Based on multiple reports, the once-booming esports industry is currently in the midst of collapsing, submitting to the economic downturn and bleeding investment.
The esports sector is recognized for regional or international video game competitions where pro and amateur gamers compete against one another for cash prizes and accolades. The estimated value of the worldwide esports market in 2022 was little over US$ 1.34 billion, according to business insights from Fortune.
The esports market is estimated to reach USD 5.48 billion by 2029, expanding at a compound yearly growth rate of 21.0% over the projected timeframe. Increasing the number of live streaming events and income opportunities is likely to have a positive market impact.
This Bloomberg report presents another viewpoint. According to the report, several well-known esports teams and organizations, particularly in the US, are shrinking as a result of a general economic downturn, a doubting venture capital industry, and a crypto meltdown that has undermined a significant source of funding.
Investors Pulling Out
According to the report, many esports companies are firing employees in order to cut costs and stay afloat in the face of significant inflation. Bloomberg mentions that well-known teams like Team SoloMid and 100 Thieves have already let go of a combined dose of staff. Given the two clubs' standing as premier esports organizations, this is startling news.
Based on data from Statista, sponsorships and advertising accounted for the majority of eSports industry revenue in 2021. In the said year, the global eSports industry's revenue from sponsorships and advertising amounted to 641 million US dollars.
Media rights, on the other hand, brought in somewhat more than 192 million US dollars. The statistics firm believes that these numbers have the potential to increase in the years leading up to 2025.
Top Teams Adjusting
Based on a Deloitte research, 2018 was a record year for esports in terms of both the number of investments and the amount of money invested. In 2018, the industry received about $4.5 billion in investment. These figures, according to Bloomberg, have already faded, with venture capital investments at an all-time low.
The public markets also exhibit dissatisfaction. FaZe Clan, a team of video game stars and esports professionals who contributed to the development of the influencer marketing sector, went public via a SPAC in July, and its stock has fallen by roughly 80% since then.
As per a Forbes report, organizations continue to struggle as there is not much competition and only Twitch and YouTube are really interested in esports content. Media rights revenue has not yet kept up with those viewership numbers. Additionally, talent is becoming much more expensive.
Many esports organizations also appear to be shifting on, investing more on influencers and less on sports teams, some executives believe game producers should take more responsibility for the situation teams are in today.
With this, the top ten esports organizations are now valued an average of $353 million, up 46% from 2020, but most are swiftly diversifying their operations as they face the industry's challenges.
As shown by estimates, the esports audience number surpassed 532 million people in 2022. By 2025, there are projected to be more than 640 million eSports spectators worldwide. Will the industry survive this current choke point?
