What has happened to eSports?

Over the last ten years, eSports has developed from a “nerd” product - a niche phenomenon that generated around 200 million dollars in revenue worldwide in 2014 - to a “mainstream” dimension - i.e. digital mass entertainment - at least in some countries. According to Statista, Newzoo and BCG (Boston Consulting Group), the industry has broken the billion-dollar revenue barrier in 2021, reaching an audience of almost 550 million people worldwide and gaining staggering memberships for events such as the League of Legends World Championship (173.8 million total viewers), the Free Fire World Series (5.4 million tuned in simultaneously) and Dota 2 International (2.7 million).

All of this has attracted high profile attention, investment and sponsorship, even outside of the target segment. Brands such as Nike, Mastercard and Red Bull have been attracted to this booming business, injecting capital and helping to add zeros to the prize pools of major events. Suffice to say, the 2021 Dota 2 International paid out a record $40 million in prize money, while the 2019 Fortnite World Cup “stopped” at $30 and Kyle “Bugha” Giersdorf (winner of the singles category) brought in a whopping $3 million. Since then, however, something seems to be stuck in the gears of an industry that has not been able to return to its previous pace of growth since the pandemic and is even showing some worrying signs of fragility.

Unsustainable growth

Behind the apparent stability, the models of many esports organisations have proven less solid than expected, especially in the Western market, where over-reliance on sponsors and media rights is beginning to show its limits; all this in the midst of a historic moment that is certainly not helping (due to the pandemic and beyond) and especially in an increasingly fragmented and almost saturated environment, whose space has shrunk with the return of sports and live events after the health emergency. The data supports this downturn and rings alarm bells that cannot be ignored.

In the United States, one of the most prolific markets, the Overwatch League has seen a 30 per cent drop in viewership from the peaks it reached between February and August 2020, when viewership was inflated due to Covid restrictions; Activision Blizzard drastically reduced the prize pool for the 2023 finals, while the Call of Duty League saw an audience drop of more than 17 per cent for one of its main events in 2024; overall, the expansion of esports has slowed significantly, dropping from annual revenue growth rates of around 25-30 per cent (2015-2019) to 15-20 per cent (2021-2023). The audience therefore no longer seems to be sufficient to sustain and consolidate the ultra-competitive model that these leagues strive for. The warning from Nicole LaPointe Jameson, CEO of the Evil Geniuses team, is clear: “Without more structured audience engagement, it will be difficult to maintain the same intensity of growth.”

Chinese model

At this stage, it would be inappropriate or at least premature to speak of a crisis. This is mainly due to the results on the Asian market, and in particular the Chinese (but also Korean and Singaporean) market, which alone generates around 40 per cent of global sales. Events such as the League of Legends Pro League and the King Pro League continue to attract millions of viewers in China, with audiences proving to be more loyal and less volatile than in the West. The basis for this stability? First and foremost, a better balance between sponsorship revenue and spectator engagement.

The Chinese model has taken an early direction that now seems inevitable on a larger scale. That is, trying to penetrate the digital ecosystem more organically, especially through streaming on Douyu, Bilibili and Huya (bearing in mind that Twitch is on Beijing's long blacklist of social networks), platforms that are very popular with young people and enjoy great visibility, and even broadcast some events on the national TV channel Tencent. The example of Beijing has thus become a benchmark for the entire industry, whose challenge in the coming years will be to emancipate itself more from sponsor investment and media rights revenue. “Esports is not going away,” according to a recent report published in Business Insider, ”but it is inevitably rethinking its structure to adapt to a new phase.”

On the path to a new sustainability

“Prosperity is only possible by moving to a more sustainable pace of growth," confirms BCG in a market analysis published in 2023, which emphasises that revenue diversification is a crucial factor in this process. The contraction of recent years should therefore not necessarily be seen as the beginning of decline, but rather - to borrow a phrase from The Esports Observer - as a “deliberate downsizing”, i.e. a change of course that over time leads to a stable and sustainable base that is less tied to major events and more integrated into everyday life, with a greater diversity of revenue streams.

Teams are experimenting with new approaches. US-based Cloud9, for example, has invested in creating original content for platforms such as YouTube and Twitch, relying heavily on the contribution of influencers and creators to maintain awareness without having to rely on multi-million dollar events. Other examples of change include organisations such as Fnatic (UK), TSM and 100 Thieves (US), which have launched clothing lines, merchandising products and collaborative brands to grow their business.

The words of Jacob Wolf, a journalist from Dot Esports, sum up the current situation well: “The esports market is not dying, it's evolving.” The maturation process we are witnessing is based on the realisation that we need to rethink the economic foundations of the industry and thus restructure the relationships between the main players and the community - a path that could lead to a less flashy industry with a more robust business model in the long term.