Shoot-Out

The nascent esports industry resembles America’s Wild West.

- Mike Ozanian, Christina Settimi & Matt Perez

Esports companies are constantly buying and selling teams and players to compete in the best leagues and build audiences on Amazon’s Twitch and Alphabet’s YouTube. Facilities are being built where gamers can train. It’s a shoot-out to see who can be the biggest and baddest brand.

There are some similarities to traditional sports leagues. Riot Games began selling franchises for $10 million a pop for its game League of Legends in the summer of 2017. Activision Blizzard began selling franchises for $20 million for its Over watch League around the same time. Iconic sports names—from the New York Yankees and Houston Rockets to Robert Kraft and Magic Johnson—have bought in.

They were smart. League of Legends franchises are being valued at $50 million by bankers. Over watch franchise valuations are $60 million to $80 million, depending on country and city. In other words, the former has seen a five fold increase in a year, the latter a three- to fourfold increase.

Why? According to Newzoo, the number of esports enthusiasts worldwide will reach 165 million in 2018, which translates to year-over-year growth of 15%. Esports revenues will grow 38% this year, to $906 million, and reach $1.65 billion by 2021. Most of the business will come from North America (38%) and China (18%). Sponsorship is the biggest revenue stream ($359 million this year), followed by advertising ($174 million), media rights ($161 million), game publishing fees ($116 million) and merchandise and tickets ($96 million).