Jun 27, 2019

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.

Go deeper: Read Axios' Deep Dive on the Business of Sports

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Coronavirus dashboard

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  1. Global: Total confirmed cases as of 3 a.m. ET: 665,164 — Total deaths: 30,852 — Total recoveries: 140,225.
  2. U.S.: Leads the world in cases. Total confirmed cases as of 3 a.m. ET: 124,665 — Total deaths: 2,191 — Total recoveries: 1,095.
  3. Federal government latest: President Trump announces new travel advisories for New York, New Jersey and Connecticut, but rules out quarantine enforcement. Per the CDC, residents of those states must now "refrain from non-essential domestic travel for 14 days," with the exception of critical infrastructure industry workers.
  4. State updates: Alaska is latest state to issue a stay-at-home order — New York is trying to nearly triple its hospital capacity in less than a month and has moved its presidential primary to June 23. Some Midwestern swing voters who backed Trump's handling of the virus less than two weeks ago are balking at his call for the U.S. to be "opened up" by Easter.
  5. World updates: In Spain, over 1,400 people were confirmed dead between Thursday to Saturday.
  6. 🚀 Space updates: OneWeb filed for bankruptcy amid the novel coronavirus pandemic.
  7. Hollywood: Tom Hanks and Rita Wilson have returned to U.S. after being treated for coronavirus.
  8. What should I do? Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk
  9. Other resources: CDC on how to avoid the virus, what to do if you get it.

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Coronavirus updates: Global death toll tops 30,000

Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC, and China's Health Ministry. Note: China numbers are for the mainland only and U.S. numbers include repatriated citizens and confirmed plus presumptive cases from the CDC

The novel coronavirus has now killed more than 30,000 people around the world — with Italy reporting over 10,000 deaths, per Johns Hopkins data.

The big picture: The number of deaths from COVID-19 in the U.S. surpassed 2,000 on Saturday. The United States leads the world in confirmed coronavirus infections — more than 124,000 by early Sunday. The number of those recovered from the virus in the U.S. passed the 1,000-mark on Saturday evening.

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Photo: Olivier Douliery/AFP via Getty Images

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The big pig picture: President Trump has called the antiviral drug "promising," but the results of six clinical trials on this investigational medicine are still being conducted, so its effectiveness the treatment of the novel coronavirus has yet to be proved. The World Health Organization is involved in the tests.

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