Industry veterans fear an esports bubble
Illustration: Lazaro Gamio/Axios
Whether it's the seven-figure salaries or the hundreds of millions of dollars investors are pouring in, the esports industry appears to be doing quite nicely — but some industry veterans disagree.
What they're saying: 18 of them told Kotaku that they are worried esports is a bubble, with some describing it merely as "inflated" and others as "completely unsustainable." Esports veteran Frank Field said it was nearly "a Ponzi scheme," adding, "Everyone I talk to in this industry kind of acknowledges the fact that there is value in esports, but it is not nearly the value that is getting hyped these days."
What's at play:
1. Sketchy numbers: It was widely reported that last year's League of Legends World Championship drew more viewers than the Super Bowl — the kind of headline that could turn even the biggest esports skeptic into a believer. Turns out, those numbers were unreliable, misleading and potentially even inflated, per Kotaku.
- Unreliable: When it comes to, say, an NFL game, viewership numbers are reported by a third party like Nielsen. In esports, viewership numbers are reported by either the game publishers, the esports teams or the streaming platform. Pretty big conflict of interest.
- Misleading: A Super Bowl viewer must watch for six minutes to register with Nielsen's tracking. For esports, someone can briefly scroll past a livestream and count as a viewer.
- Inflated: Multiple esports tournaments have paid to have their livestream embedded across hundreds of websites affiliated with a company called Curse, Kotaku reports. This results in numbers that don't actually represent engaged humans.
2. Lack of revenue: Multiple leagues have shuttered due to money problems and one industry analyst estimates that as many as 89% of esports teams are operating at a loss. Investment keeps coming in, though.
"When you're seeing teams right now raising over $300 million valuations on revenues under $25 [million], you're kind of like, what? … No one's more bullish about esports than I am [but] I just think good, old-fashioned common sense would go a long way here."— Jason Lake, founder, Complexity Gaming (via Sports Business Journal)
The big picture: Investors have flocked to esports because they don't want to miss out on "the next big thing." They have no problem burning through cash if the opportunity is big enough, but eventually they want to see a return.
- That promise of a future payout is strung along by eye-popping viewership numbers and overall hype. If those numbers are inflated — and the hype somewhat unearned — the industry could fall short of expectations.
The bottom line: Any outside observer can see that there is value in esports. But if we are to believe a contingent of those on the inside, it's nowhere near the numbers being thrown around.