After last Wednesday’s post on why I think the Daily Fantasy Sports market is largely locked up, I thought it would be interesting to compare it with the eSports market – one which I’m actively looking to place some real venture bets in. Part I is basically a primer on eSports whereas Part II (to be published on Thursday) will define some theses around the space and examine its underpinnings from a betting perspective.
From a venture perspective, eSports is by almost all definitions, nascent. But given the speed at which consumer and especially millennial/Gen Z targeted industries have proven to develop (in fashion and food, for instance), I don’t expect that nascency to last long.
Some quick background stats on eSports as an industry. First, market size:
So by all accounts, eSports is actually kind of small. In an age of unicorns, it’s hard to build a billion dollar business in an industry barely the size of half a unicorn. All the more so, when the majority of eSports interest is in Asia.
The largest exit to date in the eSports world is Twitch, with trailing twelve month funding to eSports companies barely cracking $50M (Vulcun, Alphadrat, Unikrn, Mobcrush, Kamcord, Skillz, Battlefy, DingIt, Kickback, and I’m sure I missed a few.) By comparison, in the same time frame, a dozen or so daily fantasy sports companies have raised over $750M (13x eSports).
And yet, eSports has the potential to be the largest gaming industry to date, across fantasy sports, casino games, and mobile gaming. Here’s why: using North America as a proxy, engagement across games currently looks like –
** For clarity sake, traditional eSports are defined by bulge bracket desktop/console gaming such as League of Legends, DOTA2, CS:GO, Call of Duty, Halo, and Minecraft, as opposed to known mobile games like Clash of Clans by publishers such as Zynga or King Digital.
Even though eSports isn’t (yet) the largest category, here are a few reasons I’m extraordinarily bullish:
- New eSports enthusiasts entering the market are growing at over 20% per year versus 11% year/year for fantasy sports. Online poker is contracting significantly year/year (approximately 10-15%).
- Gamers are becoming more engaged with time spent playing up nearly 25% from 2011-2013 from 5.1 to 6.3 hours/week.
- Consumption of eSports amongst spectators has grown 300% over two years from 1.3Bn hours/year to 3.7Bn hours/year. It’s worth noting that while overall viewership in aggregate has increased 3x in 2 years, the majority of that increase is driven by power engagement of existing enthusiasts as average time watching eSports/enthusiast has risen from 22.4 hours/year to 41.6 hours/year. This likely reflects that content is improving, distribution is improving, and channels are becoming stickier.
- There is also a growing degree of overlap between traditional eSports enthusiasts defined above and mobile gamers, especially as quality of the latter continues to improve and trend more towards MMO (Massive Multiplayer Online Games) than RPGs (Role Playing Games).
Consider that a good primer on eSports and why despite its small size (from a revenue perspective), I believe it will open up massively in the next 24-48 months. I’ll leave you with some additional good resources to get up to speed on eSports and we’ll do Part II on Thursday: