Let the Game Begin: How Esports is Shaping the Future of Live Entertainment

Let the Game Begin: How
Esports is Shaping the Future
of Live Entertainment
September 2023

Dr. Alexander Schudey, Pavel Kasperovich,
Adeel Ikram, David Panhans and Mila Matviets

Boston Consulting Group partners with leaders
in business and society to tackle their most
important challenges and capture their greatest
opportunities. BCG was the pioneer in business
strategy when it was founded in 1963. Today,
we work closely with clients to embrace a
transformational approach aimed at benefiting all
stakeholders—empowering organizations to grow,
build sustainable competitive advantage, and
drive positive societal impact.
Our diverse, global teams bring deep industry and
functional expertise and a range of perspectives
that question the status quo and spark change.
BCG delivers solutions through leading-edge
management consulting, technology and design,
and corporate and digital ventures. We work in a
uniquely collaborative model across the firm and
throughout all levels of the client organization,
fueled by the goal of helping our clients thrive and
enabling them to make the world a better place.
Boston Consulting Group partners with leaders
in business and society to tackle their most
important challenges and capture their greatest
opportunities. BCG was the pioneer in business
strategy when it was founded in 1963. Today,
we work closely with clients to embrace a
transformational approach aimed at benefiting all
stakeholders—empowering organizations to grow,
build sustainable competitive advantage, and
drive positive societal impact.
Our diverse, global teams bring deep industry and
functional expertise and a range of perspectives
that question the status quo and spark change.
BCG delivers solutions through leading-edge
management consulting, technology and design,
and corporate and digital ventures. We work in a
uniquely collaborative model across the firm and
throughout all levels of the client organization,
fueled by the goal of helping our clients thrive and
enabling them to make the world a better place.

01 Foreword
02 Key insights
03 Esports: An introduction
04 Esports market potential
05 Esports stakeholders and
value drivers 06
Main challenges for esports
07 Case study: the Middle East
08 Final Remarks
09 About the authors
Contents

1 LET THE GAME BEGIN: HOW ESPORTS IS SHAPING THE FUTURE OF LIVE ENTERTAINMENT
O
ur last two reports highlighted the rapidly expanding
prevalence of gaming in people’s lives (especially in
the Middle East), and the unprecedented
opportunities this opens for the industry overall.
Professional competitions are a natural extension of every
game. Video games are no exception with the first esports
tournaments dating back to the early 1990s. From there, it
was only a matter of time for them to move from arcades
to arenas, and the stakes to grow from bragging rights to
millions in prize money. This report explains what esports
is, where it differs from traditional sports, and how to best
leverage its potential both globally and in the Middle East. This report addresses key questions, painting the picture
of a vibrant new sector bursting with opportunity:
• What is esports and how similar is it to traditional
sports?
• How big is the esports market, and what is its growth
potential?
• How can stakeholders in esports and other sectors
shape the future of esports?
• What challenges does esports need to overcome to
reach a significant scale?
• Why is the Middle East well positioned to lead the next
wave in esports?
Foreword

BOSTON CONSULTING GROUP 2
Key insights
Esports is like traditional sports, but with
several important differentiators
• Game environment: Competition is built around video
rather than physical games.
• Ecosystem structure: Esports has a dedicated ecosystem
that includes 2 stakeholders not present in physical
sports – game publishers and licensing partners.
• Competition format: While inspired by sports, each video
game has a unique composition of events with its own
tournament structure and rules.
Esports has a long path to reach the popularity
of sports, but is growing very fast
• Even the largest esports events are 50x times smaller
than the FIFA World Cup, the world’s largest sporting
event.
• However, while sports viewership is stagnant, esports is
snowballing, with multiple milestones achieved over the
last decade:

» Top esports events exceed 100 million hours watched,
while the time required to exceed this threshold is
decreasing.

» Top esports events sell tens of thousands of tickets for
live attendance in days or even hours.

» Esports events are growing both in number (>300
tournaments with prizes $100,000 or more) and
prestige (average prize level doubled from 2018 to
2021 – e.g., The International’s $40 million prize pool
in 2021 approached Wimbledon’s $50 million).
• Esports growth will likely continue as much potential
remains untapped: esports audience is ~500 million, just
15% of total gamer population (3 billion). This potential
may be captured by both existing or new video games
with mobile game-based esports being an important
trend to follow.
All stakeholders see esports’ potential and are
actively working to professionalize the industry
• Esports clubs are starting to professionalize and grow
scale: e.g., Team Liquid covers >15 esports games and
has created a diversified business model with >25
million fans.
• National governments are adopting esports-related
legislation: e.g., France has recognized esports as a
professional sport as well as esports competitors as
athletes.
• Multinational bodies are experimenting with esports:
e.g., Asian Games 2022 will have 8 esports disciplines.
• Esports federations are creating dedicated programs to
find and nurture talent and make esports a sustainable
career: e.g., Japan’s JeSU offers minimum annual
salaries in esports leagues, while some Chinese regions
support esports players to acquire real estate and pursue
higher education.
• Brands are leveraging esports as a marketing channel:
e.g., HP, Intel, Mercedes- Benz, Nike and Louis Vuitton
are promoting their products through esports.
Stakeholders act mostly on a stand-alone basis
now, but they will need to collaborate to
significantly scale esports
• The business model is not yet sustainable: Esports
needs to unlock the potential of media rights to
transition from being a “marketing cost” for video games
to a stand-alone industry.
• Game publishers are cautious: Esports is not a risk-free
endeavor as it can impact the perceptions or reputations
of the underlying video games (publishers’ main
business), but collaboration might be a path to optimize
costs and grow the esports scene at the same time.
• Regulations are nascent: stakeholders need to adopt
basic practices like in traditional sports (e.g., event
calendar), while governments need to consider recognizing
esports as an industry and career to make it more
organized and predictable, especially for clubs and fans.

3 LET THE GAME BEGIN
Middle East is establishing itself as an
emerging leader in esports
• The Middle East offers significant potential for the
gaming industry, with a large population of gamers and a
track record of recent investment , which is promising for
global esports ecosystem.
• Saudi Arabia created the largest independent esports
event (Gamers8) with 12 esports competitions in 2023 and
an unprecedented $45 million in prizes over 8 weeks, while
implementing programs to support esports clubs and
athletes. • United Arab Emirates (UAE) is also very active in the field,
establishing gaming hubs (e.g., Abu Dhabi Gaming is a home
for Nigma Galaxy esports club), hosting top global events
(such as BLAST Premier World Final for CS:GO in Abu Dhabi
in 2022 and 2023, and the PUBG Global Championship 2022
in Dubai), and creating strong local events (e.g., Dubai Esports
Festival, Games for Change summit in Abu Dhabi, and an
anime and gaming festival in Al Ain).

BOSTON CONSULTING GROUP 4
Esports: in introduction
E
sports gets inspiration from traditional sports in many
respects, but differs in 3 important ways:
• Game environment
• Ecosystem structure
• Competition format
Game environment
Firstly, competition is built around video rather than
physical games. While this may sound easy or even trivial,
the intensity of an esports tournament can match that of a
football final. Esports athletes experience significant stress
and increase in their heart rate
1, while demonstrating
extraordinary skills (unique in each genre), such as speed
in their reactions ($1 million prize pools despite viewership
still lagging comparable PC titles. Other publishers may
well follow.
• Innovation: Mobile can create new genres promising for
esports. For example, the new genre of “auto battler”
was created in 2020, with leading IP quickly building on
the trend – Activision-Blizzard has developed arguably
the most popular game so far (Battlegrounds mode
within Hearthstone game
8) which could grow into a solid
esports discipline.
Video games are more complex than traditional sports.
Only a few genres, sport simulators or racing, do not require special knowledge. For example, League of Legends
and Dota 2 (both MOBA games) have >140 and >120
playable characters respectively, each with its own special
abilities, statistics and upgrades. Hearthstone (CCG) has
>1000 cards to create card decks from. Esports events for
such games attract mostly active players, as real gaming
experience is required to understand what is going on in an
esports match.
Thus, while 42 games have growth potential, it is likely that
esports scaling will also require other games to emerge.
Existing games will account for some audience growth in
the future. However, their potential is limited by popular
relevance, accessibility to a wide audience of multiple skill
levels, and ethical concerns (e.g., the level of aggression in
First Point Shooters).
9 . Other leading game publishers also followed the trend: Riot introduced Teamfight Tactics, while Valve created Dota Underlords

BOSTON CONSULTING GROUP 12
Esports stakeholders and value drivers
E
sports growing scale is attracting attention from all
stakeholders in the esports ecosystem. Each has a
distinct role in shaping esports’ future:
• Esports clubs are starting to professionalize and grow
in scale.
• National governments are adopting esports-related
legislation.
• Multi-national bodies like the IOC are experimenting
with adding esports to their agendas.
• Esports federations are creating dedicated programs to
find and nurture talent and make esports a sustainable
career.
• Brands are pursuing esports as a channel to promote
their products.

Esports clubs
Its rising popularity is spurring esports to become more
professionalized, closer to what we see in traditional sports.
Game publishers are creating esports leagues that closely
parallel their professional sports counterparts.
• Scale: ~40 esports clubs can now boast top-tier teams
in 2+ games. Most esports clubs started with a focus
on one game, but key franchises are extending their
capabilities. For example, G2 was established in the end
of 2014 to compete in League of Legends, but currently
covers 7 games, including League of Legends, CS:GO,
Valorant, Rainbow Six Siege, Fortnite, Apex Legends and
Rocket League. Team Liquid has even larger coverage
with ~15 games.
• Popularity: ~15 esports clubs have >10 million
followers. As in sports, strong performance in
competitions draws a loyal fan base, and significant
attention both to specific players as celebrities and a
club’s brand. FaZe Clan has had tremendous success
in the esports arena, attracting ~70 million followers
on social media. TSM, Team Liquid, 100Thieves and
Luminosity Gaming boast >25 million followers each.
Most followers come via Twitch, which has a direct connection with gaming as fans watch esports players’
streams. But esports clubs often have strong presence
on other platforms – e.g., FaZe Clan has 11.5 million
followers in Instagram, while LOUD has >12 million
followers on YouTube.
• Value: At the end of 2022, the top 10 clubs’ collective
value exceeded $3 billion. Investors also supported
esports clubs, anticipating overall segment growth.
Multiple teams have raised hundreds of millions of
dollars in funds. At the end of 2022 TSM was valued at
$540 million, and Team Liquid at $440 million, implying
10-15x revenue valuations. While this is still less than the
leading sports franchises like the Dallas Cowboys (valued
at >$7 billion), it nevertheless indicates strong progress
for the young esports industry.
• Business model: Esports clubs are actively diversifying
their business models. With the recent inflation,
interest rate-induced economic downturn, and shift in
investor priorities, esports clubs are trying to establish
more sustainable business models. FaZe Clan offers a
cautionary tale. This very successful club (its CS:GO team
has won most major tournaments in 2022) completed
an IPO valued at $725 million in 2022. But then high
operating expenses and losses created financial difficulty,
leading to a 20x drop in the value in Q1 2023. Such
economic pressures have led esports clubs to actively
diversify their activities. Previously focused on esports
competitions (with main revenues being from sponsors
– prize money is often distributed directly to players),
clubs today are transforming into media / entertainment
companies. Some attract popular streamers (e.g., G2 has
>10 content creators, including former leaders in various
games such as Hearthstone; FaZe Clan had Snoop Dogg
in Board of Directors and as a streamer) or transform
their esports athletes into streamers (e.g., Tier One). Top
clubs also monetize through branded in-game items,
often launched before major tournaments. In addition,
many clubs like G2 and Team Liquid have developed
their own mobile applications, giving fans access to
unique content, merchandise, events, and even NFTs,
that drive additional monetization. There is still room
for further innovation, e.g., creating a strong brand in
specific products/ services as top global streamers such
as MrBeast do.

13 LET THE GAME BEGIN: HOW ESPORTS IS SHAPING THE FUTURE OF LIVE ENTERTAINMENT
National governments
Government support is crucial for such a young industry
as esports, recognizing that traditional sports have
benefited from government investments in infrastructure,
subsidies, and tax benefits. While esports could reach
traditional sports’ level in the future, it will require
government nurturing. Some countries are starting to acknowledge esports as
an industry, which is a critical first step. In France, for
example, esports is an official sport, with its players
recognized as athletes under the country’s new Digital
Republic Bill. Denmark has integrated esports into the
curriculum in 70 schools across age ranges throughout
the country. China recognizes esports professionals
(players and organizers) as official occupations, although
it has started to regulate gaming hours for children which
may impact esports’ growth and athlete development.

Multinational bodies
Olympic committees are also exploring esports to boost
the popularity of the Olympic games. The International
Esports Federation (IeSF) has submitted a request for the
International Olympic Committee (IOC) to recognize it as
an official sport. IOC has responded by providing IeSF with
the necessary steps for such recognition, acknowledging
that, someday, esports may feature in the Olympic Games.
In 2021, the Olympic Council of Asia announced which
titles would be added to the 2022 Asian Games (to be
hosted in September 2023) as medaled events: League of
Legends (MOBA); Dota 2 (MOBA); Hearthstone (Card);
Street Fighter V (Fighting); Arena of Valor (MOBA); Dream
of the Three Kingdoms 2 (MOBA); FIFA (Sports); and
PUBG Mobile (BR).
It is interesting to look more closely at how these titles
were selected. Of the eight, four are MOBA (multiplayer
online battle arena), primarily due to this genre’s
popularity within the esports community. We also see
titles included that specifically appeal to a regional
audience. For example, Dream of the Three Kingdoms is popular with the Chinese audience (and less known
outside of China), while FIFA has a strong presence in the
Middle East and parts of Europe. The absence of a shooter
title is also notable – in particular, Valve’s CS:GO, a
quintessential esports title and one of the few that offers
fairly unrestrictive licensing requirements for event
organizers. In general, the selection of titles comes down
to the popularity of the games, but also the restrictions
publishers may place on their titles being used for such
competitions and possible social sensitivities.
It is worth highlighting that as esports is still at the early
stage of development, national games seem to be a bit
premature for the industry. Over 60% of the top 8 esports
teams are multi-national, while national events in esports
are not yet common (e.g., compared to football, where
national competitions are the most anticipated events).
These factors incentivize players to focus on the success of
their esports clubs, leaving limited bandwidth for national
games. While IeSF hosts the World Esports Championship,
so far its viewership is 30-35x lower than for leading team-
based esports competitions (Exhibit 6).
So What?
Exhibit 6 – Attr acting the best ta lent to the event is ke y to gain viewership
Competitions between esports
teams / pla yers C
ompetitions between
nations
100+ events ~5 events
Viewership (million hours) for top 3 events
in a category in Q3 2021 – Q2 2022
1 TOP competitions are single game and between teams or individual players\

Source: Esportsearnings, Esportscharts, BCG analysi sIESF
G lobal Esports G ames
P UBG Nationals Cup
WCG
Hangzhou 2022 Asian G ames”The majority of successful
esports teams boast an
international composition.”
“T op esports g ames
emphasize esports teams and
maint ain bustling esports
schedules, leaving little ro om
f or national events.”
“E vents orchestr ated by game
publishers ha ve
so f ar pr oven to be more
prestigious and financially
rew arding f or esports t alent.”
ESL Mobile Open League
MPL
DO
TA Pr o Circuit
ESL Pr oleague
League of Legends
Championship Series PGL Majors
ESL One
P
UBG G lobal
Championship
DreamHack
BLAST Premier
140
140 – 200
1
5
x30-35
BOSTON CONSULTING GROUP
14

15 LET THE GAME BEGIN: HOW ESPORTS IS SHAPING THE FUTURE OF LIVE ENTERTAINMENT
Esports federations
Esports federations are building on government interest and
starting to develop programs that nurture talent and help
athletes pursue careers in the field. Japan’s JeSU now offers
financial guarantees for players, with minimum annual
salaries in esports leagues. Some Chinese regions provide
support to esports players to acquire real estate and pursue
higher education. KeSPA in South Korea introduced multiple
supporting levers for esports athletes years ago (from event
organization to post-career support and compensation) and
is extending them further. For example, it now offers legal
advice to teams/players on visas, taxes, etc. Private entities
are also following the trend, including universities in the
USA and Europe now awarding scholarships to esports
players.
A supporting ecosystem is emerging, with further growth
expected as popularity and the willingness to spend on esports continue to rise. Many of the elements of
professional sports are making their way into esports.
Already, we have managers, coaches, training centers,
nutrition specialists, sports psychologists, and other experts
working with professional esports athletes. Online
competitive gaming platforms provide an opportunity for
young talent to begin honing their skills and make a name
for themselves. This was critical early in the COVID
pandemic as events went completely virtual, proving esports
could continue in a largely online format.
Brands
Brands have started leveraging esports as a key marketing
channel to reach their target audience and build brand
awareness and loyalty. Today 45% of sponsorships already
come from companies outside the gaming industry ( Exhibit 7).
Exhibit 7 – Sponsorship extends well beyond the gaming industry
Link to gaming Group of sponsors
Key sponsors (selected examples) % of all sponsorship 1
1 Based on number of sponsored teams, events, publishers2 Based on top Esports events and Esports clubs analysis in 2021-2022
Source: Public data research, BCG analysis C
omputers Alienw
areAMD Corsair Hyper Logitech Legion
Logitech GC yberPowerPC NVIDIAHP OMEN RAZER
ScufG aming ZowieSteelseries Intel 28%
55%
DXRacer
HermanMiller Need for Seat Meta Threads
Secret Lab Vertagear 14%
G aming -related furniture
Twitch Huya.com TikTok Crunchyr oll 7%
Video/Streaming
BOSEEPOS JBL 6%
A udio
To tal
To tal
Drinks RedBullMonsterGfuel 8%
45%
A
T&T Motorola T-Mobile Verizons Xfinity 7%
Telecom
BMWHonda Mercedes Benz NISSAN 6%
Cars
AdidasNikePuma 5%
Wear
Oppos Samsung 4%
Smartphones
Tumi Razer CISCOSAP AIMLAB CSMONEYFTX
Co inbase MastercardJack Links BetwayGEIC O 15%
Others
Br ands with
str ong connection
to video games
Other B2C/B2B
br ands

BOSTON CONSULTING GROUP 16
Exhibit 7 – Sponsorship extends well beyond the gaming industry
Link to gaming Group of sponsors
Key sponsors (selected examples) % of all sponsorship 1
1 Based on number of sponsored teams, events, publishers2 Based on top Esports events and Esports clubs analysis in 2021-2022
Source: Public data research, BCG analysis C
omputers Alienw
areAMD Corsair Hyper Logitech Legion
Logitech GC yberPowerPC NVIDIAHP OMEN RAZER
ScufG aming ZowieSteelseries Intel 28%
55%
DXRacer
HermanMiller Need for Seat Meta Threads
Secret Lab Vertagear 14%
G aming -related furniture
Twitch Huya.com TikTok Crunchyr oll 7%
Video/Streaming
BOSEEPOS JBL 6%
A udio
To tal
To tal
Drinks RedBullMonsterGfuel 8%
45%
A
T&T Motorola T-Mobile Verizons Xfinity 7%
Telecom
BMWHonda Mercedes Benz NISSAN 6%
Cars
AdidasNikePuma 5%
Wear
Oppos Samsung 4%
Smartphones
Tumi Razer CISCOSAP AIMLAB CSMONEYFTX
Co inbase MastercardJack Links BetwayGEIC O 15%
Others
Br ands with
str ong connection
to video games
Other B2C/B2B
br ands
Sponsorship can take multiple forms, for example:
• High profile brands like HP, Intel, Gillette, and Mercedes-
Benz have been involved in esports for years through
partnership and sponsorship deals. HP sponsored the
Overwatch League franchise in the US, while Intel has
extended its long-term ESL partnership with a three-
year, $100 million deal.
• Brands such as Nike and Louis Vuitton are continually
innovating their in-game advertising models, and now
offer paid virtual apparel for avatars.
• Several brands have also started to invest in esports
directly, including:

» Organizing esports academies (Gucci)

» Sponsoring esports teams and leveraging them
through merchandize and even team names (Honda
and Team Liquid in League of Legends) – today esports
clubs often have several sponsors.

» Creating esports-driven content (Burberry and Gen.G).
• Some businesses sponsor esports activations, events,
or conventions:

» South Korea’s SK Telecom partnered with Niantic,
Pokémon Go’s developer company, to rebrand 4,000 of
its stores through Pokémon and deploy AR Reality.
» Verizon hosted an esports tournament in Dallas in
2015.

» Japanese operator NTT Docomo sponsored the top
esports event EVO Japan in 2019, showcasing its new
partnership with a major gaming company and 5G
plans.

» Telkomsel and Garena jointly hosted the Indonesia
Games Championship 2020 esports tournament.
Media companies are leveraging the esports trend to
enrich their content and differentiate from the competi-
tion, especially in the digital space:
• Time Warner / Telefonica owns Movistar esports, which
aims to become the largest provider of Spanish-speak –
ing esports content.
• Netflix experimented with Formula 1 racing through its
“Drive to survive” series, which generated a significant
boost for F1 in the US and around the globe. While there
has not yet been a similar initiative in esports (though
some media projects exist on YouTube), certain games’
strong fan base makes it possible to envision a compa-
rable effect with a high-quality production.
• Gaming consoles, Smart TV manufacturers, and compa-
nies that provide set boxes (like Amazon or Apple) can
also experiment with offering esports event content to
potentially interested customers.

17 LET THE GAME BEGIN: HOW ESPORTS IS SHAPING THE FUTURE OF LIVE ENTERTAINMENT
Main challenges for esports
C
learly, this is an exciting time in the world of esports.
The industry is enjoying rapid growth, innovation,
investment, and popularity. But several challenges
will need to be resolved if it is to deliver on its promise,
primarily related to:
• Business model: Explore paths to increase media
rights monetization.
• Collaboration: Find a way to grow the esports as an
industry without significant risks to game publishers’
video games business.
• Regulation: Secure fundamental rights and alignment
between ecosystem stakeholders.
• Government support: Recognize esports as an
industry and as a career. Business model
The esports industry’s top challenge is to figure out its
business model. The analogous sports franchise business
model is built on creating content for a wide audience and
monetizing it through media rights. However, esports’
relatively limited viewership makes such monetization
challenging. Most tournament prizes are distributed
among players directly (not to the esports clubs that hire
them) to sustain their careers. This leads other
stakeholders, mainly esports event organizers and esports
clubs, to rely on sponsors (Exhibit 8). A more sustainable
business model will be critical to realizing the full promise
of esports – one that provides financial stability to clubs
and players, expands audience reach, and allows
organizers to invest in the production and marketing of
top-quality events.
Exhibit 8 – Currently esports industry relies on sponsors r ather than
media rights
Source: Public data research on top sport and esports events in 2020-2022, expe\
rt interviews, BCG analysis
Media rights
Sponsorship
Other (tickets,
merchandise etc.)
45-55%
15-20% 25%
80%
5-10%
10-15%
Revenue in traditional sports
Revenue in esports

BOSTON CONSULTING GROUP 18
While multiple media players are already experimenting
in this space, the trend is in its early days. YouTube is
very active in acquiring exclusive rights for esports, part
of its strategy to close the gap vs. Twitch in the
streaming market. While many deals are not public, it is
estimated that YouTube has entered into multi-year
deals and paid ~$160 million for esports from Activision-
Blizzard (covering Overwatch, Call of Duty, and
Hearthstone), and $113 million to Riot for League of
Legends. Some AVOD/SVOD players are experimenting
with esports as content to differentiate themselves from
competitors. For example, the Spanish platform
Movistar offers dedicated esports content and has
invested in an esports club. Some regional platforms,
especially those focused on sports, are experimenting
with sports simulators like FIFA . TV is also getting
involved. While South Korea introduced the first TV
streams in the 1990s (focusing on the StarCraft
franchise), today some cable TV players are doing so as
well, including ESPN (League of Legends, Dota 2
tournaments) and BBC (mostly League of Legends).
Collaboration
Finding a sustainable business model is further
complicated by the esports ecosystem. Besides being more
complex, a fundamental difference compared to traditional
sports is that no one owns basketball or football, whereas
there are publishers who own games like Call of Duty or
League of Legends. Game publishers are an additional,
powerful stakeholder at the negotiating table – they are
the gatekeepers determining whether a title can be used
for esports or not. Other stakeholders have a limited say in
publishers’ plans for a game’s evolution (e.g., update,
discontinue, or launch a new version of a game).
Publishers’ shift from a traditional business model of
one-time sales towards ongoing monetization via in-game
items and subscriptions significantly extends games’ shelf
life, making them businesses in themselves with constant
development. For example, World of Warcraft has been
around for 18 years, through 8 major expansions. This
means that a game has its own community and brand,
which may be damaged by misaligned PR or activities. If
an esports tournament is poorly organized or attracts
unwanted publicity, it can have a negative impact on the
community, game, and its financial performance.
This game-specific context slows down further
development of esports, limiting both supply and demand:
• Supply: Esports is not generating money so far, while
game sales are lucrative. Game publishers are likely to
keep being careful about esports participation, treating
it more like a marketing expense than a stand-alone
business with its own potential. •
Demand: As each game is owned by another company,
it carries risks for third parties who want to develop
esports. It is possible to create and nurture a football
league without any dependency on a third party, but
impossible with a video game. This risk profile means
that most of the investment into esports will come from
either game publishers or governments.
Some game publishers have separated esports into stand-
alone businesses, organizing esports leagues around their
games. While some games are easy enough to attract
general video game fans (e.g., CS:GO or Rocket League), it
may take a long time for more complex games to become
operationally and financially sustainable. A good example
is leagues for MOBA or some FPS games with complex
mechanics like Valorant and Overwatch 2 (many distinct
heroes with their own special abilities / skills – >15 in
Valorant and >35 in Overwatch 2), which limits the poten-
tial to game fans only. Each league is focused on one game
only, so does not capture the broader gaming audience,
which is critical at this early stage. We are already seeing
the first signs of difficulty. Activision-Blizzard had to allow
franchises in its Overwatch leagues to postpone paying
fees, equalling up to $25 million per franchise. Arguably,
this led to a somewhat safer approach from Riot, where
teams for its new Valorant esports league were selected
through an interview and financial review process, but with
no franchise fee required.
This status quo will likely drive a change of approach in the
market, like focusing on more open leagues (e.g., Valve
licenses CS:GO rights to third parties and has 3 successful
leagues – ESL, BLAST, and PGL), growing popularity through
international events (e.g., Olympic games), or even
becoming a part of larger events such as Gamers8 in Saudi
Arabia. Potential partnerships to grow not only events for a
publisher’s own game(s) but esports as a whole, might also
take place in the future, especially i