Esports update

We have been a bit distracted by all things crypto lately and have not been posting much on esports. In this post, we thought we would touch a few high-level topics in the space. And as it turns out, the crypto and esports world are starting to see a lot more overlap.

Probably the biggest esports news is the completion of the first season of Activision’s Overwatch League (OWL). OWL is one of the most high profile efforts to commercialize esports. The final viewership stats seem to be at least good enough to keep the momentum going. The press is full of reports of new and rumored expansion franchises. Consistent with what we had been hearing six months ago, Activision is looking to add six (or more) new franchisees. We have also heard that the asking price has gone up since the last round, with new deals priced at $60 million. We see this as good news for esports in general – lots of money interested in participating, if not great for Overwatch specifically.

In a similar vein, Riot Games is pushing ahead with franchise plans for League of Legends (LoL) in Europe and China. The European process seems to moving along similar lines to what we saw in North America, while the China process seems a little fuzzier, filtered through the expected murk that is commonplace when doing business in China.

Overall viewership for streaming and esports are still moving ahead strongly. So good progress on that front.

On the other hand, the risks of the business remain. The two big franchise operators continue to make progress in monetizing broadcast rights, albeit with with the expected murk about revenue share that is commonplace when doing business with platform owners.

Another big-ish concern is the rise of Fortnite. For those not in the industry, or not regularly in the company of anyone under the age of 20, Fornite is a surprise monster-hit Battle Royale style game. (It is also a lot of fun to play.) Fortnite shows that gaming remains a powerful, growth engine full of innovation. It also highlights the fickle nature of the audience. In terms of streaming hours on Twitch, Fortnite has basically come out of nowhere to take up a leading share of eyeballs. This does not seem to have seriously hit leaders like LoL or Dota, but does seem to have crimped time for many other games. Remember that Twitch has two constituencies – the viewers and the streamers. Streamers are a major source of influence and their decision to switch to other games plays a big role in audience dynamics. We would not read too much into the rise of Fortnite. It does not seem to be wrecking the prospects for others. That being said, it does highlight the risk of investing in a franchise for one game, only to see that game lose consumer appeal quickly. It has not happened, but it will some day.

The world moves on. The number of gaming companies remains healthy. We have seen many new esports assets, services and games come to the market. For more on this please check out our friends at Konvoy who are crushing it on attracting new deals to their platform.

Overall, we think esports remains incredibly vibrant. We no longer hear people questioning the existence of the category. Industry debate has instead moved to a much healthier dialogue about how to grow, how to drive audiences, how to monetize, and importantly, how to protect players. This remains an industry in early days poised for tremendous growth.

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