• Why companies are investing in eSports

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    MIGGY CASTAÑEDA

    When most people hear eSports, they usually think it’s something new that hasn’t gained enough traction to attract any investment. The thing is, according to CNN, eSports as an entertainment industry is predicted to be worth $19 billion by 2019. Not bad for something that spun out of a Spacewar tournament in 1972.

    The truth is that professional video game competitions have been around for about as long as there have been video games – from competing to high scores at local arcades to climbing the online leaderboards of today’s current generation of competitive games.

    It’s because of that explosion that many companies, celebrities, and even more traditional sports teams are willing to invest in them. A number of non-endemic brands are also investing. Everything – from food, beverage, to even car manufacturers – is getting in on the game, so to speak.

    Prior to the way the eSports scene is in 2017, you had the Cyberathlete Professional League and the Professional Gamers League in the 1990s sponsoring international tournaments for Counter-Strike, Quake, StarCraft and WarCraft.

    The 2000s boom involved the growth of eSports – particularly StarCraft competitions in South Korea – and the establishment of the Korean e-Sports Association, an arm of the South Korean government to promote and regulate eSports. It was the first agency of its kind, the first to truly invest and nurture professional gaming.

    The rise of game streaming platform Twitch would also lead to brands like Mountain Dew, Doritos, and other food/beverage brands to begin recruiting players for eSports teams, if not sponsor players themselves. Amazon was one such company to see that competitive gaming was about to go big, snapping up Twitch for itself in 2014 for nearly $1 billion.

    One reason for companies suddenly investing in eSports, as related by Alex Knapp in a Forbes column, was the fact that the industry carries an “if-I-get-in-early” promise that’s too good to pass up. The figures don’t lie either, investment in the industry also means that stocks in game companies are skyrocketing, especially for the companies that have wholly embraced the eSports community.

    An example of that is Electronic Arts, which launched its “EA Competitive Gaming Division” in 2015. Its second-quarter revenue of $1.098 billion isn’t anything to scoff at. Given that, there’s a healthy learning curve when it comes to investing in the industry. Investors have to be on the lookout for how a team raises capital, as well as their monetization streams once the team is up and running.

    Many eSports teams have teams within the team that specialize in certain competitions. For example, one team may have players completely dedicated to Counter-Strike: Global Offensive, and another that’s getting ready for Activision Blizzard’s Overwatch League. The difference between the two tournament landscapes is the fact that CS:GO offers larger prize payouts, more marketing relationships with other brands, and the latter has appreciable individual success via platforms such as Twitch and smaller global tournaments.

    Given the organization model of an eSports team, investors gain built-in diversification, especially since the ecosystem of eSports itself continues to grow, with more competitive leagues spinning out of other media industries.

    There are still some issues when it comes to the formation of teams, the contractualization of players, things that are clear signs of growing pains. It means that the investment equation isn’t going to be the same with every organization, and investors need to take this into account when they start scouting teams in which they can invest.

    Miggy Castañeda writes about personal finance for MoneyMax.ph, a financial comparison website aiming to help Filipinos save money through diligent comparisons of financial products.

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