If there is one thing consistent about the volumes of voices crying out over the simultaneous downturn AND uprise of the gaming and esports industry, it’s inconsistency.
What’s going on?
I am both tired and confused by the constant barrage of conflicting headlines every day stating that the esports and gaming industry is either in freefall or an incredible boom. So, which is it?
A recent article from Bloomberg stated that billionaire investors are ‘fleeing’ the industry in droves after failing to see that the industry could generate the returns it had promised in the early 2020s. They also published articles saying that the sports betting industry ‘faces shakeout, cooling investor enthusiasm’ in the same week.
Well, it depends on who you ask, what specifically they’re referring to in the broad strokes of ‘gaming’, and whether they’re a gaming industry professional, fan, investor, or media outlet. Also, whether it’s raining, frosty, Tuesday, and what each has had for breakfast.
I decided to line up a few facts to either inspire enthusiasm or fear… depending on who you ask.
These are the items I find most consistent when reading headlines that highlight either the rise or demise of the esports and gaming industry:
- The ‘downturn’ talk is almost always from the perspective of investors based solely on what they ‘expected’ the industry to do based on hype and vibe versus what it’s actually doing (even if it’s actually doing well in general.)
- Finance and investment sites always seem to base their samples on a combo of inconsistent estimates and case samples that aren’t really good case samples.
- The ‘rapid decline’ seems to always compare the Covid/lockdown gaming numbers with this year’s non-pandemic numbers. Remember when everyone in the world was forced to stay home and gaming sales and interest in esports titles sky-rocketed because of pandemic reasons? I would definitely consider this a massively biased black-and-white comparison that doesn’t concretely suggest the industry as a whole is in a slump.It’s an industry that made insane money for two years, now just going back to making just moderately crazy money. Perspective is skewed
- The esports industry definitely has a challenge with monetization and generating positive revenue or return on investment. That said, it is a well-known loss leader. Many of these reports focus on the revenue an esports team brings in through merch and prizes. Esports is more like stock car racing (no, not as lucrative).The real revenue potential is in sponsorships, endorsements, brand awareness, placement, affiliation, and streaming/live event income.Not to discount prizes though. The top three esports prize pool totals by title in 2022 were (USD) $31.6M, $24.4M, and $18.6M, so there’s a little bit of money to be found.
- Sources to support the decline of the ‘gaming industry’ are often citing organization layoffs as an indicator but not always specifically in the gaming space, like Meta/Facebook. One such article cites failures from SoloMid (TSM) and 100Thieves (100T) based on layoffs of about two dozen staffers between them, despite both clocking as 2022’s highest-valued growth orgs. 100T alone has a net worth of $460M USD according to Sportskeeda.
I’d say most would agree that there are challenges that do come up in these reports and consistently play on the esports industry:
- Monetization is and remains a critical challenge
- The majority of paying audiences are young folks that aren’t often part of the investor economy
- Esports is currently, functionally a loss leader in the marketing mix – designed to generate hype, buzz, awareness, and energy while bringing users/viewers into the fold
- There was certainly a boom during the pandemic that has ‘cooled off’ since the return to ‘normal’. That doesn’t always equal a failing or slump any more than being allowed back in public is a ‘downturn’ in the pandemic
- The backlog of game title delays from 2020 due to the pandemic largely landed in 2021 creating a sort of double cohort of massive and anxiously awaited titles
In contrast, here are some promising projections that show where the industry is versus where speculators thought it should be – taken as an average of multiple reports because not even one of them can agree on these figures.
Gaming market estimated worth:
Esports market estimated worth:
Gaming audience size:
Esports Audience Size:
What it means for gamers
Our industry, passion, and market environment are not falling apart. By all numbers I could find it is growing, just not enough to excite investors and market-watchers specifically from ’21 to ’22.
I would argue that ’22 has been the best year in a long time for our industry. Sure, the growth metrics are marginal, but we must consider the qualitative analytics as well.
Excitement, attendance, and even the existence of in-person events, awards, competitions, conventions, and meetups are very important to us. They’re back and thriving. Some of the most hotly anticipated AAA games have hit the market in windfall, while indie and small studio games are cracking the surface like never before.
So, the next time someone tells you the sky is falling over the gaming industry, don’t be afraid to look up and decide for yourself.