market according to Statista. Among the big-name sponsors of major esports events are Coca-Cola, Mastercard and Intel.
In Asia Pacific, Porsche hosted its first regional esports tournament, the Porsche Asia Pacific Forza Cup, which reached over 24.7 million people in the region. The Grand Finals was streamed live on Facebook, YouTube and Twitch across 14 countries and the brand claims 56,429 viewers tuned in across the region.
These attention-grabbing figures are pulling spend from other marketing channels, with new investors and commercial partners likely attracted to the space. It raises the question of whether the esports bubble will pop, as its value could be overhyped.
Lacrouts notes that there are companies burning cash that is not theirs with no proper business plan. He says that influx of capital will not stick around for long, and that some that saw esports as the next big thing for making a quick buck have already left the scene.
That said, he points out that esports was born from grassroots communities with a shared passion for competition, and this very human sentiment will continue to power the industry.
“During the worst months of the pandemic, when a global lockdown was in place, the audience numbers for major esports events grew,” he says. ”Many were attributing this to the lack of other forms of entertainment. But one year later, with plenty of sports competitions back and life slowly returning to normal, the figures for esports consumption kept the steady growth. New people join every day and the retainment rate is high. It is up to us who work on the field to translate this influx into a healthy ecosystem and ensure its long-term survival.”
Drew Townley, managing director of Kairos Media, says that while capital is frequently having to be raised to keep up with the extremely high operating costs of esports organizations and businesses, he reckons there will have to be some form of a ‘reckoning’ where sustainability comes more to the forefront, and that will result in some form of slowing down.
“If the bubble does ‘burst’, it will simply slow down the growth of esports, not bring it to a grinding halt,” he adds.
Acharya thinks esports is slowly gaining acceptance and recognition as a legitimate, bona fide sport that requires talent, skill and determination, just like other physical competitions. ”Traditional sport has made way for esports to be a part of a wider, more inclusive ecosystem, given the massive growth in players, audience and publishers,” she says. ”While booming with the pandemic, we feel it has accelerated the inevitable growth, rather than create a bubble ready to burst.”
Are esports budgets being redirected into wider gaming activations?
As a lot of brand marketers that choose gaming and esports as a vehicle for their activations do it either as experimentation or because of the buzz that the industry is generating, Lacrouts says they come thinking they want esports – the most visible form of entertainment – while in truth they need gaming.
“More than a conscious effort to redirect budgets, the decision usually comes from the fact that gaming as a whole is still way larger than esports, meaning that in a wide array of situations, dipping their toes in gaming first makes the most sense for advertisers,” he says.
“That’s where the good agencies challenge their clients at the briefing/pitch stage to ensure the brands get advertised to the right audiences – might they be gamers, esports fans or both.”
At Xaxis, the way the agency positions its esports offering is not just limited to the esports sponsorships, but to reach an esports player or audience while they are spending time playing similar titles non-competitively through in-game native ads, says Acharya.
This can also be done when they are watching live or recorded gaming streams on Twitch or YouTube, or engaging with an esports influencer on social media.
“There is also a lot of engagement happening off competition and we do not want to miss out on these opportunities to reach the same audience in the same mindset away from the so-called traditional digital avenues,” she says. ”It also makes for a more integrated approach and some brands are already starting to get creative with their advertising strategies. Fashion label Louis Vuitton has partnered with League of Legends to produce in-game virtual apparel, for example.”