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Reflection Essay Test 4
(Your Full Name)
Leveling up: The rise of esports investment
1. What is the “Games as a service” model? Explain it by connecting with the “Free-to-play”
revenue generation model with a specific example.
2. What feature of esports attract venture capital investors? For that feature, excepting Epics.gg
and Visor that the reading material provided, please search and provide a new investment case as
an example here.
3. Based on the adoption of franchises in the esports industry, why traditional investors in the U.S.
were drawn into esports?
4. For team organizations investment, what were the attractive and risky elements for the form of
single-game organizations?
5. Why the strong Game Developers have been getting stronger?
6. What bring the larger investment media platforms such as streaming services and social media
in 2018?
Potential rewards (and risk) in esports investing
7. There are three investment benefits from the perspective of an esports company. Please describe
more details than the summaries in the figure.
(Note. Do NOT just paraphrase the summaries in the picture below)
Proceeds –
Knowledge –
Credibility –
8. Why was Heroes of the Storm banished from a successful esports league? What makes a
successful esports league?
9. Successful professional streamers such as Ninja, Shroud, Nadeshot are former pro-gamers. In
the esports industry, they are influencers and esports ambassadors. Based on the differences
between the influencers and professional esports teams (or pro-gamers), what do you think about
the comparison between the phenomenon of gaming influencers and the boom of professional
wrestling in the 1980s?
Dynamics of esports investments
10. Based on the due diligence considerations, explain why Valor Equity Partners decided the
largest investment into Cloud9.
(Note. You MUST use the particular term(s) in the due diligence for a potential investment)
The rise of esports investments
A deep dive with Deloitte Corporate
Finance LLC and The Esports Observer
April 2019
The rise of esports investments | Contents
Image – TEO
Page 06
Page 22
Page 28
Executive summary
This publication contains general information only and Deloitte
Corporate Finance LLC and The Esports Observer are not, by means
of this publication, rendering accounting, business, financial,
investment, legal, tax, or other professional advice or services. This
publication is not a substitute for such professional advice or
services, nor should it be used as a basis for any decision or action
that may affect your business. Before making any decision or taking
any action that may affect your business, you should consult a
qualified professional advisor.
Deloitte Corporate Finance LLC and The Esports Observer shall not
be responsible for any loss sustained by any person who relies on
this publication.
Copyright © 2019 Deloitte Development LLC. All rights reserved.
Leveling up: the rise of
esports investment
Esports investment has made
significant strides in recent years as
traditional investors join venture
capital in exploring many of the
diverse investment opportunities
across the industry’s diverse
The rise of esports investment | Contents
Page 32
Page 34
Page 38
The value of an esports
investment: an investor view
Why Modern Times Group made
two of esports’ best investments
By recognizing the shifting media
environment early and putting its key
investments into a position to
capitalize on growth, MTG has
solidified its position as a major
player within the rising esports
The rising power (and risk) of
influencers in esports
The value of an esports
investment: an investee view
Late to the party: learning from
the history of Heroes of the Storm’s
esports initiatives
Establishing a successful esports
league can offer its challenges, and
these challenges are not the exclusive
issue of the developer. Industry
players further downstream who
invest time and capital to participate
can also face significant risk.
Dynamics of esports
Many investors will find the strong
expected growth trajectory of the
industry, potential for diversification,
and unique customer base intriguing
as they increasingly explore potential
esports investment opportunities.
As the esports industry grows,
companies that invest in strategic
partnerships can obtain access to a
variety of tangible and intangible
benefits that can help to fuel growth,
establish operational efficiencies, and
drive market positioning.
As esports influencers continue to
gain larger followings built on the
social aspects of their entertainment
value, the recognition of their brands
in their own right may lead them
away from the structure of traditional
esports team organizations.
In order to best position themselves
to maximize potential investment
dollars, esports companies should
understand the different investors in
the industry and the key questions
they will ask.
The rise of esports investments | Executive summary
Executive summary
Family Office
Private Equity
Breakdown of esports investments in
2018 by investor type.(1)
Venture Capital
Number of investments
USD invested
in 2018
Jan. – Feb. Jan. – Feb.
Number of investments in esports, 2014 – February 2019.(2)
hile popular streamers such
as Tyler “Ninja” Blevins have
dominated the public
discourse on esports and gaming over
the past year, an indication of the
staying power of the industry and its
future potential is the underlying
story of investment dollars into the
For esports, 2018 was a record year in
both number of investments and
investment dollars. Over $4.5B USD
was invested into the industry in 2018
alone.(3) While this headline number
is certainly significant, it is the
composition of these investors that
also offers interesting insights.
For the first time, traditional private
equity investors have gotten involved
in a meaningful way. From 2014 to
2017 there were only nine
disclosed investments into esports
businesses from private equity firms,
relative to the eleven that took place
in 2018.(4)
Interest among traditional investors
to explore different ways to gain
exposure to the industry is indicative
of the maturation of the industry and
its growing mainstream appeal from
an investor perspective.
The esports ecosystem offers a
variety of different investment
opportunities across a range of
subsectors. Some are unique to the
industry, such as team organizations,
while others hold similarities to other
traditional industries, such as
consumer products and event
planning, which could be more
palatable to investors entering the
space for the first time. y
The rise of esports investment | Executive summary
A key merit of the industry is the core
demographics. In 2018 the esports
industry had a global fan base of
380M with 37% representing males
aged 21 to 35, and 16% representing
females ages 21 to 35.(5) In addition, in
the U.S., 61% of esports viewers earn
more than $50,000 per year.(6)
Investment offers exposure to this
demographic that is increasingly
averting its attention away from
traditional media.
With increasing focus by investors
and an attractive industry profile, this
thought leadership seeks to explore
the current state of the industry from
an investor perspective.
specific valuation considerations.
The potential rewards (and risks)
of an investment
After establishing the investment
landscape in the prior section, this
section explores the potential benefits
and hazards of partnerships for both
investors and companies alike.
Through a series of articles written by
The Esports Observer contributors,
this section presents examples of
some of the nuanced issues to
consider as one explores esports for
investment potential.
Dynamics of esports investment
In doing so, this paper is divided into
three parts: the rise of esports
investment, the potential rewards
(and risks) of investment, and the
dynamics of an esports investment.
The rise of esports investment
The first section examines the history
of investment into the industry up to
today. More specifically it explores
how different investor types have
engaged with the industry, such as
venture capital and private equity,
before ultimately analyzing the
current state of the industry through
five major subcategories.
These subcategories (team
organizations, developers, event
coordinators, media platforms &
advertising, and consumer products)
are examined through an investor
lens with a focus on several key
Finally, the publication offers
companies in the space an overview
of the positives and negatives of
partnering with different investor
types and a breakdown of key
questions and diligence areas they
should consider exploring before
agreeing to a deal.
Overall, as the industry continues to
grow and mature, investment interest
from outside players is expected to be
in lockstep. The goal of this thought
leadership is to provide a starting
point for the discussion; offering both
traditional investors exploring the
space for the first time, and esports
companies that are considering
raising capital or exploring a sale,
some factors to consider when
contemplating an investment in this
dynamic, fast-growing industry.
The rise of esports investments | Leveling up
Leveling up: the rise of
esports investment
Esports investment has made significant strides in recent
years as traditional investors join venture capital in exploring
the diverse investment opportunities across the industry’s
he esports industry attracted
over $4.5B USD in disclosed
investment in 2018, up from
$490M from the previous year.(7)
Interest is likely to increase with the
introduction of more franchise-style
leagues, the centralization of esports
teams (including management and
support staff), and continued growth
in the esports audience—the latter in
particular driven by a greater
awareness of esports and other
forms of live videogame
entertainment, within the popular
Right now, there are uncertainties
over the long-term viability of certain
esports competition series, and the
revenue potential of lower valued
teams could stifle future investment
into the space. That said, by far the
most capital intensive entities are
those building the infrastructure
behind the industry: game
developers, live streaming services,
and ancillary services (for in-game
communication, player data, etc.).
The rise of esports investment | Leveling up
The rise of esports investments | Leveling up
The esports gold rush years
This greatly incentivized publishers to
support a competitive scene, and to
develop professional esports
competitions as marketing extensions
of their products. “Free-to-play”
games, which originated in Asia and
were popularized in the west by
League of Legends, largely replaced the
subscription model (used in games
like World of Warcraft), and allowed
developers to justify the need to keep
a game running for years, potentially
decades—provided revenue remains
Competitive show matches have been
part of gaming since its early days,
but the onset of online and local area
network (LAN) support began with
packet-based computer networking in
the 1970s. Once further developed,
this allowed for higher simultaneous
player counts and team play,
dedicated servers, and persistent user
information (i.e. win/loss records,
rankings). Esports through the 2000s
remained a high-cost consumer
hobby, with the global financial crisis,
in particular, limiting spending on PC
gaming hardware.(8) At this time,
options for broadcasting competitions
were also extremely limited, and
monetization was restricted to small
batches of ticket and merchandise
sales at live events, which were held
The simultaneous emergence of
dedicated online streaming services
allowed esports to expand its
audience and support regularly
scheduled broadcasts. The resulting
consumer brand interest in pro
gaming competitions allowed a
number of tournament operators to
scale into sustainable enterprises.
This spawned a number of
tournament brands, many of which
were financially backed by global
“tech giants.” Examples included
Samsung’s World Cyber Games, the
Boost Mobile-sponsored Major
League Gaming circuit, and the Intel
Extreme Masters.
The 2010s saw a growth in both
online viewership and prize money
for esports.(9) If one imagines all the
stakeholders in the industry as
“planets,” then this was a period of
near perfect alignment. Game
publishers began to transition from
cyclical game releases to the “games
as a service” (GaaS) model, where
revenue is generated continuously
from microtransactions, rather than
one-time physical and digital sales.
There are a few key examples of
mergers and acquisitions within the
last decade that have had a measured
impact on esports’ acceleration:
In February 2011, Chinese tech
conglomerate Tencent Holdings
Limited (Tencent) paid $232M USD
for a 93% stake in League of
Legends developer and publisher
Riot Games, Inc. (Riot) —later
acquiring the totality of the
company for an undisclosed
amount.(10) The game’s
professional competition in China
is run as a joint venture between
Tencent and Riot. Tencent is also
an owner or investor in multiple
esports game publishers, including
Supercell, Activision Blizzard, Inc.
(Activision Blizzard), and Epic
Games, Inc (Epic).
Amazon.com, Inc. (Amazon)
acquired Twitch Interactive, Inc.
(Twitch) on Aug. 25, 2014, for
$970M.(11) This followed months of
reporting that Google LLC (Google)
had reached a preliminary deal to
acquire Twitch through its
YouTube subsidiary, for $1B.(12) In
subsequent years, Amazon’s
subscriptions services and
payment methods have been
integrated into Twitch. The latter is
used in microtransactions,
allowing esports operators as well
as individual streamers to
monetize their content.
In July 2015, Swedish media firm
Modern Times Group (MTG)
acquired a majority stake in
esports competition organizer,
content producer, and services
provider Turtle Entertainment
(ESL) for $87M (it currently owns
82.48%).(13) In November of that
same year, MTG fully acquired
gaming festival company
Early team organizations, competition
organizers, and software developers
were, and still largely are, backed by
Amount (USD)
Riot Games(10)
Tencent Holdings
Consumer Products
Valor Equity
Tencent Holdings

Turtle Beach
Consumer Products
Notable transactions in the esports industry over the last decade ($ in millions)
venture capital firms. The high-growth
potential, limited operating history,
and early instability of the industry
led to cautioned interest from larger
The rise of esports investment | Leveling up
Number of investments
Jan. – Feb. 2018 Jan. – Feb. 2019
Number of investments in the esports industry, 2014 – Feb. 2019.(21)
In December 2015, game
publisher Activision Blizzard
acquired “substantially all” assets
of esports competition organizer
and broadcasting network Major
League Gaming (MLG), for
$46M.(19) MLG continues to
organize and broadcast
competitions for Activision Blizzard
game titles. In 2018, the company
created its own Activision Blizzard
Esports Leagues division to
commercialize its esports
properties, such as the Overwatch
League and Call of Duty World
With maturation comes expanded
In the period following these highvalue acquisitions, many investors
from industries adjacent to
esports/gaming (i.e. sports teams and
entertainment companies) have
recognized the maturation of the
esports industry and its potential for
growth. While the highest individual
investments in 2018 were raised by
private game publishers, streaming
platforms, and software developers,
individual team organizations (which
typically recruit player rosters across
multiple games) also raised
significantly higher capital than in
previous years, with the top five
highest valued teams collectively
raising over $150M in disclosed
funding rounds.(23)
predominate driver of investment
within the esports industry over the
last several years.
2018 was a record year for venture
capital investment, with 49
investments, double the number of
investments in 2017.(20) In terms of
subindustries, venture capital was
largely focused among media
platforms & advertising (45%),
developers (31%),
and team organizations (18%).(24)
This is likely due to the pre-revenue
nature of many types of investments.
These are largely tech focused
investments with unique concepts,
such as BITKRAFT Esports Venture’s
Venture capital
As expected in any nascent industry,
venture capital has been the
Number of Investments
DreamHack AB (DreamHack),
which also runs a series of esports
competitions.(18) At the time these
were among the largest
investments by a traditional media
company into esports and
signified the firm’s commitment to
gaming as a staple online video
Venture Capital
Family Office
Private Equity
Esports investment breakdown by investor type, 2014-2018.(22)
The rise of esports investments | Leveling up
investment into Epics.gg, a digital
trading card platform for esports.(25)
a series A round at the end of 2018.(27)
organizations (33%) and developers
Family office
Among developers, analytics has been
a key focus area among venture
capital investors with over 40% of
investments within this
subcategory.(26) A unique component
of esports is the inherent ability to
track a variety of data from games
This data could be leveraged by
teams, looking to gain an advantage
in competitive play, or among a
game’s casual player base to beat
their friends.
One such example is the artificial
intelligence (AI) analytics company,
Visor, a support tool for Overwatch
that can analyze gameplay in real
time and provide in-game tips to
players. The company raised $4.7M in
Private equity
Similar to venture capital, in the early
stages of an industry, such as esports,
family offices also provided significant
The esports industry experienced a
significant increase in private equity
investment in 2018.
Family offices include high net-worth
individuals or investment vehicles
that invest on behalf of an individual
or family. As they are investing their
own money, family offices typically
have more flexibility to take greater
risk than traditional private equity
Private equity groups made 11
investments in 2018, two more
investments than made over the last
four years combined.(30) Unlike
venture capital or family offices,
private equity will typically require a
level of maturation in the underlying
business before investing.
Family office investments in esports
more than doubled in 2018, from 6
investments in 2017 to 15.(28)
This can be seen in the types of
investments that private equity made.
The major categories of investment
were Media Platforms & Advertising
(36%), Event Coordinators (27%) and
Team Organizations (18%).(31) Within
In 2018, family office investments
were mostly made into team
Changing esports league structures may entice investors
The adoption of “franchises” and similar league structures may offer esports teams protection from new
entrants and investors comfort regarding their potential investment.
By Graham Ashton, The Esports Observer
Consulted by Tobias Seck, The Esports Observer
In the U.S., investors typically make
one of three plays: 1) private equity
investments in an existing esports
team organization and/or ownership
group; 2) developing an esports
division out of a pre-existing sports
franchise; or 3) establishing an
entirely new esports team brand,
usually as part of a franchise league.
In 2018, multiple esports competition
organizers either restructured their
existing leagues or built entirely new
closed circuit competitions.(34) Not all
of these competitions are “franchised”
in the strict sense of granting partners
the right to own/operate teams in a
specified location, but all feature buyin fees, preclude any kind of
promotion-relegation system, and
introduce revenue sharing and
performance-based financial benefit
models for teams.
League of Legends has integrated a
partner team model into four
professional circuits (China, North
America, Europe, and Turkey), with
the prices and processes for entry
differing between regions. The
Overwatch League has pulled in
franchise fees ranging from a
reported $20M-$60M for its first two
years of operation and intends to
expand its team count from the
current global 20 to an eventual 28.(35)
Competitions in lower-tier titles, such
as the Clash Royale League, Paladins
Pro League, or national
leagues have either offered slots with
comparatively lower entry fees,
introduced revenue sharing models,
or provided stipends for participants.
Growing sports property, and a team
brand that is appreciating in value, is
one model traditional sports investors
are well used to. Cloud9, a multigame esports organization with
teams in both the Overwatch League
and League of Legends Championships
series raised $50M in its Series B
funding round.(36) For comparison, the
average franchise deal for a National
Basketball Association (NBA) team
during the 1980s was $58.25M.(37)
While the viability of esports leagues
as 10, or 20-year ventures is untested,
the entry cost is so comparatively low,
and the target audience value so high,
that dozens of traditional investors
have taken the bet.
The rise of esports investment | Leveling up
Media Platforms&
Investment Amount
Number of Investments
2018 esports investment breakdown by category ($ in millions).(38)
Note: In order to avoid skewing the
data the chart above does not include
the transactions listed below:
Tencent investment of $632M into
Douyu TV and $461M into Huya
Epic’s capital raise of $1.3B.(40)
these categories, there was a
consistent story of later stage
investments into established names,
such as Greenoaks Capital investment
into Discord Inc., a free voice and text
chat app for gamers, and ICONIQ
Capital’s participation in Epic’s, the
creator of Fortnite, $1.25B capital
Strategic companies have been
consistently involved in esports M&A
over the last five years, with an
average 6 investments per year.(33)
Strategics have explored investments
in the space as a means to expand
their presence or capitalize on a
growing market.
Today’s esports investment
In 2018, the esports industry reached
$4.5B USD in disclosed funding across
a broad array of companies.(41) From
startups to established companies
entering the space, the esports
ecosystem is filled with investment
opportunities of every shape and size.
With so many different ways to invest
in the space, it can be difficult to
identify where an investor’s capital
may be well placed. To that end, the
following is a breakdown of the five
primary categories of esports
investment opportunity:
Team organizations
Third-party event
Media platforms &
Consumer products
The rise of esports investments | Leveling up
Team organizations
Just like in traditional team sports,
competition within esports takes
place between players representing a
specific organizational brand. The
difference in competitive gaming,
however, is that most prominent
team brands have diversified across
multiple games. Think of it as though
the Washington Capitals, Washington
Wizards, Washington Mystics, and
Baltimore Brigade all wore the same
jersey sporting the logo of their
ownership group: Monumental Sports
Major esports organizations like
Cloud9 or Team Liquid compete
across anywhere from five to 12
different games with varying levels of
success and scale. This diversification
allows a single organization to reach a
much broader audience (creating
more value for its sponsors) and
helps to protect against the risk of any
one game losing its value either due
to poor performance by the team, or
reduced support from the developer.
However, casting such a wide net can
create substantial added costs for an
organization as it must pay salaries
for each extra player, coach, and
support staff member. The turnover
in game popularity outside of the big
three (League of Legends, Dota 2,
Counter-Strike: Global Offensive) is
often so quick that teams should
consider broadening their scope to
remain relevant, which can also result
in a net loss from games which never
take off enough to generate revenue
for the organization.
When making an investment into a
team organization investors should
identify a company that has
consistently made smart decisions
when choosing which games to invest
in, and has also shown a willingness
to cut its losses in failing titles.
A potential exception comes in the
form of single-game organizations
which are involved in franchised
Team organizations investment snapshot
Investment in esports
teams has increased
significantly over the
last several years. While
this investment has
been driven largely by
venture capital, it has
been largely deployed
to the major teams.
Family Office
Private Equity
2018 team organization investments by investor
($ in millions)
Team organization investments over time, 2016-2018.(42)
leagues. Teams such as the
Overwatch League’s Boston Uprising,
owned by the Kraft Group, will not be
able to diversify into any other games
due to league rules.(44) Similarly,
Clutch Gaming was founded by the
Houston Rockets ownership group,
and controls a franchise spot in the
League of Legends Championship
Series.(45) In both cases, the added
revenue sharing opportunities for
league sponsors and media rights can
make investing in these single-game
organizations attractive. However,
such an investment likely carries
substantially more risk, as the brand
could lose significant value if that
league or game were to collapse.
When making an
investment into a team
organization investors
should identify a
company that has
consistently made
smart decisions when
choosing which games
to invest in.
The rise of esports investment | Leveling up
Median: 13.1x
Echo Fox
G2 Esports Immortals
2018 estimated revenue multiples for top 10 team organizations. (49)
With the industry experiencing
significant growth over the past few
years, esports teams have enjoyed
strong growth multiples, as seen
above. Growth multiples such as
these are largely driven by the
expectation of strong future
performance. For esports teams, this
is the expectation that the industry
will continue its strong growth
trajectory and the given esports team
will remain a major brand in the
However, as the industry matures,
investors will likely expect these
teams to achieve operational
efficiencies as they determine and
develop their core competencies.
Rather than attempting to be a “onestop shop” of all things esports (such
as teams, media, analytics, consumer
products, etc.), many teams are
narrowing their focus to the
development of winning rosters for
the games they are in.
Based on market activity by some of
the highest valued esports teams, the
following appear to be the most likely
sources of expenditure over the next
two to three years:
Dedicated training facilities are
Of the $258M USD in
investments made to
team organizations in
the last two years, over
50% has gone to the top
replacing the long-used
“gaming house.” For
organizations, this can offer
revenue potential in the form
of naming rights, on-site
activations, and content
creation. In addition, it allows
consolidation of staff and
players, with management and
talent working under the same
Recruitment of high-quality
management and sales
teams, typically with
professional experience wholly
outside the esports and gaming
Talent development and
youth outreach, including
academy or secondary teams
for tier-one esports titles, and
seasonal competitions for
college students.
International expansion,
with teams either recruiting
game rosters or building
subsidiary team brands in
Latin America, Southeast Asia,
and the Asian Pacific regions.
Stronger merchandising
arms and retail presence. In
the League of Legends
Championship Series (LCS), for
example, nearly all teams have
an ongoing apparel
partnership with brands
including Puma SE and
Champion Athletics.(47)
The result of these trends is that
newly formed teams may have
difficulty when exploring investment
options. They may also have limited
ability to achieve the scale required
for operational efficiencies.
As a result, while investment for team
organizations has increased, the
focus of this investment has
historically been towards making the
strong stronger. Of the $258M USD in
investments made to team
organizations in the last two years,
over 50% has gone to the top 10.(48)
The rise of esports investments | Leveling up
Developers are the core difference
between esports and traditional
sports. If the National Basketball
Association (NBA) was to disband, you
could still get a group of people
together to play basketball whenever
you wanted. New groups could form
to organize professional play for the
sport. The success or failure of that
game is not dependent upon the
ability of a single governing body to
generate revenue.
This is not the case in esports. In
order to play League of Legends, even
at the amateur level, Riot must
continually spend resources and
capital maintaining the game. If the
company shut down its servers, the
entire League of Legends esports
ecosystem would immediately
With the exception of some fighting
games, every single prominent esport
played today relies on the active
support of the game’s developer.(53)
Not only that but in many cases today
the developer is also the primary
source of that esport’s infrastructure
and prize money. The modern
esports ecosystem is heavily reliant
on the success and sustainability of its
most prominent developers.
That said, the industry is constantly
evolving. Many of the biggest esports
titles today have come from
developers who were not players in
the space just two years ago. Whether
it’s a well-established company
maintaining its big esports games, or
a smaller company developing the
next big thing, there are investment
opportunities available with
developers at every level.
Valuation considerations
The development of a video game by
a developer often takes several years
and requires significant capital outlay
to complete. Having multiple studios
under a developer working on
different games all at once allows
developers to have a greater
opportunity of creating a blockbuster
title while also spreading revenue
throughout the year.
Unlike the other subsectors of the
esports ecosystem, developers
represent a more mature industry
with several major developers
attaining market capitalizations well
into the billions.
These larger developers consistently
dominated the market, with the top
25 companies accounting for 77% of
the total global game market in
These developers can also leverage
their economies of scale for
production and distribution.
The dominance of the space by this
smaller subset of developers is due in
part as a hedge against the inherent
risk of video game development.
When examining investments over
the last several years, one can see
how the strong developers have been
getting stronger.
Developers investment snapshot
Investment in
developers has
continued to grow over
the past several years.
While the space is
dominated by the
largest developers,
there remains
opportunities for
smaller investments in
fledgling subsectors
such as analytics or
early stage game
2018 investments in developers by subcategory.(52)
($ in millions)
Developer investements over time, 2014-2018.(50)
For comparison purposes, This table does not include Epic Games $1.25B capital
raise in 2018.(51)
The rise of esports investment | Leveling up
Enterprise Value/EBITDA
Game Developer Index
S&P 500 Index
Index of game developer EV/EBITDA multiples compared to the S&P 500 from 2016-YTD 2019. (Game Developer Index includes
Electronic Arts (EA), Activision Blizzard (ATVI), Take-Two Interactive Software Inc. (TTWO), NetEase, Inc. (NTES), and Nintendo (NTDOY).
Since 2015, the major investments
among game developers have been
with the larger developers.(55) This
would include major activity such as
Activision Blizzard’s acquisition of
King.com Limited, the creator of the
popular Candy Crush mobile game, for
$5.9 billion in 2015 and NetEase Inc.’s
(NetEase) investment of $100M into
Bungie Inc., the creator of popular
titles such as Halo and Destiny, in
Compared to the S&P 500, these
investments appear to be paying off.
Game developers have consistently
outperformed the S&P 500 when
comparing EV/EBITDA multiples.
Multiples for game developers
reached a high in January 2018 of
This performance has been largely
driven by several positive trends that
have been favorable for these
developers. These trends include the
rise of mobile gaming, particularly in
Asia, where demand for mobile
games is expected to drive revenue
growth by 10-15% per year in the
future.(59) Another trend has been the
emergence of micro-transactions.
Micro-transactions consist of smaller
in-game items that a player can
purchase to enhance their in-game
While this subsector is dominated by
the major developers, there continues
to be investment opportunities
among smaller start-up developers
with unique concepts or gameplay.
Micro-transactions have benefited
developers as they can have lower
development costs and allow them to
maintain consistent revenue streams
from the same player base.
This includes the largest investment
of 2018, the $1.25B capital raise of
While this trend has been a boon for
many developers, in the past year
there has been increasing player
pushback on this over monetization.
In addition, one particular type of
microtransaction, the “loot box”,
where players pay for a randomized
set of in-game items of varying
quality, is facing greater scrutiny from
governments that consider it a form
of gambling. For instance, in 2018 the
Netherlands and Belgium determined
that some loot boxes violated their
gambling laws.(60)
Increasing pressure on microtransaction revenue could be
contributing to the declining
developer multiples seen above.
In addition to game developers, other
developers have also seen significant
investment interest. Particularly
among venture capital investors and
analytics companies. These
developers typically seek to harness
the underlying data within video
games to enhance the player
experience whether through
improving their gameplay or
providing meaningful analysis for
competition. Since 2016 there has
been over $35M invested in analytics
developers alone.(62)
Overall, while the space is dominated
by major developers, there remains
opportunities for investments of all
The rise of esports investments | Leveling up
small weekly tournaments such as the
Connecticut-based Great Value
Third-party event coordinators
While many of the most prestigious
esports tournaments are operated by
developers, there is an entire
ecosystem of third-party event
coordinators operating throughout
the world. From international
championships to high school
leagues, third-party organizers play a
critical role in the industry and are
often contracted by developers to
operate regional leagues and select
events within a tournament circuit.
In addition to running their own selfbranded events, many event
coordinators also run white label
tournaments for various clients. Some
also offer on-demand online
tournament services which allow
amateur players to experience a
tournament environment.
Additionally, third-party organizers
generate revenue through ticket
sales, sponsorships, media rights, and
Event coordinators vary greatly in
scale from major names like ESL and
DreamHack that operate events for
thousands of attendees across the
world, to regional groups that operate
Perhaps the most appealing thing
about third-party organizers to a
potential investor is their scalability.
Event coordinators investment snapshot
Event coordinator
experienced a
significant increase in
both number of
investments and
dollars invested in
2018. These
investments were also
well diversified across
the range of investor
Venture Capital
Family Office
Private Equity
2018 event coordinator investments by investor
($ in millions)
Event coordinator investments over time, 2015-2018.(71)
Not only can these companies
diversify into a wide range of
tournament products and
organization services, but organizers
at every level have the potential to
scale almost infinitely. DreamHack
has expanded into India, Spanish
organizer LVP works with Riot to run a
U.K. league, and Chinese company
Mars Media will soon operate a Dota 2
Major in France.(65)(66)(67) Successful
third-party organizers can expand not
only the size and scope of an
individual tournament, but
continually move into new territories
to work with new partners.
Valuation considerations
As event coordinators become
increasingly important in the esports
industry and the landscape grows
more competitive, coordinators are
looking for ways to differentiate
themselves. Without a unique and
scalable platform, many coordinators
are unlikely to succeed.
One manner in which event
coordinators are differentiating
themselves is through the
development of their own facilities. At
the inception of the industry
coordinators would utilize existing
spaces that could offer reasonable
accommodations for tournaments
and events. However, as the industry
has grown so has the demand for
events with hyper-specific
offerings.(68) This had led to the
development of dedicated esports
arenas, training facilities, and venues
across the globe.(69)
The rationale for the continued
investment in the space has varied
depending on the stage of the
company and type of investor. The
recent investment into N3rd Street
Gamers by SeventySix Capital and
Comcast Sports Ventures (Comcast
Spectacor) was meant to help
facilitate growth in pursuit of a
national expansion strategy.(70)
The rise of esports investment | Leveling up
United States
South Africa
Cumulative event coordinators investment by country (2015 – 2019).(73)
In a similar fashion, the investment by
Creandum and Sunstate into RFRSH
Entertainment was to expand the
brand by bringing competitions to
three new locations in 2019: Sao
Paulo, Brazil; Miami, United States;
and Madrid, Spain.(74) The investors
hope to establish the company on a
mainstream level, in leagues with
NBA, UFC, football and online
entertainment in general.(75)
Notable investments that work to
establish brands on a mainstream
level help strengthen the industry’s
credibility. This additional awareness
may even serve to direct more capital
into the space.
Top investments by country
As the data above suggests, Russian-
based companies have received the
largest amount of capital in the event
coordinators space.(76) These
investments are directly tied to the
funding and subsequent sale of
ESforce Holdings.(77) In 2015, the
company held its first funding round,
receiving $100M in its Series A.(78)
Only three years later the company
would be acquired for $100M, the
exact amount it had previously
In comparison, the investments within
the United States are more diverse
with a total of 10 investments, into 5
different companies, since 2015.(80)
One of the most noteworthy
investments into a U.S.-based esports
event coordinator was Smash.gg’s
raise of $11M to help local esports
fans create their own tournaments.(81)
Smash.gg works to create smaller
events from the ground up – enabling
fans to take organizing into their own
Sweden-based event coordinators
have received $54.6M in capital since
2015, with the most recent
investment of $1.3M into
Challengermode.(83)(84) Similar to the
rationale of investment into RFSH
Entertainment, Challengermode
sought to achieve their next phase of
growth by going mainstream.(85)
This continued alignment in
investment thesis supports the notion
that as capital flows into event
coordinators and demonstrates its
viability, incremental funds will follow.
The rise of esports investments | Leveling up
Media platforms & advertising
investor.(86) Excluding significant
outlier investments by Tencent into
Douyu TV and Huya TV for $632.0M
and $462.0M respectively, the
average investment size was just
under $10.0M.(87)
Media platforms & advertising
encompasses a variety of different
categories that are focused on fan
engagement. This ranges from
advertising agencies that support
nonendemic brands seeking to gain
exposure within the space to
companies exploring new ways to get
viewers more engaged with the
influencers and teams they watch on
a regular basis through different
streaming services.
With an actively engaged and growing
demographic, the esports industry
will likely see an increasing number of
nonendemic brands explore different
ways to engage with the space. For
many brands, the underlying
demographics of esports are
appealing. Esports has an estimated
global fan base of 380 million and this
is largely comprised of millennials
between the ages of 21 and 35.(88)
Not only are these viewers young,
they also represent expendable
From an investment perspective, this
category remains in its infancy. Of the
15 investments into media platforms
& advertising companies in 2018, all
but three had a venture capital
Media platforms & advertising investment snapshot
Largely dominated by
smaller venture
capital investments,
the category has
experienced steady
investment growth
over the last few
years as investors
increasingly recognize
the value of the
esports fan base
demand for greater
2018 media platforms & advertising
investments by investor type.(97)
($ in millions)
Media platforms & advertising investments over time, 2015-2018.(95)
For normalization, this table does not include Amazon’s $970M acquisition of
Twitch in 2014 or Tencent’s investment into two streaming platforms for $1.0B in
income. In the U.S., 61% of esports
fans over the age of 18 are earning
more than $50,000 a year.(89) Many
fans are increasingly shifting away
from traditional forms of media and
are instead engaging with streaming
platforms such as Twitch and
YouTube. In 2018 the average
concurrent viewer count for Twitch
was around 1.1 million.(90)
Both endemic and nonendemic
brands will increasingly be drawn to
these underlying dynamics, and as a
result, the need for advertising
support is expected to remain. In fact,
according to a SuperData research
report, by 2020 advertising and
sponsorship will account for 60% of
the industry’s overall revenue.(91)
Brand engagement could take a
variety of paths. For example, some
can take a traditional sponsorship
route, such as Audi Denmark’s
$750,000 partnership deal with
popular Danish esports team Astralis
for branding on Astralis jerseys.(92)
Engagement can also take other
forms, such as KFC Corporation’s
partnership with notable Twitch
streamers of the game
such as DrLupo, where if the streamer
won a game viewers could post a KFC
emoji into the stream’s chat for a
chance to win a $5 KFC gift card.(93)
No matter the form that engagement
takes, nonendemic brands will rely on
advertisers with an understanding of
the underlying demographics of the
industry and effective ways of
engaging. This creates an opportunity
for investors to capitalize on this
An example of this is the September
2018 $3.6M Series A capital raise for
Upfluence, an influencer focused
marketing agency with an emphasis
on offering brands support in working
with Twitch influencers.(94)
The rise of esports investment | Leveling up
Networking & Social Media
News Agencies
Breakdown of media platforms & advertising investments in 2018 by subcategory. (99)
Note: this table does not include Tencent’s investment into two streaming platforms for $1.0B in 2018.(98)
As noted above, the use of streaming
services has increased rapidly over
the last several years. For example,
for Twitch, average daily concurrent
viewer count has grown from a little
over 100,000 in 2012 to 1.1 million
viewers in 2018.(100)
Viewers are engaging both with
presentations of competitive play and
popular influencers. As larger
streaming services, such as Twitch
and YouTube, compete for viewers,
an industry has emerged for tools
that support and enhance the
streaming experience for content
creators and fans alike.
Investments into streaming services
and social media engagement has
increased by over 200% from 2017 to
2018.(101) These investments have
largely consisted of capital raises by
venture capital firms into early stage
An example would include
StreamElements, a “full-stack”
platform that supports streamers in
broadcasting their gameplay. The
company raised $11.3M in Series A
funding in 2018.(102)
In addition to these software tools
that assist creators in their production
of streaming content, other media
platforms & advertising companies
have focused on enhancing the
viewer experience through various
applications that add an additional
layer of connectivity with other fans
or the creators themselves.
One of the larger investments in 2018
within the media platforms &
advertising category relates to this
engagement. Discord, a popular
gaming chat application, raised
$150.0M in 2018 at a $2.05B
valuation.(103) Discord has grown
quickly over its three years of
existence as users have used its voice
and text communication services to
talk with teammates and friends
during and outside of gameplay. (104)
By May 2018, Discord had 130 million
registered users, tripling its user base
since 2017.(105)
Other examples within this space
include Taunt, a social engagement
platform for fans that allow viewers to
compete against each other by
predicting the outcome of games they
are viewing. The company raised
$3.0M in 2018 from The Foundry
The rise of esports investments | Leveling up
One of the most attractive esports
segments for traditional private
equity and strategic buyers continues
to be consumer products. These
companies typically offer consistent
revenue streams with a strong
runway for growth, which can make
for a well-suited partner and
investment opportunity. This thesis
aligns with the figure presented on
page 20, which shows large strategic
investors (namely Logitech and
Foxconn) directing capital into
consumer technology products.
For the apparel segment of consumer
products, there has been rapid
growth in the west, with dedicated
streetwear brands competing with
merchandise designed by team
Valuation considerations(108)
Consumer products
Strategic Range of Assets
Ability to Target Millennial
Growth, Strong Operating
Strong Product Offering
Near-Term Growth
Mature Company
Evolving Growth Story
Mixed Operating Performance
Less Branded Portfolio Mix
Case study: Logitech acquires ASTRO Gaming
Tapping into a popular esports headset brand offers significant opportunity to major computer
peripherals player.
With esports rising popularity,
peripheral brands are seeking ways
to resonate within the space. One
example of this dynamic is the
acquisition of ASTRO Gaming
(“ASTRO”) by Logitech International
(“Logitech”) for $85M USD in July
2017.(109) With an expected revenue
of $35M in 2017, this purchase price
implies a multiple of 2.4x revenue.(110)
In the years leading up to the
transaction, Logitech was
experiencing fairly flat annual
revenue growth of (0.15%) from 2014
to 2015 and 0.69% from 2015 to
2016. (111) By comparison, overall
esports revenue grew 67.52% and
51.69%, respectively.(112)
Additionally, the acquisition of ASTRO
was an opportunity to further
diversify in an increasingly
competitive hardware market that
has faced headwinds in recent
years.(113) Worldwide PC shipments
have sharply declined, and peripheral
hardware has followed a similar trend
due to a combination of factors
including market saturation,
extended replacement cycles, and
competition from other consumer
within the esports industry.
By contrast, the esports hardware
market, however, has been able to
insulate itself from some of these
trends, due in part to the promotion
of products by influencers and teams.
Similar to a basketball fan wanting to
get the signature shoe of their
favorite player, esports fans are
motivated to get the hardware they
see their favorite players using.
The result for Logitech was a
significantly stronger brand presence
in the esports industry commanding
the attention of major influencers in
the space – specifically with those
already gaming with ASTRO headsets,
such as Nick “NICKMERCS” Kolcheff
and Brett “Dakotaz” Hoffman.(117) As
of today, ASTRO and/or Logitech
constitute a piece of the gaming
setups of more than 60% of the top
The industry has shown to be a
revenue generating avenue and as
gamers demand more customization
the hardware manufacturers are
driven to offer these options with the
latest high-performance processors
and graphics cards.(115)
As such, the acquisition of ASTRO
offered the opportunity to further
expand Logitech’s product portfolio
ASTRO also gave Logitech access to
higher margin products with retail
values between $200 and $300.(116)
For Astro, the transaction offered a
great opportunity to leverage the
capabilities of one of the largest
players in the technology hardware
While ASTRO’s operations were
previously limited to the United
States, the acquisition offered the
(Continued on next page)
The rise of esports investment | Leveling up
ability to expand sales globally.(119)
In fact, one of Logitech’s first steps
following the acquisition was to
capitalize on the new product line by
making them available outside the
United States.(120)
Previously, ASTRO’s flagship headset
product line was limited to three
SKUs due to high R&D costs. Postacquisition, capital was invested into
the development of new high-margin
product lines, increasing the total
number of SKUs.(122)
Although the total revenue of ASTRO
only contributed 2% to total net sales
growth, the guiding strategy of
diversification into esports was likely
a significant success factor for the
57% growth experienced in the
gaming segment of Logitech.(124)
This acquisition also provided ASTRO
access to a vast network of
distributors and suppliers, which
could be leveraged to reduce costs
and increase efficiencies.(121)
The years following the transaction
Logitech experienced revenue growth
far in excess of the years preceding,
at 10.08% from 2016 to 2017 and
15.55% from 2017 to 2018.(123)
Following this acquisition Logitech
continues to build a diverse business
that incorporates esports and gaming
Consumer product enterprise value to revenue multiples
Median: 1.1x
Roccat (125)
Astro (127)
Saitek (128)
March 2018
July 2017
July 2017
Sep. 2016
April 2016
Turtle Beach
EagleTree Capital
Size(1) $MM:
computer components
and accessories, such
as keyboards and
and markets
PC peripherals and
components, such as
cases, keyboards, PCs,
and fans.
Designs and
manufactures video
gaming equipment,
such as, wireless and
Bluetooth headsets
for Xbox, PlayStation,
PC, and mobile
Designs and
consumer electronics
products, such as
computer games
accessories, input
devices, and audio
Designs, develops, and
headphones and
activity trackers for
sports and active
United States
The rise of esports investments | Leveling up
Ultimately, the esports ecosystem is
vast and growing every day. Making
sound investments in the space
requires significant research, and
likely partnering with a group or
advisor who has an intimate
knowledge of the industry. However,
by understanding the basic structure
of esports, you will be better
equipped to begin asking the right
questions, identifying where your
investment can have the most impact,
and yield the greatest potential
The rise of esports investment | Rewards (and risks)
Potential rewards (and
risks) in esports investing
As the esports industry becomes increasingly more appealing
as an area for investment, investors and companies alike
should understand the potential benefits, and risks, of
exploring partnerships.
ESL IEM Katowice 2019 (Copyright: ESL | Adela Sznajder).
The rise of esports investments | Rewards (and risks)
nvestment interest in the
esports industry is
Investments, measured by number of
deals and amount invested were
larger in 2018 than any year prior.(131)
In addition to this general increase in
deal flow, the types of investors
considering investments has also
2018 was a record year for private
equity investment into esports, and as
the industry continues to grow these
traditional investors will continue to
look for ways to explore potential
opportunities.(132) For traditional
investor groups, entering a new
industry for the first time,
understanding the key benefits, and
perhaps more importantly, key
challenges is critical.
This section seeks to address these
considerations for a traditional
investor considering esports
investments. Through a series of
short articles, this section highlights
some of the potential advantages and
risks of investment for both investors
and companies operating within
esports looking for investments.
This section begins with two brief
primers on the potential benefits of
an investment in esports.
Late to the party: learning from
the history of Heroes of the
Storm’s esports initiatives
For investors, esports offers access to
a fast growing industry highlighted by
a youthful demographic.
The second examines some of the
potential challenges of developing an
esports league and the challenges this
can have for not only developers, but
also team organizations and other
groups that are vested in the leagues
For esports companies, in addition to
investment proceeds, investors can
offer business expertise and
credibility as these esports companies
aim to capitalize on near and long
term opportunities.
This section then highlights some of
the nuanced challenges and
considerations an investor should
consider when exploring investment
options. Through a series of articles
written by The Esports Observer,
major topics and trends within the
industry are presented and discussed
from an investor perspective.
Why Modern Times Group made
two of esports’ best investments
The first article highlights the
successes of MTG’s two investments
into ESL and DreamHack.
The rising power (and risk) of
influencers in esports
The final article considers the rise of
influencers and the potential
challenges their popularity poses to
the existing team organization
The core focus of these articles is to
demonstrate that while the industry
has experienced significant notoriety
over the past several years, there are
nuanced considerations that will
require in-depth diligence.
The rise of esports investment | Investor view
The value of an esports
investment: an investor view
Many investors will find the strong expected growth trajectory of
the industry, potential for diversification and hedging, and unique
customer base intriguing propositions as they explore new
opportunities within the esports ecosystem.
hile endemic brands and
investors already involved in
esports can already see its
value, outside investors will likely be
drawn by several potential benefits
and considerations.
Although each subsector of the
esports ecosystem will have nuances
that can add further benefits
depending on an investor’s current
portfolio; overall, the strong
performance of the industry to-date
and its unique customer base are
driving factors in its appeal.
Industry with strong growth
next big thing.”
Access to key demographic
Diversification opportunity
In 2018 the esports industry had a
global fan base of 380M with 37%
representing males aged 21 to 35,
and 16% representing females ages
21 to 35.(134) In addition, in the U.S.,
61% of esports viewers earn more
than $50,000 per year.(135)
Due to the uniqueness of the
industry, traditional investors may
also view esports investments as a
means of diversification.
Unlike more mature industries that
may have a more limited growth
profile, the esports industry is still in
its nascent stages and offers
exposure to trends that are not
wholly reflected in other industries. As
such, an investment in esports could
offer strong hedging implications.
With $869M of revenue in 2018 and
an expected CAGR of 34.9% over the
next four years, the esports industry
is an attractive market.(133) In
addition, the disruptive nature of the
space and its impact on traditional
media and sports, will likely appeal to
investors looking to get in on “the
Strong growth
The industry offers access to a unique
demographic that is increasingly
turning away from traditional
By investing into this space, investors
can gain access to this demographic.
Whether this would be nonendemic
brands attempting to increase
awareness among this demographic,
or traditional private equity investors
seeking to leverage access to crosssell products and services from
ancillary industries within their
portfolio.(137) No matter intent, the
industry’s unique fan base would
likely be a key investment highlight.
Access to key
The rise of esports investments | Investee view
The value of an esports
investment: an investee view
As the esports industry grows, companies that invest in strategic
partnerships can obtain access to a variety of tangible and
intangible benefits that can help to fuel growth, establish
operational efficiencies, and drive market positioning.
With so much
investment activity
occurring throughout
the industry, it’s
important to remember
that there is meaningful
value being provided to
many esports
companies through
their funding round.
Capital infusions offer esports
companies the dry powder to
maintain strong growth while
pursuing new objectives
n the last 15 months, over $4.5B
USD in disclosed funding has
flowed into the esports
industry.(138) From prominent esports
organizations to third-party event
coordinators, small startups to major
streaming platforms, the pool of
investment opportunity within
esports is vast.
meaningful value being provided to
many esports companies through
these funding rounds. A strong
understanding of the value these
investments provides should not only
help companies identify the right
investment partners, but can aid
investors in determining how they
can get involved in the space.
With so much investment activity
occurring throughout the industry, it’s
important to remember that there is
From the perspective of an esports
company, the primary investment
benefits can be bucketed as
Partners provide experience
and operational expertise that
can be invaluable for growing
esports businesses
Traditional investors in esports
companies offers legitimacy to
the business model and
provides value for future
The rise of esports investment | Investee view
proceeds, knowledge, and credibility.
One of the most obvious and direct
benefits of any investment is the
infusion of capital into a business.
With the esports industry growing so
rapidly, many esports companies
have become reliant on capital
investment in order to seize new
opportunities or maintain their
current market share.
Franchised league systems such as
the League of Legends Championship
Series and the Overwatch League
require teams to pay franchise fees
ranging anywhere from $8M to $20M,
respectively.(139) While these
payments can be spread out over
time, they represent a significant
expense in the budget of any team
organization, and many of these
teams do not yet generate enough
revenue to offset those costs. To that
end, many teams have stated that
their recent funding rounds will be
used in part to cover these franchise
fees. For example G2 Esports raised
$17M in funding in February 2019, in
part to pay the franchise fee to enter
the European League of Legends
Championship Series.(140)
There are many segments of the
market which remain open to the first
company that is able to establish a
firm foothold. A prime example of this
is high school esports. While there are
several companies attempting to
create national systems for high
school esports, none has yet risen to
become the industry standard.(141)
This is part of the reason why one of
the companies competing in this
space, PlayVS, has already completed
multiple funding rounds, injecting
millions in new capital in order to
move quickly to develop its platform,
secure partnerships, and build out its
In many ways, the esports industry is
still working to shed its grassroots
origins. Some of the most prominent
team organizations, event
coordinators, and startups began as
passion projects started by
competitors and fans rather than
being established as profit-oriented
business ventures. While the leaders
of these companies certainly know
the esports industry well, they may
lack the knowledge, experience, and
connections that can help scale their
business to the next level.
This is why having investors get
involved as board members or
strategic advisors is an appealing
proposition for a growing esports
company. Often, companies in the
esports industry are looking for more
than just someone to write a check
when seeking investment; they are
looking for a strategic partner.
Someone who can help the company
navigate its next expansion effort,
offer guidance on new projects, and
offer a large network of new contacts
in complementing industries.
This type of partnership can be just as
valuable as the capital itself. In
discussions with esports companies
and startups, an investor should
consider how active a role that
investor wants to take in advising that
company, and what additional value
that party can bring to that specific
There are a number of questions a
potential investor might consider
when exploring an esports
investment opportunity. If
considering investing in a tournament
organizer, investor questions may
include: Where is the tournament
organizer hoping to expand next?
Does the investor have connections in
that region that can offer guidance on
which cities would make the best
tournament hosts? If the team the
investors is meeting with plans to
build a training facility, can the
investor advise them on how to keep
construction costs low?
Investors should ask thoughtful
questions to ensure that they fully
understand the current and future
needs of the company, and how a
partnership will be most profitable.
The esports industry has gained a
great deal of credibility over the last
12 months, but still has room for
improvement in earning the same
level of universal respect as
traditional industries.(143)
Most conversations with new
partners, investors, sponsors, and
government officials still requires a
significant amount of education on
the basic mechanics of the industry,
and many investors still need to be
sold on the economic potential and
capacity for viable industry business
Prominent, respected investors carry
The rise of esports investments | Investee view
a great deal of weight in the space
today as they can greatly increase the
level of credibility for a given
company. A nonendemic sponsor
may not have heard of aXiomatic, or
fully understand the value of its
organization Team Liquid, but
knowing that NBA star Michael Jordan
has invested in the team will likely
make many executives sit up and take
notice.(144) The fashion industry is far
more likely to hear what the owners
of 100 Thieves have to say about their
streetwear line if they know that hiphop icons Aubrey “Drake” Graham
and Scooter Braun are actively
Adding a celebrity or prominent
business figure to an investment
group can go a long way toward
opening doors and making an esports
company “legitimate” to an outsider’s
In addition, when considering future
liquidity events for the business, such
as potential full sales to strategics or
majority or minority recapitalizations
with private equity investors, having
the support and investment backing
of traditional investment groups (e.g.
venture capital, growth capital, family
offices, or private equity) can offer a
strong indication to future potential
follow-on investors that the business
is credible.
The potential benefits of esports
investments may seem evident at the
surface level, but understanding how
proceeds, knowledge, and credibility
factors apply specifically to esports
companies can serve both sides of
the negotiating table. Investors can
ask better questions and determine
the specific value they bring to an
organization to in turn optimize their
return on investment, while
companies can gain a clearer
understanding of their needs and
seek out investors that best suit them.
The rise of esports investment | Modern Times Group
Why Modern Times Group made
two of esports’ best investments
By recognizing the shifting media environment early and putting its
key investments into a position to capitalize on growth, MTG has
solidified its position as a major player within the rising esports
By Andrew Hayward, The Esports
Consulted by Tobias Seck, The
Esports Observer
sports is such a young and
rapidly evolving industry that
with many investments, it’s
simply too early to decide whether or
not they have been economically
successful moves. For example,
despite all of its potential, it could be
years before we know whether
Overwatch League teams can get a
return on investment on the millions
of dollars poured into franchising.(146)
However, there is one straightforward
example of a lucrative investment—
two, actually. The Modern Times
Group (MTG) made a significant move
establishing itself in esports in 2015
by acquiring a majority interest in ESL
parent company Turtle
Entertainment, as well as fully
acquiring DreamHack.(147)(148) Since
then, both tournament operators
have continually grown and become
even more firmly entrenched as key
companies and market leaders in the
MTG has since restructured its
organizational structure and split its
media business from those key
investments and others in the gaming
and video space, shedding previous
business interests to refocus on its
rapidly-growing digital endeavors.(149)
DreamHack Masters Stockholm 2018 (Copyright DreamHack | Adela Sznajder).
The rise of esports investments | Modern Times Group
Under the MTGx banner,
both businesses see steady
growth following investment
MTG obtains 74% of Turtle
MTG doubles sales
from 2016 from
$146M to $362M
MTG spins off its Nordic
Entertainment Group
regional TV business and
focuses on MTGx
MTG increases its
ownership level in Turtle
Entertainment to 83%
MTG reports its highest
sales, profits and margins
MTG acquires
Dreamhack for
Former Turtle Entertainment COO, Peter
Nørrelund is appointed Dreamhack co-CEO
Timeline of MTG’s investments into Turtle Entertainment/ESL and Dreamhack.(160)(161)
Here’s a look back at the timeline of
MTG’s esports investments and
decisions, the financial impact todate, and how it has changed the
Swedish firm’s focus going forward.
Making moves
MTG first invested in Turtle
Entertainment/ESL in July 2015,
acquiring 74% of the company from
founders and investors for €74M EUR
(then $86.9M USD).(150) Four months
later, in November 2015, MTG
acquired DreamHack in its entirety for
kr244M SEK (then $25.8M).(151) Both
companies were placed under the
MTGx video games, esports, and
video brand, and steadily grew in
2016 and 2017, after which MTG
began making further moves.(152)
In March 2018, MTG’s board
announced that it would instigate a
process to split the company into two
publicly-traded entities, with its
Nordic Entertainment Group regional
TV business spun off into a separate
company.(153) Meanwhile, the side of
the business previously under the
MTGx umbrella—which also included
online competitive league, E-Sports
Entertainment Association League
(ESEA)—would continue on simply as
MTG following the completion of the
At the time, Tobias Gyhlénius, group
head of PR at MTG, told The Esports
Observer that the timing was right “in
order to maximize the focus and
potential of each group for the benefit
of owners, customers, and
employees.“(155) In May 2018, MTG
continued its restructuring
maneuvers by appointing long-time
employee (and previously Turtle
Entertainment COO) Peter Nørrelund
as DreamHack’s co-CEO to help
optimize the company’s growth and
In October of 2018, MTG increased its
ownership level of Turtle
Entertainment/ESL to 82.48%, paying
kr152M (then $17M) for that
additional 8.48% control.(157) That’s a
significant premium over the rate
paid for MTG’s original investment in
the company.
Financial growth
Each year following 2015, MTG’s sales
and profits have continued to
increase. MTG’s 2017 annual report
hailed the company’s evolution into “a
smarter and more relevant MTG,” and
it showed in the significant growth of
the MTGx business.(158) Sales in the
division more than doubled over
2016, rising from kr1.33B ($146M) to
kr2.96B ($361.7M). Esports accounted
for the largest share of the division’s
sales at 46% for 2017.(159)
That surge continued into 2018. In
Q1, MTG reported 32% year-over-year
growth in esports revenues, driven by
more than 70% growth in ESL’s
revenue from owned-and-operated
Following the March announcement
of the impending split into two
companies, the remaining MTGx half
reported kr994M ($112M) in sales, up
The rise of esports investment | Modern Times Group
4.41% from Q1 2018 and 63% yearover-year.(163) Esports represented
kr411M ($46.3M) of that, marking a
41% increase over Q1 2018 and
representing 41.3% of total revenue
for the vertical.(164) This was driven by
more than 60% growth year-over-year
in revenue for ESL and
In Q3 2018, the MTGx division
reported kr1.02B ($111M) in sales, an
increase of 28.3% from kr798M
($86.8M) the same quarter in
2017.(166) Turtle Entertainment/ESL
saw a 16% revenue boost over Q3
2017, however, DreamHack saw lower
year-over-year revenue due to
changes in its Q3/Q4 event
schedule.(167) Esports sales were down
13% year-over-year in Q4, as doubledigit growth in both ESL and
DreamHack’s owned and operated
business was diminished by
weakened work-for-hire revenues.(168)
For the full year of 2018, MTG
reported its highest-ever sales,
profits, and margins, with the MTGx
division profitable for the first time on
a full-year basis despite ESL’s
restructuring costs of kr49M
($5.5M).(169) Overall, the MTGx
division’s sales were up nearly 36%
for 2018 at kr4.03B ($449.4M) over
kr2.96B ($361.7M) in 2017.(170) Esports
accounted for kr1.52B ($169.5M) of
that in 2018, up 11% over the kr1.37B
($167.4M) tally in 2017.(171)
The impact on MTG
MTG’s fortunes have risen each year
since adding Turtle Entertainment/ESL
and DreamHack to its stable, with
MTG’s digital businesses gradually
taking a more prominent role in the
company’s current and future
outlook. That point is driven home
with the split between MTG and the
new Nordic Entertainment Group
(NENT Group), which was finalized
when the latter’s shares began
trading on the Nasdaq Stockholm
market in late March 2019.(172)
Even before the split, the shifting
interest and momentum within MTG
was apparent. In the years leading up
to the plan, the company shed
various television interests in other
European countries, gradually
whittling down its focus on traditional
terrestrial TV offerings as its digital
elements grew and became a much
larger part of MTG’s
MTG continues to invest in the
esports space, too. The company has
invested in BITKRAFT Esports
Ventures—an investment fund
specifically for industry companies—
as well as nutrition brand Runtime
and learning app Blitz.(176) With the
NENT Group formally splitting off,
MTG can now focus its attention
specifically on its complementary
digital offerings, including esports.
ESL and DreamHack continue to grow
as two of the industry’s leading global
third-party tournament coordinator.
After 19 years in the business, ESL’s
bold new rebrand is intended to help
light its own path ahead and show
that the company is still vital in
today’s esports landscape, while
DreamHack’s extended events
schedule shows its own ongoing
expansion.(177) Those investments
could pay off even more significantly
over time as the esports industry is
expected to continue to grow by leaps
and bounds.
Investing in Turtle Entertainment/ESL
and DreamHack has not only set MTG
up as one of the most prominent
players in esports, but has also
permanently altered the course of the
32-year-old company as it adapts to
the changing entertainment
The rise of esports investments | Late to the party
Late to the party: learning from
the history of Heroes of the Storm’s
esports initiatives
Establishing a successful esports league can offer its challenges,
and these challenges are not the exclusive issue of the developer.
Industry players further downstream who invest time and capital to
participate can also face significant risk.
By Trent Murray, The Esports
Consulted by Tobias Seck, The
Esports Observer
The factors that led to
the cancelation of the
league and the decline
of Heroes of the Storm
esports can serve as an
important lesson for
evaluating the viability
of future games and
eveloper Blizzard Entertainment
(Blizzard), a subsidiary of
Activision Blizzard, has perhaps
one of the most important legacies in
all of esports. StarCraft launched the
modern era of professionalized
competitive gaming, Hearthstone
opened the doors for an entire genre
of digital card game esports, and the
Overwatch League kicked off a brand
new era of franchised leagues and
However, things have not been all
landmark decisions and sold out
grand finals. In December 2018,
Blizzard announced that it was
discontinuing all esports support for
one of its lesser-known title, Heroes of
the Storm (HOTS).(181)
The game had professional leagues in
four major regions, commitments
from major organizations like Fnatic
and Team Liquid, and to-date has
awarded the sixth-most total prize
money across all events of any esport,
according to Esports Earnings ($17.9M
USD).(182)(183) Despite significant
investment on the part of its
developer, Heroes of the Storm failed
to grow an audience on Twitch during
the two years its professional league,
the Heroes Global Championship
(HGC), was in operation.(184)
The factors that led to the cancelation
of the league and the decline of
Heroes of the Storm esports can serve
as an important lesson for evaluating
the viability of future games and
Late arrival to the genre
The Multiplayer Online Battle Arena
(MOBA) genre is one of the biggest in
all of esports.(185) Two of the “big
three” esports titles (League of Legends
and Dota 2) are MOBAs.(186) By the
time Blizzard entered the space, its
leaders had already established a firm
foothold. League of Legends (LoL)
launched in 2009.(187) Dota 2 was
released in 2013.(188) SMITE was
released in 2014.(189) Heroes of the
Storm did not enter its open beta
phase until May of 2015.(190)
By that time, not only had these other
titles established large, entrenched
player bases, but plenty of other
studios had tried and failed to
compete. The DC Universe-themed
Infinite Crisis never made it out of
beta.(191) Electronic Arts abandoned
Dawngate by the end of 2014.(192)
Major publishers and popular IP came
and went. To this day, many MOBAs
have had difficulties cracking the
market dominance of LoL and
Dota 2.(193)
The rise of esports investment | Late to the party
Arriving so late to the MOBA party
meant that Blizzard’s entry would
come with extremely high
expectations, and would have to find
a way to differentiate itself in an
already saturated market.
A unique MOBA experience faces
growing pains
Blizzard’s first attempt to stand out
from the MOBA scene was to declare
that Heroes of the Storm did not
belong in that market at all. The
developer ignored the MOBA label in
all press and marketing, referring to
the game instead as a “team
In order to stand out and offer
players a unique experience, Heroes
of the Storm had also tried to improve
and differentiate many of the core
features and mechanics of other
MOBA titles.
These changes created a lower
emphasis on individual player skill in
favor of stressing the importance of
teamwork for achieving victory.(195)
For veteran MOBA players and
newcomers alike, this combination of
messaging and departure from
convention gave many players the
impression that Heroes of the Storm
was the MOBA for people who had
not enjoyed the traditional MOBA
While enjoyable at a casual level,
these unique game mechanics also
likely helped to create a disconnect
between the game’s esports scene
and its general player base. One of
the primary reasons many players
first choose to watch a game’s
competitive content is to learn how to
improve their own skills. However,
because professional Heroes of the
Storm placed so much emphasis on
teamwork, there was often little a
player could learn that would
translate into their solo play
Additionally, Heroes of the Storm drew
some criticism for its ranked play
experience from some of the game’s
top players.(197) Due to matchmaking
problems, a lack of key drafting
features, and various other issues, top
competitive players would explore
organizing their own ranked mode
outside of the Heroes of the Storm
ranked ladder.(198)
Throughout the lifespan of Heroes of
the Storm, the disparity between the
game played by the pros and the
experience of the average player
would create separation between the
game’s core community and its
professional scene.(199)
Between its messaging and core
gameplay experience, Heroes of the
Storm struggled to incentivize players
to engage with its competitive
scene.(200) When looking at successful,
long-lasting esports, the opposite is
consistently true.(201) Players can
watch top-level professional matches
and learn how to improve their own
game. Individual skill and playmaking
ability are rewarded across the board.
In spite of these hurdles, however, a
small, dedicated esports scene began
to emerge for Heroes of the Storm.
Where’s the value?
The early days of Heroes of the Storm
was a veritable who’s who of top
esports teams. Cloud9, Evil Geniuses,
Virtus.pro, and Natus Vincere all
signed teams before Blizzard held the
game’s first World Championship at
BlizzCon 2015.(202)(203)(204)
Competitive Heroes of the Storm gameplay at the 2017 DreamHack Mid-Season Brawl.
(Copyright DreamHack | Abraham Engelmark)
However, by the time the Heroes of
the Storm Global Championship
(“HGC”) launched in 2017, all four
organizations had left the
game.(205)(206)(207) A few prominent
organizations such as Fnatic and
Dignitas remained, but many of the
teams that qualified for the HGC
remained unsigned by any significant
The rise of esports investments | Late to the party
esports brand throughout the
league’s existence.(208)
One significant barrier for both team
organizations and viewers was the
lack of in-person tournaments. While
viewership for Heroes of the Storm was
never especially high, it was always
substantially higher during live
tournaments when compared to
online events.(209)
With low viewership, online events
provide limited value to esports
teams, and although Blizzard
provided large prize pools for each
year of Heroes of the Storm esports,
that money was limited to the major
offline tournaments.(210) Online
competitions also meant that the
players could not be shown on
camera, which meant that the
sponsor logos on team jerseys were
rarely visible.
From 2016-2018, Blizzard held three
international offline tournaments a
year.(211) There were occasionally
other small live events during the
year, but the overwhelming majority
of Heroes of the Storm’s highest level
of competition took place online. As a
result, teams outside of the top two in
a region had difficulties generating
value from their investment in Heroes
of the Storm.
By the end of 2018, only six
prominent esports organizations
(Tempo Storm, Dignitas, Fnatic, Team
Liquid, Method, and Gen.G) had
Heroes of the Storm rosters out of 32
HGC teams.(212)
What can we learn
While Blizzard was most adversely
impacted when Heroes of the Storm
was unable to gain wider acceptance,
it also affected many of the
organizations who chose to invest.
When a professional organization
invests in a new game, there are
substantial upfront costs including
player and support staff salaries,
allocating resources to provide
jerseys, graphic assets, and social
media coverage for the new team.
As player salaries continue to rise and
franchise fees become more
common, effectively identifying
sustainable games will become more
and more important for both team
owners and their potential investors.
The story of Heroes of the Storm
provides a few key points by which
investors can examine a game to help
evaluate the potential risk/reward of
investing at an early stage.
Is this game relevant?
For a game to build up enough
momentum to become sustainable as
an esport, it needs to be embraced by
a large player base. Is the game in
question at the forefront of a relevant
genre, or is it chasing a trend that has
already passed?
While not a perfect indicator of long
term esports health, a large player
base can make it more economically
viable for a developer to continue
investing in both the esports scene
and ongoing development. The
majority of a game’s viewing audience
will likely come from its active player
base as well, so the size of that player
base can provide an indicator of
expected viewership.
Is this game competitive?
Successful esports games are
designed to reward individual skill
and playmaking ability and have an
actively supported, popular
competitive mode. Ideally, the game’s
ranked mode also provides an
experience that closely resembles the
game mode played by professionals.
The competitive depth of a game can
be a strong indicator of sustainability.
StarCraft: Brood War and Super
Smash Bros. Melee are widely
considered to be two of the deepest
competitive games ever made, and
both have sustained active,
professional esports scenes more
than 15 years after their release.(213)
Are there enough offline events?
Online leagues can drastically reduce
operating costs for developers, but
they often provide little value to
esports organizations if they don’t
directly feed into a wide array of
offline tournaments. Sponsorships
are typically a key revenue stream for
team organizations, so they need to
be able to generate value for brands
with every game.
Any game that over-emphasizes
online events without some clear way
to generate visibility for sponsors will
likely struggle to generate that value.
A healthy esports ecosystem should
have multiple opportunities for all
professional esports teams to
compete offline, with the best teams
earning extra value by qualifying for
international championships.
While there are plenty of additional
factors professional teams must
weigh before choosing to invest in
any game, answering these questions
can provide investors with a useful
baseline by which to measure the
health of each game professional
teams participate in, and to evaluate
the potential risk/reward of buying
into a high-ticket franchise system.
Several active esports titles today
show warning signs in at least a few
of these categories, and so investing
requires careful consideration.
The rise of esports investment | Influencers
The rising power (and risk) of
influencers in esports
By Graham Ashton, The Esports
Consulted by Tobias Seck, The
Esports Observer
As esports influencers continue to gain larger followings built on the
social aspects of their entertainment value, the recognition of their
brands in their own right may lead them away from the structure of
traditional esports team organizations.
Esports ambassadors
driving value
Esports has entered the mainstream
consciousness, with dedicated
episodes in TV shows such as The
Simpsons, to public—and capital—
endorsement by hip-hop stars
including Aubrey “Drake” Graham,
Jacques Bermon “Travis Scott”
Webster II, and DeAndre Cortez
“Soulja Boy” Way.(222)(223)
espite its common usage in
marketing, the term
“influencer” carries somewhat
of a negative connotation within the
gaming community. Professional
esports teams will often identify their
line-up of influencer talent simply as
“streamers” or “content creators.” The
esports industry relies on
authenticity, which conflicts with the
idea of pro-gamers known more for
marketing value than dexterity with
keyboard and mouse.
Nevertheless, certain gaming
influencers are rapidly outpacing the
value of the professional esports
teams they are contracted to, and the
ethical concerns with influencer
marketing—highlighted by
controversies such as the Fyre
Festival campaign or YouTube
personalities such as Laura Lee and
Felix “Pewdiepie” Kjellberg—are just
as likely to cripple a
This was exemplified by the
CSGOLotto scandal, in which two
popular YouTubers promoted a socalled “skin gambling website” without
properly disclosing their ownership in
the business.(218) This was the first
Federal Trade Commission (FTC) case
levied against influencers.(219)
For the esports industry, influencers
may pose a secondary problem; loss
of leverage. While esports
tournaments and competition brands
are able to garner millions of views in
a single event, team organizations are
discovering that the brand equity of
their professional players in some
instances is quickly being outpaced by
Traditional media agencies, such as
Creative Artists Agency (CAA) and
United Talent Agency (UTA) have set
up gaming-focused divisions, and in
some cases, drawn talent away from
endemic esports organizations.(220)(221)
In tandem, certain gaming
personalities have slowly become
household names among their target
age group. The most notable of these
is Tyler “Ninja” Blevins, a former Halo
professional who quickly became
Twitch’s most subscribed personality
after a set of star-studded Fortnite
streams, and high profile media
appearances.(224) These include a
multi-commercial campaign with
Samsung to promote its Galaxy
phone series, a live-stream in Times
Square on New Year’s Eve, and a
cameo appearance at the NFL’s own
Super Bowl commercial.(225)(226)(227)
It should be noted that while Ninja
occasionally competes in
tournaments, he is more often
recognized as one of the most
popular gaming influencers.(228) This
represents a schism within the
gaming entertainment space; the
purely-competitive scene, and players
(or in some cases, entire teams) that
are personality-driven.
This factors into the diversification
opportunity for esports investors.
(Continued on next page)
Michael “Shroud” Grzesiek, a notable influencer, competing at the DreamHack ASTRO
Open in 2017. (Copyright DreamHack | Adela Sznajder)
The rise of esports investments | Influencers
While media rights are one of the
fastest growing revenue streams in
the industry, predicted to account for
$251.3M of the projected $1.1B total
revenues in 2019, the reliance on
sponsorships has prompted certain
professional esports teams to run
influencer-driven campaigns for
Examples include G2 Esports’ “Making
the Squad,” a talent-contest for
Fortnite streamers, and Team SoloMid
establishing a “Fortnite house” to
create content for the game before an
official tournament was even
All said, there are some instances of
competitive players taking the typical
role of a brand ambassador.
Last year, two Russian Dota 2 players
from the organization Virtus.pro were
featured in advertisements for The
Procter & Gamble Company brands
Head & Shoulders, and Gillette.(232)
Most notably, the Chinese League of
Legends player Jian “Uzi” Zi-Hao was
featured in a promo campaign for a
major athletic footwear and apparel
Characteristics of the gaming
Marketing influencers typically
accumulate their audience and reach
by building credibility within a given
industry. Gaming influencers carry
many of the traits seen in any other
type of social media personalities:
they start conversations, drive
engagement, and set trends among
their audience. While some gaming
influencers may occupy their own
niche (e.g. gameplay tutorials and
tips, unboxing videos, product/game
reviews), the most followed
personalities typically bear the
following characteristics:
Competence of play: Whether male
or female, the most popular gaming
streamers usually have a high winrate when playing. Their ability at a
given game is rarely at the level of a
purely competitive gamer, but they
are able to maintain a respectable
in-game rank. Since they are in many
ways the protagonist of their stream,
audiences tend to favor a player that
can triumph consistently.
Regular scheduling: While the
specific times of play are subject to
change, an influencer will typically
broadcast on a daily basis. The
earliest start and latest end time are
pre-provided, with an announcement
posted on all social media channels
once the broadcast has begun. In
many cases, highlights of these
streams, which can last up to 10
hours, are posted on various video on
demand services.
Associated game: A successful
influencer will be able to transition
between multiple game titles,
particularly when a new release or
content update arrives. However, the
most popular gaming influencers
predominantly play one specific
Regular scheduling
Competence of play
Associated game
Key characteristics of a major gaming influencer.
The rise of esports investment | Influencers
Which major influencers got their start in esports?
Many of the most popular influencers initially started as competitive esports players and
eventually shifted their focus towards entertainment.(241)
Tyler “Ninja” Blevins
Michael “Shroud” Grzesiek
Matthew “Nadeshot” Haag
Became a professional streamer for
Luminosity Gaming in 2011. Began
streaming Fortnite in 2017, follower
count grew by 250% from 500K in
six months .
Stepped down from Cloud9’s CS:GO
team in 2017, and left the
organization and game entirely in
2018. Has competed in some
tournaments since.
A former player and captain for
OpTic Gaming, Haag became a fulltime content creator in 2015. He set
up 100 Thieves as a lifestyle brand in
2017, before building out the
company into an esports
organization in 2018.
Followers: 31.1M
Game: Halo 3
Teams: Cloud9, Renegades, Team
Followers: 8.2M
Game: Counter-Strike: Global
Teams: compLexity gaming, Cloud9
Followers: 6.7M
Game: Call of Duty
Team: OpTic Gaming
Jaryd “summit1G” Russel Lazar
Michael “Imagqtpie” Santana
While Lazar is a full-time streamer,
he still competes as a semiprofessional player. His last
recorded competition was in August
Retired from professional League of
Legends play in 2014, briefly
returned to competitive play in 2017
in “Delta Fox,” a team made of
retired players—known also as the
“Meme Team.”
Followers: 4.5M
Game: Counter-Strike: Global
Teams: A51, Team Mythic, subtLe
Influencers vs. professional
esports teams
As mentioned, influencers have been
a staple of esports team organizations
for some time already. The
organizations that are largely cashflow positive generate a significant
source of income by retaining highly
followed professional players and
influencers, using them to promote
sponsor products through video
content, and splitting the revenue
A clear example is Team SoloMid
(TSM), which has ten Fortnite
influencers signed to its roster, all of
whom have a combined 11.5M
followers on Twitch.(234) The combined
Twitch followers of TSM’s League of
Legends professional team, its flagship
Followers: 1.0M
Game: League of Legends
Team: Dignitas
…Certain gaming
influencers are
rapidly outpacing the
value of the teams
they are contracted
competitive roster, is only 2.8M.(235)
TSM promotes its sponsors, including
Dr. Pepper, Geico, and Grubhub,
through all its professional players,
but in May 2018 the organization
signed a partnership deal with
Chipotle Mexican Grill, Inc. that
focused exclusively on the team’s
“Fortnite house,” with product
promotion via content on social
media, YouTube, and Twitch.(236)(237)
While Fortnite developer Epic Games
is attempting to build a competitive
scene around the game, complete
with a $30M prize pool World Cup in
2019—the largest prize pool in
esports to-date—the current value for
professional teams lies in its
streaming potential.(238) The game is
less about competing, and instead
functions as a video-game social
media platform, complete with ingame live events (including music
concerts).(239) The game has celebrity
players including Joel Thomas
“Deadmau5” Zimmerman, Chancelor
“Chance the Rapper” Bennett, and
various professional sports athletes
and personalities, who are not known
for playing competitive videogame
The rise of esports investments | Influencers
While this is a positive development in
driving audience and brand interest in
live gaming events, it poses several
potential risks for esports
organizations that have traditionally
focused on competition prowess:
Can an esports organization
with limited experience in
brand development and
management guarantee the
success of its influencers?
How do these organizations
recruit influencers, and ensure
long term audience growth?
If investors and brands
entering the live gaming
space can attain a greater
reach and ROI through
individual investors, how will
this affect the resources for
competitive esports players?
What will be the effect on
esports tournament operators
if more teams siphon their
resources to content creation
and marketing, instead of
player development and
Will esports organizations
need to change their
business models to
accommodate the rise of
both influencers and gamingcentric marketing agencies?
For example, Tyler “Ninja”
Blevins and Jack “CouRage”
Dunlop were previously signed
to Luminosity Gaming and
OpTic Gaming, respectively.
The two later signed exclusive
influencer management deals
with Loaded, an agency created
by esports technology and
services company Popdog.(242)
What happens if an
influencer’s brand value (i.e.
follower count, value of
sponsorships) exceeds that
of their team? How can
investors be assured that the
company will not lose that
The phenomenon of gaming
influencers within esports can be
compared to the boom of
professional wrestling in the 1980s.
While the outcome of Fortnite
matches and popular streaming titles
are not fixed, they are more for
“entertainment purposes” rather than
legitimate contests. Whereas the
success of professional wrestling
entertainment and its contemporaries
did not steal the audience of
professional sports, the relatively
short history and market instability
may put professional esports teams
in an awkward position.
Until recently, influencers have been a
profitable side-arm of the esports
industry; a way to generate greater
ROI for sponsors. Soon, they could
become the dominant face of live
videogaming, and a more valuable
prospect for stakeholders.
The rise of esports investment | Dynamics
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The rise of esports investments | Dynamics
Dynamics of esports
In order to effectively position themselves to maximize
potential investment dollars, esports companies should
understand the different investors in the industry and the key
questions they will likely ask.
s the esports industry continues
to rise in popularity, new
investors will explore the space
in order to capitalize on its strong
expected growth profile over the next
several years. With an influx of new
investors, it is important for esports
companies to understand what each
investor type is able to offer. While
the dollar size of an investment is
certainly the headl…
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