by Ai Yunhao
While popular sports such as football and basketball are searching for the best ways to recalibrate, a unique genre of sports has been sailing through the pandemic with near non-stop movements and emotions, though not necessarily sweat. Esports in various forms have bucked the trend and produced games, tournaments and scores that suck up the idle moments of fans and sponsors who have otherwise been deserted by the traditional sorts. China, arguably a leader in the esports’ league of nations, shows that it may have found a team sport where it can win games.
The E Sort of Sports
Esports can be defined as the professional or semi-professional competitive game in an organized format (meaning either tournament or league) with specific goals and prizes, according to Newzoo, an industry consultant. Beyond this professional level, there are oceans of areas dotted by amateurs, amateur-turned KOLs and celebrities whose games and activities attract huge followers. Measuring these latter groups’ viewership and revenue, however, would be some tricky businesses.
By this count, global esports revenues are expected to grow (No, it isn’t a typo) at 16% YoY in 2020, reaching US$1.1bn. To put this figure into perspective, the 28-year old English Premier League, widely regarded as one the world’s most valuable sports franchise, was reported to have a revenue of US$6.5bn for last season (2018-19), according to Deloitte, an accountant who has tracked the sport for 29 years. The sport may be looking at a decline in revenue this season of about US$1.3bn. There is still a visible gap between esports and its traditional cousins, but if the trend of esports is secular rather than cyclical, as many have predicted, its break into the top ranks will look just a matter of time.
Within the esports’ geography, China, growing 18% YoY, is the largest market, with total revenues of US$385m in 2020, or a third of the market. North America comes in as a distant second, with US$253m or a quarter of the market. Western Europe occupies the remaining spot in the top three with less than 10% of the market. China’s lead from its peers looks even more visible if we count the esports audience. Its audiences of 163m in 2020 are head and shoulder above the 57m of second-placed North America.
Cutting the pie differently may allow us to look at the economic dynamics via a different lens. In this regard, sponsorship accounts for a lion share (58%) of the game’s total revenue. In 2020, it will contribute some US$640m, up from US$544m last year. Consistent with the practice in traditional sports, sponsorship revenues are generated when brands endorse events, teams, or individuals in the form of product placements, brand advertisements and use of IP rights around the said sports/esports categories. Next, media rights and merchandise & tickets each account for about 17% and 11% of the pie. Unique to esports only, digital (e.g. in-game items) and streaming revenue contributes to a small but rapidly growing slice of about 4%.
A Chinese Team that Can Win Games
With China being the single largest esports market, it is therefore not surprising to see that corporate China is a key source of sponsors for the game.
Esports as a genre of games first became popular in China during the early 2000s when World Cyber Game, the trend-setter originated from Korea, hosted its first Chinese tournament in 2001 and when games such as StarCraft and Counter-Strike broke out here in the country. Back then, the pc-based gamers were initially the elitist university students who had the first taste of the games. Later, especially after the accession to WTO, it was the vast number of inland-based migrant workers, populating the internet café and bars for the network connection and proximity to each other in order to learn the trade and form teams, who became the mainstream gamers.
Like many phenomena in China, esports’ industry life cycles have followed this famous pattern: openings, chaos, retrenchment, demise, and re-openings. Video games and therefore esports have their fair share of these pendulums. Interestingly, two programmes by CCTV, Chinese state media, succinctly reflect these policies swings. Its 2003’s series of “Esports’ World” coincided with a period of openings that broke the wave. The zeal was short-lived, however, and the series was taken off the shelf in 2004 after the broadcasting regulator decided to ban all TV shows featuring electronic games. The ban ensured a period of up-and-down with the “demise” registered in 2018 when the stall in video-game licenses provided the last straw. A long ado re-opening was formally announced when CCTV’s six-episodes of “Esports in China”, a programme filmed in 2017, were finally broadcast in March and April 2020.
Along the way, the industry and its ecosystem receive a boost from corporate sponsors the lineup of which could easily be a misnomer of a Who’s Who of China’s new economy. In content (game publishing) Tencent and NetEase, together with their foreign and domestic subsidiaries such as Riot and Epic, have been the dominant players in producing top-rated games. With revenue from individual games saturating quickly, these publishers find that esports league and tournaments, despite the hefty promotional costs, are worthy investments, because they help to deepen the engagements with fans. Furthermore, with respect to media rights and broadcast, listed companies or unicorns such as Huya, Douyu, Kuaishou (run by Kwai), and lately Bilibili, are flexing their financial muscle and outbidding one another to gain the right to beam the live stream of games to their fans.
All in all, Chinese esports ecosystem is, for now, registering a spectacular run of fortune. If anything, it is one of the few team-sports from which China does produce some global champions.