Australian gaming companies prepare for eSports revolution
The global gaming market is estimated to be worth US$116 billion annually.
Games have always been a fun pastime for both adults and kids alike – but only recently has gaming delivered the strong commercial returns more readily seen from sectors such as resources, banking, telecoms or IT.
As a sector, gaming now eclipses all other forms of entertainment such as movies and music in terms of revenue – now estimated to be around US$116 billion per year globally.
Video gaming has become an established global entertainment medium, with over two billion active gamers across all platforms. The prime trend-setter has turned out to be mobile gaming – given the much larger numbers of gamers that own a phone, compared to those at own a gaming console or a gaming PC.
However, even more surprising has been the dawn of an entirely new gaming phenomenon: eSports.
The dawn of eSports
Competitive gaming, or eSports, is taking video gaming popularity to the next level. Rather similar to the transition of many amateur sports when professional versions were gradually introduced.
There are legions of fans already watching video game competitions, with over 650 million estimated global viewers that overlap into the all-encompassing video games market that reels in US$116 billion every year.
Industry figures show that around 82% of this audience is aged 18-34, a demographic that wields high disposable incomes. The net result is that online gaming has propelled eSports to a future multi-billion-dollar giant in the years to come.
According to analyst estimates, eSports as an industry turned over US$655 million in 2017 – a 32% increase on the previous year’s US$493 million.
An eSports tournament taking place in front of a sold out crowd with many more watching online from around the world.
Gaming companies are expecting the annual revenue haul to climb as high as US$1.5 billion by 2020 and compound annual growth rates to reach as high as 35-55% in the next five years.
However, the catch is that the overwhelming majority of revenue is generated through sponsorships and advertising – two areas of funding that have been notoriously sketchy and seasonal at best.
eSports is truly a 21st century phenomenon that wasn’t even possible before the turn of the century. But alongside exponential growth in game development, game adoption and internet connection speeds – eSports has thrived as an industry and as a cult-classic pastime amongst the younger generation.
The entire premise is built on spectators watching professional gamers playing highly-popular games – in the same vein as a tennis fan would watch their favourite tennis player.
The rapid pace of tech development now means gaming aficionados can watch their favourite gamers in real-time while tracking their each and every move via social media within an omnipresent internet that’s connecting more people and more devices every year.
The phenomenon has been sufficiently popular to warrant the establishment of multiple eSports leagues in recent years.
eSports is only commencing its early growth phase and several events are now being organised each year that serve as both “proof of concept” and viable commercial entities in their own right, generating significant margins for all those involved.
eSports coming to Australia
One such event will come to Australia later this year.
The Melbourne eSports Open will welcome the world’s most adept gamers who will play solo or team-based matches against their peers. Spectators to the event will each pay for the privilege of watching the world’s best gamers and the winning prize pool is estimated to be in the millions of dollars.
The Melbourne & Olympic Parks precinct is set to host the ‘Melbourne Esports Open’ in September this year.
Further signs of eSports becoming a truly genuine market niche that could potentially eclipse current consumer favourites such as traditional sports and other forms of entertainment include the following:
For one, some US colleges have begun granting scholarships to pro gaming students in much the same way they would to traditional athletes.
Furthermore, player salaries have been established for top eSports leagues, with some contracts in excess of US$100,000 (A$134,000) per year – a figure that’s significantly above Australia’s average income bracket of around A$79,000.
The highest paid Overwatch player Jay Won, was 17 years old when his mother signed his US$150,000 contract with the Overwatch League on his behalf in 2017.
As further anecdotal evidence, the Luxor Las Vegas opened a dedicated eSports arena on the Las Vegas Strip earlier this year which further underlines the level of consumer sentiment pent up in gaming and eSports.
Additionaly wind in the sails of this embryonic-stage industry has come from traditional sports groups, possibly embroiled in their own event scheduling concerns.
The 2024 Summer Olympic organisation committee is in discussions with the IOC to consider eSports for the event, citing the need to include eSports to keep the Olympics “relevant for younger generations”.
The current field
From the current crop of ASX small cap companies, there are currently only four that are specifically focused towards gaming, eSports and/or gaming digital media on the ASX.
They all have a slightly different approach to commercialising the gaming sector.
Esports Mogul story
Esports Mogul (ASX: ESH) is an eSports media and software business that’s created a variety of commercial angles related to competitive gaming online, including several commercial verticals into Asian and Latin American countries that are leading the world in online gaming adoption.
The company’s flagship product, Mogul Arena, is aimed at gamers and gaming spectators alike by facilitating hosting, organising and participation in competitive gaming. The platform allows people to socialise, create teams and participate in tournaments for prizes and bragging rights.
Esports Mogul unveiled a growing partnership with Razer, one of the world’s leading gaming hardware manufacturers last month.
Razer has become a significant shareholder in Esports Mogul after leading an oversubscribed placement that raised over A$4 million. Under the agreement, eSports Mogul will license the Razer Arena platform technologies and will drive future development.
Other contenders
Animoca Brands (ASX: AB1) is a global developer and publisher of mobile games and e-books based on globally popular brands. The company has launched a range of games over the past 18 months and has recorded strong revenues on the back of its in-house games catalogue.
SportsHero (ASX: SHO) has created a real-time fantasy sports app and “social prediction platform” offering an alternative to sports betting and gambling. The company has recently reported that the current World Cup had generated a “proof of concept” as well as gross revenue of A$50,000 for one of its initiatives.
Emerge Gaming (ASX: EM1) has created a product called Arcade X, which offers players a “unique and mature gaming experience”.
The company made its debut on the ASX earlier this year, venturing away from resource exploration and embracing a digital commercial strategy harnessing the rapid growth of the gaming industry.
Emerge comes to the ASX sporting a widely popular eSports platform and “lifestyle hub” that has hosted over 10,000 online tournaments called “Gaming Battleground”.
Within a couple of weeks of going public, Emerge signed a partnership with Detonator Media Group in South Africa to facilitate the launch of Arcade X and its inherent corporate tournament and sponsorship revenue model in South Africa.
Under this model, Emerge receives revenue for providing online gaming tournament hosting services while being able to attract gamer registrations at “no cost” as a result of corporate brands marketing the Arcade X platform on its behalf.