Newzoo’s latest breakdown for the eSports market gives a detailed picture of exactly where the money is being made and lost. Of the US$950m total forecast for 2020, sponsorship expected to deliver US$584m (up 7.5% year on year) and media rights US$163m (up 3.3%). Digital will contribute US$22m (up 61%) and streaming US$20m (up 45%). But expansion in those market segments will be offset by a huge drop in revenue from merchandise and tickets associated with live events which have been cancelled this year, down 50% to US$52m, as well as a decline in turnover from publisher fees, down 12% to US$109m.
In March, international digital entertainment investment firm Modern Times Group (MTG) revealed that its esports operations were likely to be 35-45% down in the first half of 2020 compared to the first half of 2019, thanks to last-minute event cancellations and events being run online only with no live audiences.
Publisher Bandai Namco cancelled all of its eSports world tour events for 2020, with competitions in popular fighting games like Tekken 7, Soulcalibur VI and Dragon Ball FighterZ moving online instead. The 2020 Fortnite World Cup was abandoned though Epic Games continued with its online Fortnite Champion Series. The next live event editions of Arena of Valor World Cup 2020 and Street Fighter V: Champion Edition 2020 were postponed until 2021 to be replaced by online regional tournaments. 2020 was also the first time in 23 years that the Tokyo Game Show was cancelled.
Parallel growth in online streaming and audience viewing figures
While live eSports events came to a standstill, there was a parallel increase in the number of people watching streaming matches live on Twitch and YouTube. It demonstrates the growing appeal of eSports amongst consumers across the globe in tandem with a lockdown induced surge in demand for other forms of online entertainment.
Streamlabs Quarterly report for the three months from July to September calculates that amount of time people spent watching live streaming content across all platforms almost doubled (up 92% year on year) to 7.5bn hours. However, the figure was slightly down from 7.7bn hours in the prior quarter before Coronavirus restrictions had started to be relaxed.
The shutdown of Mixer in July after Microsoft signed a partnership deal with Facebook Gaming was a strategic move designed to boost subscriber numbers for the xCloud cloud gaming platform. Rather than switching to Facebook, however, the majority of Mixer users have moved onto Amazon’s Twitch. That latter now represents over 91% of market share measured by hours streamed according to Streamlabs, with Facebook Gaming claiming only 3.4% and YouTube Gaming 5.5%.
Reports suggest that an average of 2.6m concurrent viewers tuned into Twitch in November 2020 to watch, host and cheer on live streams of people playing computer games in 2020, up from 1.2m in November 2020 according to TwitchTracker.
Future remains bright
Despite cutting its revenue forecasts, Newzoo noted there was no decline in the size of the eSports audience or the number of organisers involved in the ecosystem. That bodes well for the future, more so if eSports companies and organisers can shift the balance of their revenue streams away from live events and towards online provision.
Around 40,000 people attended the League of Legends World Championship at the Beijing National Stadium in China in 2017, but 100 million people watched it online. The real opportunity may lie in monetising the virtual, rather than the physical, audience – through fan club membership fees, media rights and merchandise sales. Amazon already makes money from Twitch in several different ways, via advertising, subscription fees and in-app currency purchases that viewers buy to fund live shout-outs to streamers they like.
Newzoo’s forecasts do not seem to have deterred venture capitalist companies which see eSports companies as worthwhile investment vehicles. Shotcall, a platform that allows streamers, content creators and organisations to offer paid engagement opportunities to eSports fans recently received US$2.2m of seed funding led by Initial Capital and New Stack. The platform provides streamers with various features, including offering and charging for private competitions, coaching sessions and charity events. Elsewhere Esports Insider estimates that the value of major eSports investments, mergers and acquisitions in September 2020 totalled US$186m.
With eSports ticketing, merchandising, currency purchase, and membership fees tending towards smaller transaction charges, direct carrier billing (DCB) is an ideal method of funding purchases from consumer smartphones. That is particularly amongst the younger demographic, with the average age of players and fans around 26 according to Nielsen estimates. And accessibility to flexible, convenient billing options like DCB, which allows people to charge goods and services to their monthly telephone bill, would significantly boost audience participation and revenue for eSports companies alike.
 COVID-19 Continues to Impact the Esports Market: Newzoo Revises Its Esports Revenue Forecast, Newzoo, 7th October 2020
 MTG says COVID-19 could sink esports revenues by 45%, gamesindustry.biz, 25th March 2020
 Esport events cancelled due to Covid-19, eSports News UK, 9th August 2020
 Streamlabs & Stream Hatchet Q3 Live Streaming Industry Report, Streamlabs, 7th October 2020
 $186.3M raised in disclosed esports investments in September 2020, Esports Insider, 5th October 2020