IS ESPORTS DYING YOUNG?
February 2024, by Matias Van der Heijden
Have you heard of e-sports? Did you think video games were just a way to kill time? Well, for most people, they are; however, for the best of the best, it has become a respectable career path. This has been made possible by the recent growth of e-sports. It may be a relatively new industry, starting to gain traction with the support of major video games significantly popular among millions. E-sports has now grown to have thousands of tournaments hosted by various organisations and even game developers themselves, offering prize money and a platform from which to be viewed.
Even though the number of tournaments involving numerous teams/organisations has grown and continues to grow, the viability of esports organisations from a business standpoint is yet to show anything promising. Many notable figures have invested in the industry, ranging from billionaires like Mark Cuban, Musicians like Drake and (retired) Athletes like Shaq and Michael Jordan. However, from these names, the statements vary about their investments, with Mark Cuban stating an esports team was an “Awful Investment”, but Shaq stating that he believes in his investment and that it’s “one of the fastest-growing industries” and “we’ve seen a huge increase in both gamers and viewers”.
Even with these investors, a large array of companies are reporting losses year on year. The most notable has been ‘FaZe’, an esports organisation that went public in July 2022 at $13.07 a share, then proceeded to lose 24% of the share price on the first day. The shares now trade at $0.15 a share as of January 2024. In 2022, ‘MAD Lions’, a popular organisation, had a revenue of $3.45 million; however, with operation costs of $9.5 million, they had an overall loss of $6 million. ‘G2’, another organisation, has reported profit for 2021 and 2022. This is a result of numerous successful teams gaining more notoriety and, therefore, more sponsorship money and a cut of prize money (however, prize money becomes quite insignificant as players take between 60-80% of the cut).
G2 may have found some success, but with the number of teams growing and the number of spots in major tournaments staying the same, it is getting more competitive to even own a team, let alone a successful one. Player salary costs a pretty penny, with the minimum wage in the LEC (League of Legends EMEA Championship) being $64,000, with the salary cap in this tournament being $2,000,000 annually (reportedly, some players are earning upwards of $5,000,000 in other regions). With these costs for just the players, it’s no wonder that the organisations hiring them are struggling to make money.
But why can’t esports seem to make enough money to match these costs? If we look at the numbers, viewership for esports events is steadily increasing. The League of Legends World Championships 2023 reached a peak of a whopping 6.4 million live viewers and over 100 million hours watched. 18,000 people even attended the event in person.
Even with all this viewership, most teams that played didn’t seem to be able to make enough to cover their operations costs. Could it be that there still isn’t enough viewership? Will viewership continue to grow more? Why aren’t people watching? Why does a game like League of Legends, with over 150 million players registered, only have 4% of its player base willing to watch?
These are the sort of questions we answer at MM-Eye where our consumer research plays a pivotal role in providing answers to complex questions and devising practical solutions. Delving into the underlying reasons behind consumer behaviours could empower the e-sport industry to make more informed decisions and take strategic actions that help support viewership and commercial investment.
With League of Legends planning on coming to the UK for 2024 and using the o2 as their stadium, it’s possible viewership may reach a new peak in the year ahead, but what could be done to further boost this growth? If you have burning questions like this about your industry, product or brand please get in contact with our team @MM-Eye.