The company predicts 2016 revenues of $0.5 billion will grow massively in the next five years and hit $1.5 billion by 2020.
Esports market momentum just getting started
The esports industry has been around for a while now. And while the market has been steadily developing the last couple of years, the lack of global awareness presented a barrier to growth. Mainstream organizations and non-endemic companies saw no real appeal in joining an industry that wasn’t well known.
This has recently started to change.
Global awareness, popularity, and revenues have surged sky-high, and last year was the most successful in the history of competitive gaming. Newzoo’s new report reflects the industry’s major potential in the coming years.
“Even more major non-endemic brands will close big sponsorship deals with teams, leagues, and events,” said Newzoo CEO Peter Warman. “Nike, Adidas, and Under Armour will battle it out for jerseys in 2017. Early movers [in the industry] are increasing their investment by several factors year on year. Ultimately, esports provides brands an entry point into the favorite pastime of digital natives and millennials.”
— Newzoo (@NewzooHQ) February 17, 2017
Revenue outlook shines bright
“Esports is not only growing exponentially as a new independent business and industry, it is also accelerating the convergence of various established industries,” the Newzoo report said.
The revenue split between industry segments and the growth within each of those segments shows a clear picture of how the industry is advancing so quickly. All five sections of the pie chart below – media rights, advertising, sponsorship, merchandise and tickets, and game publisher fees – have experienced double-digit growth with a promising outlook for the future. Newzoo predicts 2017 revenues to reach almost $700 million, an increase of 41 percent from last year.
As shown above, sponsorships are currently the industry’s biggest revenue stream. That segment also shows the second-highest year-over-year growth.
With more broadcasting and streaming, the exposure of the industry is increasing rapidly. A natural result of this development is the increase in media rights revenues. That segment is forecasted to bring the biggest increase in revenue over last year (81.5 percent).
With a five-year CAGR of 35.6 percent, the industry is projected to near $1.5 billion value by 2020. According to the report, sponsorship revenue should represent the largest fraction of total revenue and reach $655 million by 2020.
According to Newzoo’s report, esports’ international audience of 323 million from 2016 is expected to grow to 385 million this year.
The company splits fans into “occasional viewers” and “esports enthusiasts”; each represents about half the total fan base. By 2020, the audience is expected to grow to 589 million, mostly driven by more exposure and new game franchises.
“Growth in emerging regions, such as Southeast Asia and Middle East & Africa, increased viewership from TV broadcasts, and new franchises like FIFA and Overwatch are the main drivers of global esports viewership growth,” the report stated.
Awareness of the industry is expected to reach 1.8 billion by 2020. More familiarity should attract new business, which will further drive revenue growth and the expansion of the industry itself.
The report stated: “This growth will be aided by game publishers incorporating esports into their game clients and other communication channels, along with increased coverage of esports in the media.”
Growing prize pools and number of events
More annual events come about as a result of increasing awareness and popularity. Additionally, as more companies and organizations are jumping on the esports bandwagon, more money is available for prize pools.
In 2016, 424 esports events offered a prize pool of $5,000 or more. Most of these events took place in the European region (165), with the North American region following closely (118).
The volume of events offering at least $5,000 in prizes last year grew by roughly 50 percent from 2015, reaching about $80 million. Last year also saw a new record reached for biggest-ever prize pool. The International Dota 2 prize pool reached a staggering $20.8 million. The North American region accounted for more than 50 percent of the prize pool money, followed by China with about 13 percent.
Prize pool increases show how much esports have grown in the last decade.
Total prize money in 2005, as reported by Newzoo, amounted to about $3.6 million. This number grew to $93.3 million in 2016. Because of this development, more gamers can now realistically pursue a career in the field. More money available in the industry means players have an easier time supporting themselves with gaming.