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The online multiplayer and esports sector has seen a meteoric rise in popularity, as affordable gaming equipment and the widespread availability of high-speed internet connections has made gaming practical and accessible for many more people. The Covid 19 lockdowns and the launch of a range of new virtual reality devices, mobile gaming platforms and new high-powered consoles have all contributed to the growing market for home and online gaming, taking the sector from the realms of back bedroom hobby enthusiasm to a multi-billion-dollar global industry.

Alongside the rise in home gaming, influencer and reviewer culture has grown up on social media, with popular individuals and teams creating and sharing gaming-related content and competing in competitions and tournaments across the globe. So-called ‘esports’ teams are big business, and professional gamers train for hours every day for the chance compete in front of large crowds of esports enthusiasts at tournaments worth millions of dollars, broadcasting their matches to millions of fans online.

Worldwide, the size of the esports market was valued at USD 1.72 billion in 2023 and is projected to grow to over USD5 billion by the end of the decade. The most dominant teams can be incredibly valuable – Los Angeles based TSM (est. value $540 million) and 100 Thieves ($460 million) and the Netherland’s Team Liquid ($440 million) are among the most successful, each taking tens of millions of dollars in prize money from tournaments for games including Fortnite, Counterstrike, League of Legends, Valorant, and Apex Legends. With a young, predominantly millennial fanbase, successful esports teams have the potential to build brand loyalty for returns over decades, using their profile and trust to communicate directly with their tech-savvy followers.

This market also earns considerable revenue from advertisements and endorsements that are aimed at esports viewers, a revenue stream that has increased as viewership on online platforms such as YouTube and Twitch has grown. YouTube saw its viewership rise by 6 million in 2022 and combined viewer figures for the top 10 most popular games accounted for over 40 million hours viewing on Youtube and Twitch last year.

All this content equates to money from advertisers, with esports stars and teams able to leverage considerable value from marketing their content to their legions of fans across the globe.  Due to the huge amount of interest in esports, investment is flowing into the sector, with celebrities including David Beckham and Will Smith and global brands, now becoming sponsors in esports teams.

While the initial set up costs may be relatively low, the larger and more successful teams are looking to consolidate their positions through M&A activity in order to compete across more esports sectors and appeal to a larger fanbase.

In 2023, the global video gaming industry M&A volume amounted to 152 transactions with a value of USD 76.76 billion. The esports industry is growing rapidly, with increasing viewership and revenue, offering potential for high returns on investment, and Bishop and Sewell has experienced this having recently advised DCB Sports on acquisition of David Beckham’s Guild Esports.

As the industry continues to grow, we can expect to see more deals as companies will look to consolidate their position, expand their reach and build profitable gaming brands that can compete successfully across multiple titles, competitions and geographic locations.

Gaming is no longer just the proviso of spotty geeks in dingy bedsits (though they’re doubtless still there!), and esports offers investors opportunities for prize money, plus the revenue from multiple content streams, advertising and product endorsements. Yet esports is also a volatile and challenging sector, relying on the consistent success of human players and the support of fickle fans. Those organisations that can successfully diversify their revenue streams, becoming both esports and gaming-led entertainment brands, are best placed to capitalise and profit from this interesting phenomenon. Keep a close eye on this sector – as they say, a fortnite is a long time in esports!

 

Contact our Sports Law and Corporate & Commercial expert:

David Little is a Partner at Bishop & Sewell in our expert Sports Law and Corporate & Commercial teams. If you would like to contact him, please call on either 07968 027343 or, 020 7631 4141 or email: company@bishopandsewell.co.uk.

The above is accurate as at 30 October 2024. The information above may be subject to change.

The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.


Category: News, Blog | Date: 30th Oct 2024


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