Author: Papuna Gogoladze
Recent advancement in technologies enabled developers to push their limits and create games that are not much different from actual movies in terms of graphics and story. The first two games that dragged me into video games were “Super Mario” and “Sonic the Hedgehog” – basically movement of few coloured pixels on the screen. As video games evolved over time, improved game contents attracted more and more people. According to the report published by Newzoo in April 2017, there are approximately 2.2 billion people, who play video games around the world. Although other report, published by Unity in April 2017, suggests that this number is estimated at 2.6 billion people. In a word, we see that one-third of world population is engaged into playing games.
Gaming, which is an integral part of the global media and entertainment market, has constantly been increasing since 1995. The amount of published games increased from 100 million in 1995 to 2.6 billion in 2017 (Internet Trends 2017 – Code Conference, Mary Meeker, May 31, 2017). In the gaming industry, mobile gaming (smartphone and tablet gaming) seems to be the most lucrative segment growing at 19% year to year to $46.1 billion in 2017.
The global games market is estimated to be worth $116 billion in 2017, which implies 10.7% growth compared to 2016. It is expected that the market will reach $143.5 billion in 2020 (Newzoo, November 2017).
The rise of gaming industry developed a special form of competition using video games, which today is known as Esports or electronic sports. Michael Wagner defines esport as “an area of sport activities in which people develop and train mental or physical abilities in the use of information and communication technologies” (p.3; cf. Wagner 2007, Martončik 2015, Al Dafai 2016). In this definition it is remarkable that “e” in eSports does not stand for “electronic” or “computerized” but information and communication technologies.
Back in 1972, at Stanford University students participated in “Intergalactic Spacewar Olympics” for the game Spacewar. The grand prize was one-year subscription for Rolling Stone magazine. This may sound funny if we look at prizes for modern tournaments. For example, in 2017 the tournament called “The International” took place in one of the most played games – “Dota 2” and prize pool reached $24.8 million. Unbelievable right? What is even more surprising, almost 94% of the prize pool was contributed by players. Unlike from “Intergalactic Spacewar Olympics”, winner of “The International” tournament won approximately $11 million. (This may make one think about giving up university and going into gaming). To have a better understanding, let us take “The International” that was held in 2016, when each member of victorious team “Wings” won $1.83 million while Dustin Johnson, winner of US Open Golf, won $1.8 million and Stan Wawrinka, winner of US Open Tennis, won $3.5 million.
Once stadiums and concert halls were used to host football matches or live concerts of popular artists, but the trend is changing. For example, in South Korea stadiums that hosted 2002 FIFA World Cup, are now overcrowded by eSports fans. As reported by Newzoo, from 2014 to 2016, the eSports global audience increased from 203 million to 292 million, which is 43% increase in just two years. It is projected that the amount of viewers will exceed 427 million by 2019.
Source: UK Video Games Fact Sheet – The Association for UK Interactive Entertainment
Generally, audience is divided into two groups: eSports enthusiasts (viewers who watch multiple times a month) and occasional viewers (viewers who watch less than once a month). As we see from the Figure 1, starting from 2014, amount of eSports enthusiasts has been constantly growing and will reach 215 million in 2019. In the United States, 76% eSports enthusiasts say that hours that they used to spend on watching Traditional Sports are now spent on watching eSports. In addition, as Figure 2 represents male millennials in the United State (age 21-35) are just as likely to watch eSports (22%) as baseball or hockey (Newzoo, October 2016).
Source: UK Video Games Fact Sheet – The Association for UK Interactive Entertainment
Furthermore, Figure 2 shows that traditional sports (American football, basketball, baseball and ice hockey in this case) lose popularity among younger audience (except ice-hockey), while they are eminently popular in older generation. Due to the fact that older age groups (36-50 and 51-65) did not have an opportunity to be introduced to advanced video games in their youth, we can assume that after 30 or 40 years, when millennials grow older, popularity of video games may dominate popularity of major traditional sports.
Increased interest in eSports resulted in enormous funding deals. According to the report published by CBinsights in September 2017 (Leveling Up: Deals To Esports Startups On Track For 4th Annual High) there have been $1.2 billion worth of global eSports funding deals (90 in total) surpassing full-year figures in 2015 – 84 deals in total totaling $942 million. It is projected that total deals in 2017 will amount to 136 hitting total value of $1.9 billion.
Source: UK Video Games Fact Sheet – The Association for UK Interactive Entertainment
Currently, considering how young eSports industry is, it does not even measure up to traditional sports (CBinsights). On average, American sports leagues are more than a century old, whereas first coverage of the eSports was done by ESPN 5 years ago. For example, National Football League (NFL) was founded in 1920 and the league approximately earns $13 billion.
To see how video games sector (and not only eSports) contributes to economy let us discuss an example of the United Kingdom, which is anticipated to be leading European games development center within five years. Generally, video game sector can be divided into three parts: development, publishing and consumption. In 2015, British Film Institute published a report entitled “Economic Contribution of the UK’s Film, High-End TV, Video Game, and Animation Programming Sectors' in which there is depicted contributions of video games with respect to development, publishing and consumption.
It appears that in 2013 video games development contributed £639.1 million gross value added (GVA) and employed 9400 full-time employees (FTE). Video games publishing activities in the UK employed 3100 FTEs and generated £210.9 million GVA, while video games consumption generated an estimated 1800 FTEs of employment and £53.0 million in GVA. In total, UK video game industry employed 12100 FTEs and contributed £755 million GVA to UK’s economy.[1]
Source: “Economic Contribution of the UK’s Film, High-End TV, Video Game, and Animation Programming Sectors” – British Film Institute
In conclusion, rise of eSports and, generally video games, brings a lot of lucrative opportunities not only for players but for different industries. Since being a participant or viewer requires one to have big budget high-end hardware devices, the people involved in gaming are more likely to have high income. Thus, it opens up huge market for digital media providers and hardware manufacturers. And finally, eSports betting is supposed to hit $100 million threshold, making it 7th biggest betting market, surpassing some traditional sports such as golf and rugby. But what must be mentioned is that by the end of 2017, World Health Organization classified gaming disorder as a serious mental health condition that may hinder development of the industry. This topic arose huge controversy and has become a subject of broad discussion.
[1] These findings only depict direct impact, multiplier and spill-over effects are not taken into account. To see how multiplier and spill-over effects influence the overall contribution, please refer to the following link: “Economic Contribution of the UK’s Film, High-End TV, Video Game, and Animation Programming Sectors” -
http://www.o-spi.co.uk/wp-content/uploads/2015/02/SPI-Economic-Contribution-Study-2015-02-24.pdf
