21 July 2019
While extraordinary physique is required for professional players in basketball, for instance, ordinary people can enjoy playing competitive video games. Photo: Reuters
While extraordinary physique is required for professional players in basketball, for instance, ordinary people can enjoy playing competitive video games. Photo: Reuters

What eSports need to get into the mainstream

Even if you’re not a football fan, you have probably heard of Neymar’s jaw-dropping 222 million-euro transfer from Barcelona to Paris Saint-Germain.

Record-breaking transfers of superstars are common not only in football but also in the NBA, baseball and other sports leagues. In fact, athletic events in which no superstars are present are bound to lose their audience and participants.

Tennis provides a vivid example of how superstars have led the sport to flourish. Roger Federer and Serena Williams, both 35, outlasted their younger peers in grand slam tournaments this year, their age-defying performances delighting tennis fans all over the world.

In contrast, golf has been suffering in the post-Tiger Woods era. Since Woods, a 14-time major champion, had his last victory in golf’s four biggest events in 2009, a drastic fall in TV ratings occurred. Golf-equipment businesses filed for bankruptcy, golf courses and even golf-related property investments hit trouble. His impact on the sport and fans is evident as the global golf industry continues its contraction.

Recently, a new type of sports, eSports, has been creating a buzz. Hailed as the next generation of sport, eSports are growing by more than 40 percent annually, with enthusiasts and occasional viewers reaching 400 million worldwide (majority in Asia).

The eSports market is expected to reach US$1.5 billion in 2020, up from US$700 million this year. Massive growth is also seen in eSports gambling, with its market size approaching tens of billions of dollars.

ESports competitions mainly feature team events, offering millions of dollars in prize money. Teams comprised of pro gamers are formed to participate in competitions and tournaments. One of the eSports legends, Fnatic, has received US$7 million in financing this year and is valued at nearly US$40 million by the market.

The majority of revenue comes from advertising and more importantly, live-streaming on sites like Amazon-owned Twitch, as well as China-based Huya, a subsidiary of Chinese video-based social network YY Inc.

Popular games in eSports include Tencent-owned League of Legends and King of Glory, Activision Blizzard’s Overwatch and Valve’s Dota 2 and Counter Strike.

The gaming hardware sector is dominated by Razer Inc. The company specialises in producing gaming mouse, peripherals and gaming laptops with NVIDIA GPUs. It now has the backing of Hong Kong billionaire Li Ka-shing among other big-name investors. Razer recently made a preliminary filing for IPO on the Hong Kong exchange. While its filings indicate that it has not made a profit since 2014, I would expect a roaring IPO for the company.

ESports have an advantage in its low entry barrier. According to an analyst, while extraordinary physique is required for professional players and even superstars in basketball, or American football, ordinary people can enjoy playing competitive video games.

Will eSports be a short-lived fad? By far, it is hard to judge. But to propel competitive video gaming into a lucrative mass-market sport, the industry needs charismatic, talented superstars like Neymar.

This article appeared in the Hong Kong Economic Journal on Aug. 8

Translation by Ben Ng

[Chinese version 中文版]

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Eddie Tam is the founder and CEO of Central Asset Investments.

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