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The Esports Industry Bubble – Is it real? Should We Worry?

Can investment in esports continue to grow? Or should we expect the bubble to burst in the near-future?

The financial world likes to portray esports as a highly lucrative industry that will soon be ready to go toe-to-toe with conventional sports. We’re continually being bombarded about the exponential growth of the industry, emphasizing its market value and illustrating its omnipresence in the modern world. In short – there’s lots of hype.

But lately, industry insiders have starting discussing an issue that could potentially plague the esports industry. They call it the “esports bubble” and it could result in specific ramifications for both investors and esports fans.

Esports Bubble 101

According to Reuters, global esports revenues in 2019 will surpass $1 billion – a 27% increase from 2018. This growth is due to new advertising revenues as well as lucrative sponsorship deals and media acquisition rights.

Clearly, investors aren’t afraid of pouring hundreds of millions of dollars into the rapidly growing esports industry. They continue to put their money where their mouths are – placing high expectations for turning many millennials’ favourite pastime into an industry to be reckoned with.

However, some prominent figures are beginning to question the worth of the esports industry. Some believe the numbers may be inflated and the value of the industry may be overstated.

With everyone and their mother investing in esports, it’s easy to lose track of just how much real growth the industry is experiencing. Top-tier players are boasting 7-figure salaries, esports organizations are investing heaps of money into support staff (nutritionists, fitness instructors, psychologists), and events are becoming more lucrative with each passing iteration. 

On top of that, growing prize pools of top-tier events are breaking the boundaries of conventional sports. Incredibly, Dota 2 The International – the annual Dota 2 esports world championship tournament – has over $35 million in accrued prize pool money. Other esports events aren’t as lucrative, but they’re still well over several million dollars in total prize money.

And it’s all powered by big investment dollars – sponsorship, media rights, and venture capital. 

So what happens if the viewership numbers are exaggerated, as some experts suggest? Ad revenue will suffer, and investors might start making ROI inquiries. If so – what happens when new investment stops pouring in? Will the bubble burst?  Fortunately, there are no signs of investor deal-flow drying up anytime soon.

Better yet, the newest round of investment (sponsorship deals and acquisitions) are strong and abundant – Evil Geniuses bought Echo Fox’s League of Legends Championship Series spot for over $30 million USD. They are clearly bullish on the esports space and have the sponsorship backing and viewership to be so.

Logo: Evil Geniuses

Well-known esports organizations are also buying up rosters – NRG’s Counter-Strike: Global Offensive’s roster for (rumoured) $3 million USD. Drake’s esports organization, 100 Thieves, bought Renegades’ roster recently for an undisclosed amount of money.

Combine this with a massive wave of new partnership deals and the entry of non-endemic brands into the space (who are finally starting to recognize the value of esports) and there’s lots of reasons to think the esports industry is a long way from bursting.

Is the Future of Esports in Imminent Danger?

While there’s certainly lots of hype about esports right now, there’s also no reason to think it will slow down any time soon. And certainly no one thinks the esports industry is going away – it’s already proven it’s for real. There’s a very healthy ecosystem already built of investors, organizations, and passionate players willing to continue competing, even if the industry does experience a plateau in the future.

But we don’t think that will happen. The industry is growing too consistently, with new markets developing and more people consuming esports content each and every day. Given the growing industry demographics, the potential to monetize viewership more efficiently, and the rising franchising trends taking place, a dotcom-style bubble burst isn’t something we see on the horizon anytime soon.

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