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How eSports Became a $500 Million Dollar Industry

A few thoughts on how eSports became a global phenomenon.

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The eSports industry has officially burst into the global mainstream in a big way, heralded as being a faster-growing industry than traditional sports and commanding a viewership that in the last 4 years has grown over 15 times in size. Live eSports events are packing out the likes of Madison Square Garden in New York City. Tickets to eSports championships are selling flat out in minutes (3 minutes to be exact for the 2015 League of Legends World Championship Final in Berlin).

Big brands from other industries like Coca-Cola are already making significant investments in the sector with many more corporations lining up to see what’s in it for them. Most recently, the eSports Hall of Fame was launched to recognize the significant contributors to its accelerated journey towards becoming an estimated $500 million dollar industry. But, are eSports actual sports? If so, how did they end up apparently becoming a (seemingly) overnight success?

Humble Beginnings

eSports are defined as competitive gaming: organized computer game tournaments played for a prize. From a bunch of friends indulging in a two-player tournament at home to virtual football championships with professional sponsored teams in actual stadiums, the possibilities for eSports are vast and – for most investors – brimming with potential.

The earliest recorded eSports-type games include a “Spacewar!” tournament that took place at Stanford University back in 1972, sponsored by Rolling Stone magazine. However, the audience it attracted was small fry (read: hardcore gamers) especially compared to today’s crowds, and the winnings modest (a year’s subscription to Rolling Stone). The one missing element that would later prove the catalyst to the industry’s explosion some 40 years later was none other than online streaming.

Before we get that far though, our story takes a long-haul flight to Seoul, South Korea, where computer games tournaments were generating celebrities and million-dollar prizes as far back as the turn of the new millennium.

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The Seoul Effect

The western world’s relatively slow internet connections and persistent associations of gamers as nerds show that in terms of eSports, the West is well behind Asia. A short stroll around Seoul is all it takes to gauge just how important eSports are to the social fabric of the city. The eSports scene in South Korea is massive. For decades now, computer cafés stud every street, crammed with young people from all backgrounds. In Korean homes, two TV channels broadcast eSports on a 24-hour basis.  In December of 2005, Seoul became the home of the world’s first eSports stadium, filled with cosplay cheerleaders, tens of thousands of fans and assistants throwing eSports swag at them during breaks.

If there was a place on earth where people could become rich and famous just by being good at playing video games, it was here – to the extent that European gaming pros such as  Bertrand “ElkY” Grospellier actually left their native shores to start their eSports career in the South Korean capital. Nowadays, ElkY is more well-known for his poker skills, having amassed a total of almost $11 million in live earnings and being at the absolute top of the 2016 Social Power Table of poker, as compiled by PokerStars and Followerwonk. However, what many don’t know is that his gaming career started with popular eSports titles Starcraft and Warcraft III.

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South Korea’s importance in the history of eSports is simply undeniable, but what made it especially interesting for the industry was how its newly inaugurated Yongsan eSports Stadium could reach audiences of not just tens of thousands, but tens of millions, all thanks to Korea’s mass building of high speed broadband networks in the wake of the 1990s Asian financial crisis.

The Rise of Streaming Technologies

With the advent of online streaming globally, there were suddenly new opportunities for audiences everywhere to tune into key events in the traditional sports industry, one key example being the Super Bowl.

In February 2016, CBS announced that it streamed the Super Bowl to a record-breaking 1.4 million viewers per minute, and nearly 4 million unique viewers streamed some part of the game coverage. This was a significant jump from a mere 800,000 online viewers per minute of the previous year’s game.

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The rapidly growing popularity of streaming sports games naturally led the way for the founding of dedicated online eSports channels such as Twitch.tv, now owned by a subsidiary of Amazon, where viewers can stream live eSports games with commentary.

In 2015 alone, Twitch had over 1.5 million broadcasters and 100 million visitors per month. The figures speak for themselves and they are speaking volumes to investors.

Serious Prize Money

Even from the beginning, the more famous among eSports events (such as the League of Legends World Championships) were offering significant prize money: the first season championship held in Sweden back in 2011 featured $100,000 for the winning team. However, due to a number of factors, including tickets and betting sales, the second season in Los Angeles saw that same prize pool suddenly and significantly pushed up to $2 million. A similar situation took place for the Halo Championships, who announced only last year that their own prize pool had reached $1 million.

Recent sponsorship from the likes of Coca-Cola, Ford and American Express have also seen the prize pool across the eSports industry swell exponentially. It is almost unsurprising for those tracking the games to discover that the 2015 championships for popular game DOTA boasted prize money of up to $18 million.

It is anticipated that billions will be wagered on future eSports tournaments, with a growing number of corporates looking to identify favorable investment opportunities and contribute to the rapidly expanding size of this brand-new industry.

Institutional Support

The U.S. government has shown itself to be remarkably progressive in its recognition and support of eSports players in the same way as traditional sports athletes. The U.S. State Department has officially declared the League Championship Series as a professional sport and now grants international players visas and special permissions to live in the U.S.

At least five North American colleges including Columbia College, Missouri are now awarding scholarships to promising eSports talents like Sasha Hostyn. “Esports aren’t the future, they’re the present,” said the College’s President Scott Darymple. “True skill at video gaming is just as legitimate as excellence in traditional sports.”

An undeniable fact, in viewing figures at least: in 2013, 26.3 million people watched the NBA finals. The same year, the League of Legends Season 3 World Championship was watched by close to 32 million people.

Over the past 14 years thanks to the growth of streaming technologies and considerable endorsement by key individuals and institutions, the eSports industry has grown from amateur competitions watched by a few thousand to the fastest growing sport in the world. This growth is impressive and undeniable – accepted by big brands and much of the public alike.

This concludes my article on how eSports became a $500 million dollar industry. Have any of you been following eSports? If so, please feel free to let me know your thoughts on them and more in the comments section below.

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