Esports revenue outlook gets another downgrade as pandemic halts live tournaments

Brief:

  • Researcher Newzoo again downgraded its esports revenue outlook for the year, lowering its forecast 8% from prior projections, according to VentureBeat. The firm now says global esports revenue will reach $973.9 million in 2020 and $1.194 billion next year, suggesting sluggishness will continue into 2021 due to a weaker sales pipeline.
  • Newzoo, which VentureBeat noted has been cautious in lowering its forecasts, attributed the slowdown largely to the coronavirus pandemic, which continues to halt many physical tournaments. A cooler market comes despite growing viewership for esports and plenty of event offerings from organizers.
  • But the shift to virtual events poses a number of challenges for esports, per Newzoo. Sponsors are less interested in digital events where they can’t engage a live audience. It’s also harder to coordinate among multiple parties in different time zones and to preserve the integrity of competition, as players could have varying internet connection quality, for instance.

Insight:

Newzoo notching down its 2020 esports revenue outlook for the second time speaks to the uncertainties facing publishers and media owners as the reverberations of the coronavirus pandemic stretch on for months. Even categories seeing a boom in audience interest still have to contend with tighter marketing budgets and disruptions associated with the shift to virtual events. Newzoo noted that the situation for esports remains in flux and that it could again revise its revenue figures, per VentureBeat.

Esports have generally been painted as receiving a windfall due to the novel coronavirus. Locked-down consumers are playing more video games and, in the absence of live sports, more people are tuning into competitive video game play. As with traditional sports, however, the in-person aspect of tournaments is immensely valuable, and its prolonged absence could be cutting off lucrative brand dollars.

Newzoo’s latest figures say that esports merchandise and ticket sales will draw $76.2 million in revenue this year, lower than the $106.5 million projected in April, which was already a considerable downgrade from the $121.7 million forecast in February, before the pandemic took hold in the U.S. The hit extends to other high-dollar areas like media rights and sponsorships, which are now expected to command $584.1 million in 2020 versus the prior expectation of $614.9 million from April.

Still, esports are weathering the coronavirus relatively well and remain an area of interest for a number of deep-pocketed brands. BMW in April signed on to sponsor five of the world’s leading esports teams, a move it billed as a “major expansion” into the category. In June, Verizon inked a three-year contract to serve as the official 5G and network services provider of Legends Championship Series, the North American professional gaming division of Riot Games’ leading title “League of Legends.”

Partnerships with prominent players and content creators are also on the rise. This week, fast-casual restaurant chain Zaxby’s became the exclusive sponsor of Ali “SypherPk” Hassan, a professional gamer with 11 million followers across digital platforms. Bounty, the Procter & Gamble brand, in June enlisted a number of popular Twitch video game streamers as part of a month-long advertising campaign.

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