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Esports industry analysis1

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My analysis of the eSports market. If you like my research, you will probably also like my technology newsletter! Feel free to reach out at lakshman111@gmail.com if you want to be added or just have general comments on the research.

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Esports industry analysis1

  1. 1. ANALYSIS OF THE ESPORTS MARKET August 2015 Lakshman Mody
  2. 2. August 2015  Lakshman Mody INVESTMENT TRENDS VALUE CHAIN INDUSTRY OVERVIEW KEY METRICS CUSTOMER PROFILE TWITCH
  3. 3. How big is this market? INDUSTRY OVERVIEW August 2015  Lakshman Mody
  4. 4. $260M GLOBAL MARKET: $260 - $612 $612 - Newzoo, SuperData  August 2015  Lakshman Mody
  5. 5. Newzoo  August 2015  Lakshman Mody HOW IS THIS MARKET GROWING? $130 $194 $465 2012 2014 2017 76 117 19058 89 145 2012 2014 2017 Frequent Viewers Occasional Viewers Esports Audience Growth (Million) Esports Revenue Growth ($Million) CAGR +20% CAGR +29% 134 206 335
  6. 6. “According to SuperData research, by year end the market will be a $612 million dollar sport with a billion dollar valuation by 2018.” Newzoo, SuperData  August 2015  Lakshman Mody WHEN WILL IT BE A BILLION DOLLAR MARKET? $3 $5 $2 $7 $15 2014 2017 2020 Esports Growth Scenarios (Million) Based on Annual Revenue per Enthusiast Conservative scenario Optimistic scenario $1.1B Market $.5B Market $3.0B Market $1.0B Market
  7. 7. Why should we pay attention to this market? KEY METRICS August 2015  Lakshman Mody
  8. 8. ESPN (Newzoo)  August 2015  Lakshman Mody VIEWERSHIP PERSPECTIVE 5 13.8 15.5 20 25 27 112.2 Stanley Cup World Series NBA finals Dota 2 - The International Masters League of Legends Super Bowl Total Viewership During Championship Matches in 2014 (Millions)
  9. 9. PRIZE MONEY PERSPECTIVE $0.4 $1.0 $1.3 $3.8 $4.1 $5.0 $5.1 $10.0 Call of Duty (2015) Leage of Legends (2014) Smite (2015) Stanley Cup (2014) NBA Finals (2014) Dota 2 - The International (2014) Super Bowl (2015) World Series of Poker (2014) Championship Prize Money (Millions) ESPN (Newzoo)  August 2015  Lakshman Mody
  10. 10. Who are the people watching esports? CUSTOMER PROFILE August 2015  Lakshman Mody
  11. 11. • It is a young sport. Over half of adult esports viewers are younger than 35. • “The average eSports viewer watches 19 times a month; average session is more than two hours.” That is over an hour a day. SuperData, iMediaConnection, ESPN(Newzoo)  August 2015  Lakshman Mody WHO IS WATCHING?
  12. 12. Newzoo  August 2015  Lakshman Mody THIS IS A SPECTATOR SPORT Of all esports viewers 40% do not play any of the top epsorts franchises. Another sign that esports is becoming a spectator “sport.”
  13. 13. SuperData  August 2015  Lakshman Mody WHERE ARE PEOPLE WATCHING? Most Visited Streaming Sites Among US Esports Viewers 36% 13% 12% 9% 9% 7% 7% 6%
  14. 14. How much money is flowing and who is it going to? INVESTMENT TRENDS August 2015  Lakshman Mody
  15. 15. CBInsights  August 2015  Lakshman Mody HOW MUCH MONEY AND HOW MANY DEALS? Esports & Game Streaming Financing Trend (# of deals and $Millions) $9 $10 $15 $1 $11 $35 $15 $3 $21 $54 $10 $16 $19 $40 $37 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 1 1 1 1 1 2 2 3 2 3 2 2 4 8 12
  16. 16. WELL FUNDED ESPORTS STARTUPS Company What they do Investors Total Disclosed Funding ($M) Machinima Entertainment Network Google, Redpoint $92 Major League Gaming League Oak Investment Partners $67 Raptr Optimize Settings Accel, Founders Fund $41 Azubu Event/Game Streaming Sapinda Group $35 Kamcord Game Recording A16Z, GV, YC $28 Curse Gaming content and digital products SoftTech, Riot Games $21 Vulcun Betting Sequoia, Matrix $13 Unikrn Betting Mark Cuban $10 Skillz Cash Tournament SDK NextView Ventures $7 AlphaDraft Fantasy Esports Upfront Ventures $5 CBInsights  August 2015  Lakshman Mody
  17. 17. How did Twitch put esports on the map? TWITCH August 2015  Lakshman Mody
  18. 18. • Amazon acquired Twitch for $970M. By the end of last year, it had 100 million users having grown over 2x year over year for the last 2 years. • Some analysts point to the fact that when Twitch was purchased in 2014, users watched over 3.5 billion hours globally. In 2018, this number is expected to grow to over 6.5 billion. • It is interesting that the acquisition price was staggeringly more than the entire market was worth, indicating that Amazon must have expected the market to drastically grow and for Twitch to be positioned to capture a lot of that growth as the leading streaming service (slide 13). Bloomberg, CBInsights  August 2015  Lakshman Mody TWITCH
  19. 19. How does this industry operate? VALUE CHAIN August 2015  Lakshman Mody
  20. 20. SuperData  August 2015  Lakshman Mody ESPORTS VALUE CHAIN PARTICIPANTS Participants Description Examples Publishers Companies that make the games League of Legends is made by Riot Games Teams Professional teams that compete in tournaments NewBee is the highest grossing team Leagues Organizers of online competition or esports betting platforms Major League Gaming and Vulcun Platforms Some companies are channels that broadcast games and others provide the infrastructure for tournaments. Twitch and Xfire Brands Brands that sponsor teams, leagues, publishers, etc. Logitech
  21. 21. Other Insights and looking forward CONCLUDING THOUGHTS • “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.” Therefore, streaming will become easier as this new functionality is added in-game. • The Twitch acquisition suggests that Amazon expects this industry to rapidly grow and companies that stream to be able to capture a major part of that growth. • The trajectory of esports mirrors an accelerated trajectory of physical sports, but on a global scale. SuperData  August 2015  Lakshman Mody

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