This week, Newzoo Esports released the latest quarterly update of its Global Esports Market Report to its subscribers. The report shows that esports revenues for 2016 will grow toward $493 million in 2016, up 7% from the $463 million projected at the start of the year. This puts the year-on-year growth at +51.7%. The new figures are the result of Newzoo’s continuous effort to quantify the impact of recent developments and investments and to integrate the latest actuals in its proprietary Global Esports Audience and Revenue model. Before publication, the new figures have been validated by key players in the industry, including teams, organizers, investors, publishers, and media platforms.
The slight increase in esports revenues is mainly due to a higher-than-anticipated investment by publishers and a faster uptake of the media rights business model within the esports economy, creating a shift from direct advertising income to media partnerships comparable to traditional sports. The esports revenues expected in 2019 now stand at $1.1 billion in 2019. Betting on esports is not taken into account in these figures. Equal to traditional sports, this is a largely separate ecosystem with different dynamics and, in most cases, higher revenues than the sport itself.
Please note our latest revenue estimates for esports and games can be always be found in Newzoo Resources.
As reported in our May 2016 quarterly update, the increased involvement of game publishers has been one of the driving factors in increasing awareness for esports, as well as growing the audience. More and more publishers are embracing esports strategically as a way to increase the longevity of their games through increased player engagement, and to boost franchise awareness among a broad audience through live competitions and tournaments. For the latter reason, many publishers have looked to third-party (or white-label) organizers to help them set up tournaments around their new franchises. In total, Newzoo estimates that by the end of 2016, publishers will have spent close to $100 million to organizers to help them set up a tournaments, competitions, and leagues for their franchises.
While publishers have been a key factor in the growth of our 2016 esports revenue estimates, we do not expect publisher investment to grow at an accelerated rate toward 2019 as the number of publishers that step in as newcomers is limited. In the long term, publishers will aim to tap into new revenues streams that are directly generated through their esports activities, ultimately justifying a separate esports business unit with its own P&L.
Revenues from brands are the key component of the esports economy and will define the pace of growth going forward. The revenues generated by brands this year, consisting of advertising, sponsorship, and media rights, is expected to total $350 million. This represents 71% of the esports economy, with the other 29% generated by consumers through merchandise and ticket sales, as well as publisher fees spent on organizers and other service providers.
Looking at traditional sports, the biggest growth potential for all stakeholders in the esports ecosystem comes from sponsorship, advertising, and media rights. The investment by brands expressed per fan is still several factors lower than in traditional sports. One thing that needs to happen for esports revenues to accelerate is for publishers to take a more active role in creating opportunities for sponsoring and advertising and to share revenues with the organizers and teams that exists around their franchises. Many game publishers, however, still use esports as a marketing tool to drive the engagement of their player base, which leads to higher in-game spending. This is beneficial mostly to the publishers themselves. At the same time, the power of teams is growing as their fan base could outgrow the number of players of an individual game.
Other topics included in our latest quarterly update from our Global Esports Market Report include an in-depth look at the recent skin betting scandals, the establishment of esports associations, sports teams entering esports, and how these trends impact the maturing esports scene.