INSIGHTS
- It is estimated that the e-Sports industry in North America was valued between $257.9 million and $555 million in 2017, and the industry is expected to reach a maximum value of $1.1 billion by 2020.
- It is estimated that there were 74.4 million e-Sports fans and enthusiasts in the United States in 2017, and this number is expected to increase to 130 million by 2021.
- Three brands currently active in the e-Sports industry in the United States include Intel, Mountain Dew, and The Gillette Company, while potential entrants to the market could be L’Oréal, Sweetgreen, and Ateyo.
OVERVIEW
While there is limited information published about the e-Sports industry in the United States specifically, we determined that the United States e-Sports market size was $93.1 million in 2016. Additionally, we utilized data published on the global e-Sports industry to triangulate key insights about the North American market, which is dominated by fans and enthusiasts in the United States. Based on the finding that North America represents 37 percent of the global e-Sports industry, we have triangulated that the North American market was valued between $257.9 million and $555 million in 2017. The North American market is expected to reach a maximum value of $1.1 billion by 2020, although some industry insiders predict it may be lower. Based on a finding that 52 percent of global participants in e-Sports events were from the United States in one key study, we have estimated that there were 74.4 million e-Sports enthusiasts in the United States in 2017, and there could be as many as 130 million e-Sports fans in the United States by 2021. Approximately 70 percent of e-Sports fans are ages 13 to 40 and male, while only 30 percent of users among this age group are female. It is estimated that 44 percent of e-Sports enthusiasts are college students, and about 43 percent of e-Sports fans have an average household income of at least $75,000. Finally, three brands that are actively marketing in the e-Sports industry include Intel, Mountain Dew, and The Gillette Company. Three brands that would benefit from entering this market include L’Oréal, Sweetgreen, and Ateyo, all of which could capitalize on the under-served market for female e-Sports enthusiasts. Below you will find a discussion of our findings.
E-SPORTS INDUSTRY OVERVIEW
In order to provide an overview of the e-Sports market, including the history of the industry, growth rates, and user demographics, my colleagues and I first attempted to isolate our research to the United States. However, having reviewed industry publications, credible media resources, statistical databases, and market research reports, we did not locate sufficient publicly available data that would allow us to provide an overview of the United States market, exclusively. It appears that a comprehensive study of the e-Sports industry in the United States has not been conducted, possibly due to rapidly evolving technology rendering this industry global in nature. For example, our findings indicate that players, publishers, and game developers are not limited in their involvement in the e-Sports industry by their geographical location, but rather easily interact throughout the world. As a result of this limitation, we have expanded the scope of our research to consider the global e-Sports industry, but we have noted any publicly available information on the United States market, when available. We have also used global data to triangulate insights on the United States market, when possible.
HISTORY OF THE E-SPORTS INDUSTRY
1970s
The e-Sports industry is often mistakenly considered a relatively recent technological development, but our findings indicate that the first e-Sports competition was held at Stanford University in 1972. This competition focused on the video game, Spacewar, which is described as a "revolutionary two-player battle in which competing virtual spaceships combat each other while avoiding a dying star." The competition was eventually won by Bruce Baumgart, who won a year's subscription to "Rolling Stone" as a prize for becoming the world's first global e-sports champion.
1980s
In the 1980s, the e-Sports industry transitioned away from a focus on video games to an emphasis on arcade games. In 1980, Atari held the Space Invaders Championship, which attracted over 10,000 participants. Although arcade games were considered a niche market during this time frame, the Space Invaders Championship nonetheless generated substantial media attention for two reasons. First, Atari's technology was considered both innovative and inspiring at that time. Second, the often fierce competition between players created a significant community of gamers worldwide. Pac-Man and Donkey Kong Country tournaments also generated media attention and player interest in the early 1980s, and the Guinness Book of Records initiated the Video Games Masters Tournament. This tournament was a series of contests that recorded high scores for various arcade games. E-Sports reached the mainstream in the 1980s, with a television show called Starcade fueling the high score competition craze.
1990s
While e-Sports giants such as Atari and Sega still dominated the market, the 1990s saw the rise of Nintendo as a technological behemoth in this industry. The 1990 Nintendo World Championships further emphasized Super Mario hysteria; this e-Sports tournament toured throughout the United States and eventually concluded with a grand final game at Universal Studios in Hollywood. Upon release of the Super Nintendo console in 1994, the tournament was resurrected. Video game rental companies, such as Blockbuster Video, also hosted e-Sports tournaments for Nintendo games. NBA Jam, Virtual Racing, Mario Kart, and Super Mario World were popular e-Sports games during the 1990s.
2000s
E-Sports have been transformed in the digital era as a result of the rise of internet gaming, particularly in the Asia Pacific sector. In 2000, the Korean e-Sports Association was elevated to a division of the governmental Ministry of Culture, Sports and Tourism. Global e-Sports tournaments expanded dramatically in popularity; while only 10 global e-Sports tournaments were held in 2000, this number reached 400 in 2016. Quake, Counter-Strike, StarCraft, Call Of Duty, Dota 2, League Of Legends, and Warcraft are only a few e-Sports games that enjoy tremendous global popularity. Additionally, there is a current trend towards streaming e-Sports games in 2018. For example, Twitch allows game developers, players, and tournament organizers to live stream events worldwide, and its growing popularity is consistently mentioned in the literature.
CURRENT STATE OF THE E-SPORTS INDUSTRY
In 2018, there are four primary forms of segmentation in the global e-Sports industry: revenue source, platform, product, and game. On the basis of revenue source, the e-Sports industry is classified primarily on sponsorship and advertising. E-Sports platforms are most often personal computers and console games in 2018. Popular products include video game controllers, headsets, mice, keyboards, and other accessories, which are dependent on the e-Sports platform being used. Finally, the gaming category is diverse; the e-Sports market includes commonly multiplayer online battle arena (MOBA) games, real-time strategy games, first-person shooter games, fighting games, and sports games.
The North American market is the most dominant global e-Sports sector, based on both the total number of players and revenue generated. Additionally, in the North American market, the United States has the highest market share based on both revenue contribution and the total number of e-Sports gamers. Growth in the market is driven by gaming technology advancements, such as the aforementioned trend towards live streaming e-Sports games. The market is also driven by increased interest in e-Sports from gamers, publishers, and investors. Two major challenges in this market include fraudulent betting on e-Sports games, as well as competing interests between operators and publishers. Major global e-Sports players include Riot Games, Inc.; Hi Rez Studios; Activision Blizzard, Inc.; and Electronic Arts, Inc. All of these companies are based in the United States. The only non-American major player identified in this industry is War Gaming Public Co., Ltd., which is located in Cyprus.
E-SPORTS INDUSTRY GROWTH RATES
Global E-Sports Market
The United States was the most prominent e-Sports market by sales revenue in 2015 and 2016. South Korea generated the second highest revenues in this industry in 2016, while China was the third highest-grossing market. We identified a range of estimated total values for the global e-Sports industry from 2017 to 2020. At the low end of this range, the global e-Sports market was valued at $696 million in 2017 and expected to grow at a compound annual growth rate (CAGR) of 35.6 percent to $1.5 billion by 2020. At the high end of this range, the e-Sports industry was valued at $1.5 billion in 2017 and expected to expand at a CAGR of 26 percent by 2020. Using a CAGR calculator, this yields an estimated market size of $3 billion by 2020. Increases in global revenues are attributed to two key factors. First, e-Sports viewership and participation are expected to increase by 12 percent annually. Second, a global influx of third-party investments in this space is projected.
United States E-Sports Market
While this range of values demonstrates there is some fluctuation in the estimated global market size of the e-Sports industry, the literature indicates that the North American market is 37 percent of the global market share. We were unable to identify any publicly available data that delineates the portion of the North American market share that belongs exclusively to the United States, but our aforementioned finding that the United States is the largest market in the world suggests that the majority of North American revenues are likely attributed to enthusiasts in the United States. Utilizing the range of values suggests for the global e-Sports industry, we can triangulate that the North American market was valued between $257.9 million (697,000,000 * 0.37) and $555 million (1,500,000,000 * 0.37) in 2017. Using this same range of values, we can estimate that the North American market is predicted to be valued between $555 million (1,500,000,000 * 0.37) and $1.1 billion (3,000,000,000 * 0.37) by 2020.
The most recent year for which sales data only for the United States is publicly available is 2016, and the e-Sports industry in the United States generated revenues of €98 million. Using a historical foreign currency calculator, we determined that €98 million in 2016 would have been equivalent to $93.1 million (€98,000,000 * 0.95034 euros per dollar) in revenue.
Number of Fans
Our findings indicate that there were approximately 143 million e-Sports fans and enthusiasts worldwide in 2017. By 2021, it is estimated that there will be 250 million global fans. While we did not identify any publicly available data that confirms the number of e-Sports fans and enthusiasts in the United States exclusively, we can triangulate an estimate. In one study on e-Sports attendance and viewership at events, 52 percent of global participants were from the United States. Using this figure, we can triangulate an estimate that there were 74.4 million (143,000,000 * 0.52) e-Sports enthusiasts in the United States in 2017, and there could be as many as 130 million (250,000,000 * 0.52) e-Sports fans in the United States by 2021.
FAN DEMOGRAPHICS IN E-SPORTS INDUSTRY
In a Nielson study of fan demographics from the United States, Germany, France, and the United Kingdom, it was determined that 70 percent of e-Sports fans ages 13 to 40 are male, while only 30 percent of users in this key demographic are female. However, another study reported the rate of female participation in e-Sports may be as high as 38 percent. Approximately 44 percent of e-Sports enthusiasts are college students, and 62 percent of fans have been playing e-Sports for over two years. It is estimated that 43 percent of e-Sports fans have an average household income of at least $75,000. Nearly half of all e-Sports enthusiasts spend "most of their free time" pursuing other aspects of e-Sports, such as reading about the industry. Although these demographics describe the global audience, there is no indication that fan demographics in the United States would be markedly different, except for gender. In one study of the e-Sports enthusiasts in the United States, 85 percent were male, while only 15 percent were female.
BRANDS CURRENTLY OPERATING IN THE E-SPORTS SPACE
In reviewing significant brands in the United States that are currently operating in the e-Sports industry, my colleagues and I first attempted to identify any pre-compiled lists detailing "major" or "top" advertisers in the market. While we did not identify any pre-determined lists of this nature, we did identify four significant insights about successful brand advertising in this space. First, the greatest branding potential is found in the e-Sports industry's "staggering online audiences." In addition to online advertisements and banner ads being less costly than traditional advertisements, the growing popularity of e-Sports ensures that brands are reaching audiences of unprecedented size. Second, e-Sports events are held as frequently as traditional major sporting events, and annually, these events "grow bigger and better." Branding via e-Sports events represents an opportunity to market to a rapidly expanding audience. Third, e-Sporting events are held across such a diverse array of platforms that brands have the opportunity to advertise on the channels that best suit their own "preferences, product, spending range, and target audience.” These platforms include all major social media networks, YouTube, and evolving live streaming services (i.e. Twitch). Finally, influencer marketing is a substantial advertising opportunity in the e-Sports industry, where e-Sports professionals may boast "hundreds of thousands of followers" on social media platforms. E-Sports fans are considered "highly engaged," and they have historically demonstrated loyalty to brands that support and/or are recommended by their favorite players. For example, it is estimated that "a single Twitter link for a popular e-Sports player can easily be worth up to $800.”
Below, we have identified three brands capitalizing on these opportunities in the e-Sports industry. We have also included a brief overview of their efforts, key marketing channels, and metrics of success. Finally, we have identified three brands that could be potential entrants to this market and a discussion of why each brand would be a good fit for this industry. These lists are organized in no particular order.
1. INTEL
Intel is one of the largest computer chip companies in the world, and the company currently controls 90 percent of the global market for computer microprocessors. Intel currently sponsors IEM, which is Intel's Extreme Masters World Championship. One of the largest and longest-running e-Sport events in the world, IEM boasted more than 34 million viewers at a recent event in Poland. Over the last ten years, IEM has held 58 events on five different continents, and the first season of IEM produced approximately 500,000 video sessions. The most recent season produced 132 million views. E-Sports fans can watch IEM events across 14 different channels, including social media, Twitch, and Yahoo. In 2016, IEM recorded 3.2 million fan engagements on Facebook and Twitter. Intel has capitalized on the ability of the e-Sports industry to reach an incredible volume of fans, expose fans to branding via frequent events, and reach e-Sports enthusiasts across multiple platforms. While the company does not publicly disclose metrics of success directly related to e-Sports advertising, in 2017, Intel's revenue increased 6 percent to $62.8 billion.
2. MOUNTAIN DEW
Unlike Intel, which is a technology company, Mountain Dew has no intuitive association with the e-Sports industry. However, some of the most successful brands in the market have no direct connection to gaming, which is described as being a "non-endemic sponsor." In 2016, Mountain Dew partnered with the E-Sports Entertainment Association League (ESEA) to sponsor the Mountain Dew League (MDL). This league assists amateur players in becoming e-Sports professionals. Additionally, Mountain Dew hosts an e-Sports Twitch channel, and the company announced in 2017 that it was sponsoring three professional gaming squads: Team Dignitas, Splyce, and Team SK Gaming. As a result of these efforts, Mountain Dew benefits from exposure to the e-Sports industry's significant fan base, while investing in influencer marketing across multiple channels. The Mountain Dew League Championship reportedly reached over 2.2 million viewers on Twitch. The company believes its involvement in the e-Sports industry is crucial for targeting key demographics, specifically "the male millennial audience, a lot of whom drink Dew." This approach also serves to "best create meaningful engagements with the target audience," and as a result of its efforts, Mountain Dew's content is now considered an organic component of the e-Sports industry.
3. THE GILLETTE COMPANY
The Gillette Company partnered with ESL (previously known as the Electronic Sports League), which is a major broadcaster for the e-Sports industry via Twitch. As Gillette produces personal care products, it is also a "non-endemic sponsor" for the e-Sports industry. Gillette's approach to e-Sports marketing has primarily been to partner with industry leaders, such as ESL, and sponsor major e-Sports events. In 2017, Gillette was a co-sponsor of the Intel Extreme Masters World Championship. In addition to exposure to the vast e-Sports fan base associated with co-sponsoring this event, Gillette utilized influencer marketing by providing grooming services to all League of Legend's players during the opening weekend. Gillette also hosted autographing events with xPeke, and the company invited xPeke to corporate headquarters in Boston for an in-depth media event. Gillette believes that these opportunities will reach e-Sports fans on a personal level and facilitate brand loyalty by "demonstrating a shared passion for cutting-edge technology."
POTENTIAL ENTRANTS IN THE E-SPORTS MARKETING SPACE
1. L’ORÉAL
As previously noted, it is estimated that 70 percent of e-Sports fans are male, and many companies (including Mountain Dew) have primarily targeted this male audience. However, there are robust opportunities in the e-Sports industry to market to female enthusiasts. At the Esports Activate event in 2018, one panel focused exclusively on the lack of brand interest in marketing products to female fans. As a result of women being a largely under-served demographic among e-Sports participants, L’Oréal has expressed some interest in entering this market, noting that while hairstyle and makeup trends are trending topics on e-Sports platforms (such as Twitch), virtually no brands are marketing to women in e-Sports. The company noted that "the fact that any style trend on the platform could catch viewers’ attention signifies potential for beauty brand integrations and sponsorships.”
2. SWEETGREEN
Sweetgreen is a "destination for simple, seasonal, healthy food," and the company was founded in 2007. During the aforementioned Esports Activate event in 2018, it was noted by many participants that even food options at e-Sports events appear to be geared towards the primarily male gamer demographic. In contrast, many female e-Sports enthusiasts noted that having a wider selection of food options at e-Sports events would appeal to female participants. Healthy food vendors, such as Sweetgreen, were mentioned by female participants as being particularly desirable.
3. ATEYO
The lack of marketing to female e-Sports enthusiasts extends beyond personal care products and food options at e-Sports events. Female participants have also noted a lack of apparel designed for women exclusively, with one fan noting that "if I want an e-Sports jersey, it’s so hard to find the women’s fitted tee." One brand attempting to enter this market is Ateyo, which is an apparel startup launched by two female e-Sports enthusiasts. Existing apparel in the e-Sports industry does not meet women's unique needs; clothing is not considered "breathable" by women, nor are hoodies the appropriate size for women. Ateyo plans to focus on designing apparel for casual female gamers, recognizing that women are an under-served segment of the e-Sports industry at this time.
CONCLUSION
In summary, the e-Sports market in the United States was valued at $93.1 million in 2016. The total North American market size was estimated between $257.9 million and $555 million in 2017 and may reach $1.1 billion by 2020. It is estimated that there were 74.4 million e-Sports enthusiasts in the United States in 2017, and there could be as many as 130 million e-Sports fans in the United States by 2021. E-Sports enthusiasts are primarily male and ages 13 to 40; roughly 43 percent of e-Sports fans have an average household income of at least $75,000. Three well-known brands in the e-Sports industry include Intel, Mountain Dew, and The Gillette Company. Three brands that would benefit from entering this market to tap the under-served female demographic include L’Oréal, Sweetgreen, and Ateyo.