Boundaries can be your best friends – use them to keep your mental health strong. By LEANNE LAM The past year has been filled with ups and downs, uncertainties, and changes for all of us. From travel bans, to setting up home offices, to adjusting to a masked way of life, there were a lot [...]
Why esports companies should change their business strategies in a post-COVID-19 market, and how exactly it should be executed.
The US$1 billion esports sector is set to win this pandemic. With hordes of players entering the gaming landscape, craving the experience of online social interaction in lieu of offline social distancing, esports has seen a triumphant rise in viewership and audience engagement.
Gaming has made it possible for anyone to virtually engage in entertainment from the comfort of home. COVID-19 has only boosted engagement in the sector, with a report from Tencent boasting a 31% increase in year-on-year online games revenue in the first quarter of 2020.
Andy Fahey, Esports Specialist and Director at PwC United Kingdom, praises the resilience of the market despite the pandemic’s global economic disruption, with increased awareness playing a huge part in the market’s success.
“Awareness has definitely supercharged the growth of the industry coming out of the pandemic,” he explains. “There’s just going to be more commercial partnerships, more deals and more investments with companies and investors who may not have been so aware of esports pre-pandemic.”
However, Fahey warns that with the surge in interest and awareness around competitive gaming, companies in esports will need to compete head-to-head in the race to secure the investment surge coming out of the pandemic.
Convincing investors using unique selling points
Esports is an attractive industry for investors. In 2018, the gaming landscape brought in US$4.5 billion in disclosed investments, according to a report released by Deloitte.
On the flip side of the coin, brands and sponsors are clearly willing to throw cash at the esports industry. In 2019, brands in consumer goods, including Red Bull and Coca Cola, spent a total of US$21.8 million on non-endemic sponsorships alone in the esports market.
So the question clearly isn’t whether they can afford to sponsor esports brands or not. It’s whether they’re willing to.
“If you’re looking to secure investment or commercial partnerships, make sure investors are comfortable with what they’re investing in,” Fahey says. “Valuations are very high in esports, so sometimes it’s difficult for them to get their head around it.”
For instance, Cloud 9, with its teams conquering fan favorites League of Legends and Fortnite, ranked as the world’s most valuable esports company in 2018, coming in at a valuation of US$310 million and earning streaming revenues of over US$22 million, according to an article published by Forbes.
To grasp new opportunities or maintain current market share, esports companies rely heavily on chunky helpings of capital infusions, whether through investment or sales. A report from Deloitte reveals that franchised league systems require teams to pay exorbitant amounts. The Overwatch League, for instance, demands US$20 million in franchise fees.
But investors won’t simply be handing out their coin for free. With the vast pool of investment opportunities in the esports industry – ranging from well-known esports competitions to big-ticket livestreaming players – investors will constantly be evaluating which company is likely to give them the best ROI.
“Investors are thinking all the time, ‘Why was that team different? Why should I invest in that team and not the other?’” Fahey explains. “You have to differentiate yourself from competitors. Show your USPs. Tell your stories in a way that’s impactful […], convince your investors and ensure they’re comfortable in what they’re investing in.”
Focus on growing audience market share as the main KPI
The market share of your audience is critical. Whether you’re on a team, an event organizer or platform, it’s the key difference between success and failure.
“Revenue comes from sponsorship agreements, media rights, and commercial partnerships in content creation, and the value of these things is driven by the size of the audience,” says Fahey.
The global esports market exceeded the US$1 billion revenue mark in 2019, per a Newzoo report. Out of this staggering amount, 82% of the total market came from endemic and non-endemic advertising and sponsorships, producing over US$800 million in revenue.
“Grow your audience to make other revenue streams more valuable,” Fahey advises, “The bigger the audience you have, the more you’d get out of sponsorships and investors.”
For the major esports companies, expanding their target audience shouldn’t be too difficult, considering the overflowing pool of gamers the community offers. Business Insider Intelligence estimates total esports viewership to grow at a 9% compound annual growth rate (CAGR), with global viewership reaching over 600 million in 2023.
Build your audience with authentic narratives
“What the esports audience is passionate about is authenticity,” says Fahey. “Being entertained in an authentic way that feels a bit new and different but still plays to the foundations of why they’re all there: because they all love gaming.”
Launching ads and campaigns with narratives purposefully crafted to feed into the emotions of a given target audience is the most strategic approach to building numbers. But the key to keeping that audience engaged and loyal is genuine authenticity.
In 2018, Mercedes-Benz announced its partnership with the world’s largest esports company, ESL, and released its #GrowUp in eSports campaign. Stemming from the original #GrowUp campaign for the company’s brand and cars, the German automotive marque retargeted its narrative to better suit an esports audience.
The message of the original campaign focuses on the transition from adolescence to adulthood, highlighting themes of friendship, love and loss. Incorporating these themes into the esports world, the retargeted campaign centralizes on “growing up in a new generation of esports.”
Within the turmoil of the pandemic, esports companies can consider launching emotive and heartfelt campaigns to welcome the gaming community back home.
“The most creative content would be stories that you can paint off the back of the pandemic – what the teams have been doing and what the players have been doing… you know, bringing some happiness back to the world that has had a really tough time,” Fahey says. “I think people that do that will be successful.”
A plethora of opportunities are open for companies in the esports landscape to grab onto. Unlike many industries in today’s post-COVID-19 environment, esports seems to have emerged mostly for the better from lockdowns, and growth is there to be seized. The strategies and tactics employed by esports companies while the pandemic will likely define who ultimately emerges a winner.