Feb 2, 2019

Esports, the new social square

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Data: Newzoo 2018 Global Esports Market Report; Chart: Chris Canipe/Axios

Video games were once seen as a brain-rotting distraction from good, old-fashioned sports. Now, those same games are the bedrock of a burgeoning esports industry that is rapidly maturing.

Why it matters: The combination of streaming and social networking has manifested most visibly in esports, where millions of fans have come together from across the globe. And where there's a big audience, there's big business.

Esports-related revenue reached nearly $1 billion ($345 million in North America) in 2018, per research firm Newzoo. This was driven largely by corporate sponsorships — with ticket sales, merchandise and media rights bringing in additional revenue.

  • Last year's DOTA 2 championship, one of esports' biggest tournaments, boasted a purse of $25.5 million, more than double what golf's U.S. Open paid out ($12 million).
  • Take-Two just signed a $1.1 billion deal with the NBA for the NBA 2k League.
  • Tencent, the world's largest gaming company by revenue, is investing $150 million per year into esports ventures.

Esports are also becoming the new social media. Exhibit A: The massive success of Fortnite, the game that has become as much a way to socialize online as it is to play.

  • Most Fortnite players spend at least 6-10 hours a week playing the game, per a study by financial education company LendEDU. By comparison, the average active user of Snapchat or Instagram spends roughly 30 minutes per day on those those platforms.
  • Half of teens say playing Fortnite helps them keep up with friends, according to a study from Common Sense Media. And 44% say they've made a friend online through the game. In fact, 39% say they have bonded with a sibling through the game.
  • Fortnite reached 200 million users (nearly 80 million monthly active users) in a little over a year, per Epic Games. By comparison, it took Twitter roughly five years from launch to reach 100 million monthly active users.
  • Players are valuable: The average revenue per user (ARPU) of Fortnite users is $96, almost two times more than Google, Facebook, Twitter and Snapchat combined, per Leo Polovets, General Partner at Susa Ventures.

The bottom line: The esports industry is thriving despite having just one mainstream star and very little infrastructure. But with leagues popping up at both the high school and college levels, it won't be the wild west for long.

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