Why 2020 Will See a Lot More Esports Startups
Game on. Superstar athletes like Shaq and “Beast Mode” Marshawn Lynch have thrown their hats into the esports investment arena, as have plenty of other prominent business leaders. Esports, once the domain of geeks alone, has exploded into the mainstream as a top choice in entertainment for the younger generation.
With so much capital floating around, investors need companies to fill in the gaps and lay the foundation for the industry’s promising growth. Some will fail, but the most successful companies will establish esports empires that will ride the wave of a market that has finally found its moment.
To understand why startups will flock to the esports scene in 2020, consider the following factors:
- The esports audience is growing quickly.
According to Newzoo’s 2018 Global Esports Market Report, the esports global audience will grow to 307 million fans by 2021. Millennials and Gen Z grew up with video games, and in their adulthood, they have become full participants in the global entertainment market. Many millennials already have children old enough to appreciate esports, and that youngest generation loves video games as much or more than their parents.
In one study, 59% of American participants between the ages of 18 and 29 had seen, read, or heard about esports, with 37% of participants having seen an esports competition. Esports competition is not a passing fad or a niche interest reserved only for the geekily inclined. The esports market today is a taste of what is to come, the first realization of an entertainment preference shared by millions. The audience demands more, and the industry is eager to answer.
- Gen Z entrepreneurs are ready to start esports companies.
Pew Research defines the beginning of Gen Z as 1997, which would put the oldest members around college graduation. Most graduates and young twentysomethings will enter the workforce, but as an entrepreneurial demographic, many members of Gen Z will set out on their own. This combination of self-reliance and esports interest will inevitably lead to the rise of several esports startups in 2020 and beyond.
Not many 22-year-olds have the necessary capital to start companies, so most will turn to investors for help. That search should be a fruitful one. Investors of all backgrounds are eager to join the esports movement. Young entrepreneurs will need tenacity and great ideas to succeed, but that has been true for every generation. The most deserving esports startups will get their chances, no matter how young the founders may be.
- Esports revenue will more than triple in two years.
Money talks, and esports has a lot of it. Goldman Sachs reports that the esports industry, which generated $869 million in revenue in 2018, will hit $2.96 billion by 2022. That number does not even account for the various sub-industries that will arise to support the primary players in gaming, broadcasting, and sponsorship.
With a thriving primary market, sub-industries will have enormous opportunities to break through. Who will provide the merchandise, software, social networking, and agency services for esports in 2020? How will relationships between players and team owners evolve, and who will rise up to facilitate the needs of both sides? Esports startups can bridge the gaps and potentially outearn the revenue on the field by working on the sidelines.
- New games will bring new opportunities.
League of Legends, Dota 2, Counter-Strike: Global Offensive, Overwatch, Fortnite, and other esports mainstays enjoy the majority of attention from fans. No game lasts forever, though. Blizzard already has plans to release Overwatch 2, and while that sequel will act more like an expansion than a replacement, all games eventually fade from the limelight.
As publishers announce new games, companies must be ready to take advantage of the hype. Before long, someone will create a game that requires something completely new from the competitive scene. Perhaps a game will pit teams of hundreds of players against one another or require some kind of audience participation. Games lie at the heart of esports, and the esports startup scene will evolve to reflect the changes at the center.
- More jurisdictions will allow esports gambling.
Nevada bookmakers have allowed gamblers to place bets on esports since 2016, and the rest of the world is slowly catching on. As of November 2019, gamblers in New Jersey can make wagers on esports as well. Outside of the U.S., other nations are looking at their own gambling laws and figuring out how to work esports into the picture.
Though no one can accurately guess whether general gambling regulations will slacken in the future, gray areas could eventually lead to rulings that benefit esports gambling. Esports startups that bet on a bright future for esports gambling, whether by offering data or facilitating wagers, may find that their own gambles pay off. Given that esports gambling totals will reach $12.9 billion in 2020, the odds look good.
Even if the estimates of the experts don’t hold true to the letter, the growth of esports has become undeniable. Esports startups in 2020 can position themselves to take advantage of future growth regardless of whether that growth arrives this year or next. In this exciting time for esports, the companies with the greatest vision will come out ahead.