eSports market brief 2015

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| Playable media & games market research

ESPORTSTHE MARKET BRIEF

2015

Photo: Helena Kristiansson, ESL


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★Korea and China continue to dominate $612M global eSports market. The ongoing investment in N. America and Europe by digital-only publishers drives overall growth and audience expansion.

★The global eSports audience is 134 million strong, and growing. Investment in innovative business models, platforms and derivative businesses further spurs growth in competitive gaming. ★Competitive gaming is a marketing strategy,

not a revenue driver. In addition to traditional marketing efforts, organizing events and streaming content improves awareness and retention.

★Thirteen percent (13%) of live-stream viewers watch eSports. Almost half of eSports viewers in the U.S. use Twitch.tv, the world’s largest live streaming site for game content. Roughly the same amount of eSports viewers participate in some type of competitive gaming, mostly through online platforms. ★Corporate sponsorships total $111 million in

North America (2015E). Brand owners and advertisers are expected to adapt to emergent forms of entertainment, which will grow sponsorship deals across the segment. Following the lead of early movers, we anticipate an increase in ad spending by consumer packaged goods, automotive and technology brands.

Executive summary

eSports Market Brief, May 2015 | Copyright © 2015 SuperData Research. All rights reserved. | www.superdataresearch.com

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Note from the analyst Competitive gaming is a spectacular phenomenon that is changing game publishing. Valued at $621 million, most of the worldwide revenues today come from advertisers and corporate sponsors. But eSports also offers publishers an opportunity to expand the touchpoints around their games and give fans news way to engage with their favorite characters and enter into a deeper experience.

eSports is something that we have not seen before. In many ways competitive gaming seems, at least at first glance, to resemble traditional sports. But to think that a new phenomenon like eSports can be described in terms of the old is to misunderstand it entirely. The intersection of technology, fandom and interactive entertainment is presenting us with new ways of sharing experiences on a global scale. And with 134 million eSports enthusiasts worldwide, this is no longer a niche activity, but a shift in the way people consume games.

In this report we map out the industry’s fundamentals, identify key value chain participants and take a look at the shape of things to come.

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eSports Market Brief, May 2015 | Copyright © 2015 SuperData Research. All rights reserved. | www.superdataresearch.com 3

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Korea and China continue to dominate $612M global eSports market The ongoing investment in N. America and Europe by digital-only publishers drives overall growth and audience expansion.


Asia $374 million

N. America $143 million

Europe $72 million

Rest of World

$24 million

Worldwide market for eSports by region, 2015E

$612M Total worldwide market for eSports, 2015E Asia still leads the global eSports market with $374 million in annual revenues (61%). In the coming year, we expect to see the fruits of the continued investment in North America, Western and Eastern Europe by game companies like Riot Games and Wargaming.

4eSports Market Brief, May 2015 | Copyright © 2015 SuperData Research. All rights reserved. | www.superdataresearch.com


The global eSports audience is 134 million strong, and growing Investment in innovative business models, platforms and derivative businesses further spurs growth in competitive gaming.

PARTICIPANTS DESCRIPTION EXAMPLES

PUBLISHERSThe various games in which competitive gamers compete, ranging from shooters to multi-player online battle arena.

Titles: League of Legends, (Riot Games), World of Tanks (Wargaming), SMITE (Hi-Rez Studios), Call of Duty (Activision Blizzard), DotA 2 (Valve). AUDIENCE

TEAMSProfessional teams that compete in tournaments. Members practice up to 8 hours a day and receive earnings through endorsement deals or by becoming a professional for a particular game.

Teams: NewBee, Evil Genuises, Natus Vincere, Invictus Gaming, Fnatic.

LEAGUESOrganizers: Host both off- and online competitions, and generate revenue through corporate sponsorship, membership fees, merchandise and ticket sales. eSports Betting: Facilitate real-money betting on the outcome of eSports events.

Organizers: Major League Gaming, ESL (Turtle Entertainment).

eSports betting: Alphadraft, Vulcan

PLATFORMSChannels: Facilitate the (live) broadcast of competitions and pro-player videos. Examples: Twitch (Amazon), Azubu, YouTube. Tournament infrastructure: Offer necessary platforms to host both amateur and professional tournaments.

Channels: Twitch (Amazon), Azubu, YouTube, MobCrush, Hitbox. Infrastructure: Xfire, Battlefy

BRANDSBrand holders and advertisers that pay teams, league organizers and publishers in exchange for displaying their logos, products, or naming a competition.

★Consumer Packaged Goods: Coca-Cola, Red Bull ★Automotive: Nissan, Volkswagen ★ Technology: Razr, Intel, NVIDIA ★Consumer Electronics: Logitech, Samsung, HTC


eSports value chain participants

The combination of competitive gaming’s rising popularity and recent acquisitions has triggered investments across scalable market segments. The current market for eSports knows a wide variety of participants that each bring their own specialization. As the overall business model begins to solidify, the market will see more vertical integration and consolidation.

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2015E 134,287,236

eSports viewers worldwide




FPS and Sports games are growing as eSports thanks to Western audiences. While real-time strategy (RTS) and multiplayer online battle arena (MOBA) games dominate eSports worldwide, new genres are emerging with changing demographics. In the US, only 5% of viewers follow RTS games while more than half follow first-person shooters (FPS). Call of Duty, which began hosting official tournaments in 2013, is currently the most popular franchise among American eSports viewers.

“We lose a lot of money on eSports. It's something, currently, that we do to drive return or profitability… if we bring value to our players, they'll reward us with engagement.”

— Marc Merrill, Co-Founder and President of Riot Games

Call of DutyLeague of Legends

HaloMadden

BattlefieldWarcraft

NBAFIFA

Counter StrikeStarcraft 3%

4%5%5%

6%7%

8%8%

9%28%

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Most viewed genres by preference (US) Top viewed franchises in eSports (US)

14%

16%

18%

52%

First-Person Shooters

Other

MOBAs

Sports

Competitive gaming is a marketing strategy, not a revenue driver In addition to traditional marketing efforts, organizing events and streaming content improves awareness and retention.

Riot has invested over $10 million in prize pools in just two years. Operating at a loss, publishers like Riot and Activision Blizzard have continued to host costly tournaments and devote large resources develop eSports. Their continued support for competitive gaming has elevated the industry and helped sustain interest in their games.

PUBLISHERSTEAMS

LEAGUESPLATFORMS

BRANDSAUDIENCE




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Publishers invest in competitive gaming for long-term retention Offering an expanded user experience that crosses into both digital and physical improves the bottom line.

Last year, fans of Dota 2, a popular multiplayer online battle arena game, added $9,331,105 to its annual championship’s base prize pool of $1.6 million.

Going beyond the mere development of a game, companies like Valve have made a substantial investment in hosting tournaments to expand the user experience. This has allowed both its monthly active user base to grow, and fans to reciprocate by enlarging the championship prize pool, thereby further feeding the game’s exposure and marketing buzz.

For the 2015 championship, fans have already contributed 23% more than they did at this point last year.

PRIZE POOLMonthly active

user base at time of tournament

2012 $1,600,000 751,7582013 $2,874,407 6,218,9432014 $10,931,103 9,640,848

PUBLISHERSTEAMS

LEAGUESPLATFORMS

BRANDSAUDIENCE




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While top players can earn millions in prizes, only 40% of professional players make a living off of gaming. Since prize pools only go to a small portion of teams, most players earn a modest salary ranging from $12,000 to $40,000 a year. Players are required to practice eight hours a day, but can drill up to 16 hours a day before a major event. Low salaries contribute to a high burnout rate, as many players quit to pursue other careers.

Hao (Chen, Zhihao)Banana (Jiao, Wang)

SanSheng (Wang, Zhaohui)Mu (Zhang, Pan)

xiao8 (Zhang, Ning)Puppey (Clement Ivanov)

Dendi (Danil Ishutin)XBOCT (Oleksandr Dashkevych)

UNiVeRsE (Saahil Arora)ppd (Peter Dager) $581,748

$586,149$603,893$606,839

$667,332$1,146,794

$1,174,610$1,186,074$1,192,049$1,194,357

NewbeeEvil Geniuses

Natus VincereInvictus Gaming

FnaticSK Telecom T1

Vici GamingSamsung

AllianceSK Gaming

Cloud 9 $1,819,079$1,931,063

$2,100,947$2,181,955

$2,487,139$2,615,720$2,686,964

$3,002,033$3,571,494

$4,189,076$5,525,714

Earnings source: www.esportsearnings.com

Top players world wide by prize earnings (millions)

Top teams world wide by prize earnings (millions)

Teams and players build massive audiences, and earnings follow Individual players with a large fan base earn more from endorsements than top performers do from prize money.

Former professional player Wei “CaoMei” Han-Dong now earns over $800,000 a year by streaming. Even as sponsorship deals continue to grow, popular players can earn more by live-streaming their gameplay. In 2014, professional League of Legends player Wei “CaoMei” Han-Dong retired from eSports and signed a contract with ZhanQi TV to stream 90 hours a month in exchange for an annual salary of 5 million RMB (over $800,000 USD).

One-third of US players consider teams the most important factor when deciding which eSports matches to watch. Veteran teams like Evil Geniuses and Fnatic have become recognizable brands, offering consistency and longevity to viewers and sponsors alike. Most teams are supported by a handful of endorsements; however, corporations like SK Telecom and Samsung have assembled “company teams” that receive funding from a single sponsor.

PUBLISHERSTEAMS

LEAGUESPLATFORMS

BRANDSAUDIENCE


http://www.esportsearnings.com


Merchandising offers a valuable revenue stream for eSports teams Apparel is proving particularly popular among eSports fans, including hoodies, T-shirts, hats and jackets.


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The average size of a transaction on eSports merchandise across key Western markets breaches $40. Loyal fans support specific teams and make regular purchases, thereby providing teams a welcome additional revenue stream. Top-selling categories include apparel, headphones, mice and mousepads.

$42.30

Shown: Apparel sizes for clothing purchased by eSports enthusiasts in the United States, Germany, France and the UK in January, 2015. Total sample size n=10,076. All currencies recalculated to USD.

Apparel purchased by eSports fans in Germany, France, the UK and the US, organized by clothing size

PUBLISHERSTEAMS

LEAGUESPLATFORMS

BRANDSAUDIENCE



Leagues organize and host a variety of competitive gaming events both on and offline, broadcasting tournaments via online streaming. The ESL (Europe), Major League Gaming (N. America) and the Korean eSports Association (South Korea) all promote and organize eSports events in return for a share of the marketing spend by brand holders and advertisers. In addition, league organizations also generate revenue via merchandise and ticket sales.

After 15 years, pro eSports organizations break into the mainstream Tournament organizers, broadcasters and leagues serve as industry advocates, playing a central role in eSports’ popularity.


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PUBLISHERSTEAMS

LEAGUESPLATFORMS

BRANDSAUDIENCE

$203M Total advertising earnings for Korean eSports television broadcasters Ongamenet and MBC Game Advertising revenue represents the bulk of income for television cable companies (63%), in addition to subscription fees (29%), according to the Korea eSports Association (2007). By comparison IP-based television earned only $4.3 million in the same year.

MLG’s recently opened 14,000 square foot stadium in Columbus, Ohio.




Thirteen percent (13%) of all live-stream viewers watch eSports. Almost half of eSports viewers in the U.S. use Twitch.tv, the world’s largest live-streaming site for game content. Most spectators are active participants in the eSports community: roughly half of eSports viewers participate in some type of competitive gaming, mostly online through platforms like MLG’s GameBattles portal.

The decision to use live streaming and eSports as a central component of a game’s marketing strategy changes the design requirements. Broadcasting digital video content live over the Internet, called live streaming, has become so central to competitive gaming that titles like SMITE have this functionality built into the game.

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ESL.tv 6%

MLG.tv 7% Hitbox.tv

7%Azubu.tv

9%

Ustream.tv 9%

GamingLive.tv 12%

Dailymotion 13%

Twitch.tv 36%

PUBLISHERSTEAMS

LEAGUESPLATFORMS

BRANDSAUDIENCE

Live streaming provides eSports with a global audience The introduction of live streaming has allowed the global eSports audience to expand more than eight-fold.

Most visited streaming sites among US eSports viewers

“The games that are popular today [in eSports] were designed to be fun to play, and not necessarily fun to watch.”

TITLE Online viewers during most recent championship

SMITE 2.9MLeague of Legends 20MDotA2 27M



Corporate sponsorships total $111 million in North America (2015E). Brand owners and advertisers are expected to adapt to emergent forms of entertainment, which will grow sponsorship deals across the segment. Following the lead of early movers, we anticipate an increase in ad spending by consumer packaged goods, automotive and technology brands. In 2014 eSports fans of DoTA 2 contributed more than two-thirds to the prize money for its annual championship. The sale of merchandise both via eCommerce and at events generates $11 million in the US this year. Ticket sales are the smallest category of direct consumer revenue with $4.5 million. * Corporate sponsorships calculated on a cash basis (rather than on a value basis) to accurately reflect the total amount of sponsorship money currently flowing into the North American eSports market. The total figure includes sponsorship deals, advertising on digital channels like Twitch and YouTube, publisher-incurred marketing expenses and other forms of eSports advertising. In assessing this number for the US market, SuperData spoke with companies that are actively sponsoring eSports events.

Brands fund the bulk of eSports revenue through sponsorships Despite strong direct consumer monetization via merchandise and events, indirect revenues account for 81% of market.


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Ticket sales $4.5M

Merchandise $11M

Prize pool contributions

$11.8Corporate sponsorships*

$111.1M

Indirect and direct revenue generated from eSports enthusiasts, 2015E: NORTH AMERICA

INDIRECT (81%) DIRECT (19%)

N. America

$143 million

PUBLISHERSTEAMS

LEAGUESPLATFORMS

BRANDSAUDIENCE




As prize pools grow, so too does the number of eSports viewers Accessibility and continued investment in competitive gaming is beginning to shape a strong global audience.

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2010 2011 2012 2013 2014 2015E

134million

2015E

Global VIEWING AUDIENCE for competitive gaming (all channels) and PRIZE POOLS

PUBLISHERSTEAMS

LEAGUESPLATFORMS

BRANDSAUDIENCE

NUMBER OF TIMES US LIVE SPECTATORS ATTEND AN ESPORTS EVENT

72%PERCENT OF US ESPORTS FANS WHO ATTEND LIVE EVENTS

3per year

ATTENDEES AT THE 2014 INTEL EXTREME MASTERS FINALS

73K

As more people watch eSports, the stakes get higher

More than 12 million people attended live events in the US and Western Europe in 2014. As eSports crowds grow, events have begun cropping up at conferences like PAX, GamesCom and even ComiCon. In addition, dedicated eSports venues, or “arenas”, have been built in South Korea, China, England, Ukraine, Sweden and the United States.

North America and Europe are nascent but fast-growing markets. Since 2011, eSports have been growing in the west exponentially. In addition to live-streaming sites and online console devices, organizations like Major League Gaming in the US and the Electronic Sports League in Europe have helped provide the necessary infrastructure for the space to thrive.

2015E $42 million




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87% male 13%

female

eSports viewer spend by category (US) 32%

24%

44%Full gamesIn-game purchasesPeripheral devices

89%$76kAVERAGE HOUSEHOLD

INCOMEVIEWERS WHO BUY AT LEAST

ONE GAME A MONTH

eSports fans spend $200 a month on games and hardware The core audience that regularly watches competitive gaming consists of young, affluent men.

PUBLISHERSTEAMS

LEAGUESPLATFORMS

BRANDSAUDIENCE Audience profileAmerican eSports fans purchase three full games per

month. Viewers also spend more than half of their monthly gaming budget on additional content and peripheral devices like headphones and controllers. On average, US viewers spend $125 a month on games and in-app purchases and $58 on peripherals. Over half of adult eSports viewers are younger than 35. The novelty of online gaming has attracted younger viewers, including teenagers that are more immersed in online video content. However, as generations grow up with video games, eSports will appeal slow bing to appeal to an older demographic. Only two of the top 200 grossing eSports players are female. To address gender disparity, a growing number of organizations like Blizzard and the International eSports Federation have begun hosting women only leagues to create a more welcoming environment for female players and spectators.

$200 Monthly spend on games and

hardware



About the Analysts| Playable media & games market research

Joost van Dreunen is CEO and co-founder of SuperData Research. As one of the first academics to study video games, Joost also has over fifteen years of commercial research experience in interactive entertainment and technology industries. Before receiving a doctorate from Columbia University on the topic, Joost worked as an analyst on both the financial and consumer-side of the games industry for a variety of research outfits. Anticipating the shift to digital games early on, he founded SuperData in 2009. Joost is a recurrent speaker at major industry events such as GDC, CES and Casual Connect, and is regularly quoted in both industry publications and mainstream press.

In addition to his business adventures, Joost teaches at the NYU Game Center and the Stern School of Business.

[email protected]


15eSports Market Brief, May 2015 | Copyright © 2015 SuperData Research. All rights reserved. | www.superdataresearch.com

Senior Analyst, Consumer Insights Stephanie Llamas

Research Associate Carlos Sanmiguel

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SuperData provides relevant market data and insight on digital games and playable media. Founded by veteran games industry researchers, SuperData covers the market for free-to-play gaming, digital console, mobile, PC downloadable, gaming video content and eSports.

Monthly analyses and industry reports using digital point-of-sale data. Using digital point-of-sale data received from publishers, developers and payment service providers, we base our analyses on the monthly spending of 37 million paying digital gamers, worldwide.

Understand what people play, connect to and spend on. Our research combines transaction-level data with qualitative consumer insight. Our leadership team has experience spanning across major research firms, including NPD, Nielsen, DFC Intelligence, Comscore, Experian, Jupiter and Forrester.

A next gen approach for next gen entertainment. Our customer base includes legacy publishers (e.g. Activision/Blizzard, Ubisoft), digital-only publishers (e.g. Nexon, Tencent, Wargaming), media companies (e.g. Google, Coca-Cola) and industry service providers (e.g. PayPal, Visa, GameStop).

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Company summary



CEO Joost van Dreunen, Ph.D. [email protected]

Senior Analyst, Consumer Insights Stephanie Llamas [email protected]

401 Park Ave South, 10th Floor New York, NY 10016 +1 (646) 248 5240 www.superdataresearch.com Twitter @_SuperData

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eSports market brief 2015

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