Updated: Sep 11, 2020
Gaming on a PC. (Photo by Peter Vo)
Much of the business world has been upended in the last three months. From entire state economies being shut down, the United States having its highest unemployment rate since the Great Depression and there being little evidence that this crisis will be resolving any time soon, it seems easy to assume that any industry, especially one based in entertainment, is approaching dire straits. It is true that the state of most non-essential industries at large is poor, but esports is unlike any of its other non-essential partners. Before we can understand what makes esports unique in today’s economy, we must understand how other entertainment industries have responded to this crisis.
Traditional sports finds itself in a very precarious situation. The MLB is at serious risk of not having a season at all this year, the NHL is basically guaranteed to lose money this season regardless of whether it does or doesn’t play this year and the NFL looks to lose about $5.5 billion if it can’t play with fans this year. This paints a very bleak 2020 fiscal year for basically everyone invested in traditional sports this year, with there being no major league sport that is cash flow positive with empty stadiums. What’s worse, most stadiums are financially sustainable because they can host other events during away games or off-seasons. Right now, that revenue source is in jeopardy as well, baring major changes in local and state regulations on public gatherings.
What about the movie industry? The answer varies by section, but here is the broad rundown. Non-drive-in theaters are struggling to stay afloat and film studios are having to delay film releases en masse. The only bright spot is streaming services where some companies are seeing up to 15% increases in share value this year with 50% increases in subscriptions compared to last year.
Esports viewership is up so far in 2020, and, as of April, still projected to increase over the next three years. League of Legends streaming on the streaming platform, Twitch, is at a three-year high. Empty stadiums don’t impact revenue streams that much for an industry that only used traditional stadiums for the largest of tournaments, with a majority of the league's regular seasons being in much smaller studios, that can only hold around 1,000 people. Instead, esports leagues predominately generate their revenue from stream sponsorships of games, team revenue sharing and income generated from increased game sales as a result of the league.
All of these factors put esports in a unique position to weather the COVID-19 storm with virtually no major disruption of the business models that have made it just short of a trillion-dollar industry. To say it another way, the future of the esport industry is strong.
This is the last part of a four part series on the esports industry. To go to the beginning of the series, click here.