STWS Esports & Gaming Market Report 2022
Market Research Report Identifies Creator Economy and Metaverse as key growth drivers in the long-term success of Esports, Streaming and Gaming.
San Mateo, CA – October 7, 2022 – Sports Tech World Series (STWS) issued a new report sponsored by Tipalti, the leading automated global payables solution, and Business in Games (BIG), which reveals the state of the esports, gaming and streaming markets globally. Thirty esports and gaming industry leaders were interviewed on the greatest challenge currently facing the sector; overhyped and overblown trends from the last 18 months; and emerging developments driving growth across the industry. The experts also identified 20 startup and scaleup companies that impressed with their innovation.
Esports Need To Diversify Revenue
The report highlighted the challenges faced by professional esports teams in diversifying revenue away from sponsorship in pursuit of sustainable business models with the majority of teams not achieving profitability and heavily reliant on external investment. Sponsorship accounts for over 60% of total revenues for esports teams. Sponsorship deals are typically on shorter terms than decade-long media rights deals, giving esports less long-term stability over guaranteed revenues, as compared to traditional sporting teams and leagues. However, esports is unlikely to be able to replicate the success of traditional sports’ media rights deals due to a number of factors, including issues with IP ownership.
Esports Leveraging The Creator Economy
As esports grows more ingrained in popular culture, the business models that underpin its growth and sustainable success are beginning to evolve. It is expected esports teams will shift from being competitive teams in the traditional sporting model to agencies and brand consultancies created to connect brands and communities with their athletes as talent as creators. The emergence of the Creator Economy presents a huge opportunity for esports to monetize the direct connection they have built with their audience. The majority of these teams already possess the skills and assets required to provide these services but it is a question of how quickly they can evolve to take advantage of new opportunities. The products, services and technology underpinning the Creator Economy also continues to grow and mature to meet these needs.
Esports Team Valuations Continue To Rise
Despite structural issues with revenue diversification, the valuations of top esports teams continued to rise in 2022. The ten most valuable esports companies are worth a combined $3.5 billion, up 46% from December 2020. In July 2022, FaZe Clan became the first Esports & Gaming Lifestyle Brand listed on the Nasdaq, through a special purpose acquisition company (SPAC) merger, trading under the ticker symbol FAZE. Following its listing, FaZe Clan leapfrogged from a previous valuation of $400M to $725M making it the most valuable esports team globally. FaZe Clan typifies the potential growth, but also the struggles of Esports Teams to become sustainable, diversified businesses. Sponsorships accounted for nearly 50% of FaZe Clan’s total revenues in 2021 and it posted a net loss of $9.3M in Q2 2022.
Post-Pandemic Correction – Gaming & Live Streaming
The gaming market is going through an inevitable post-pandemic correction with decreased sales. U.S. consumer spending on video game hardware, content and accessories is projected to reach $55.5 billion in 2022, a decline of 8.7% when compared to 2021. Gaming is once again competing for consumer attention and spending against different entertainment opportunities, including live events. This decline has also been exacerbated by higher prices in everyday spending categories such as food and fuel, combined with economic uncertainty restricting discretionary spending.
Although gaming sales fell from 2021 highs, 2022 has been a record year for M&A activity in gaming with $107B+ in total deal value. This includes the announced Microsoft acquisition of Activision Blizzard for $68.9B. This deal, if fully approved by market regulators, is set to make Microsoft the second largest game company by revenue globally. Optimistic views welcome this market consolidation with the expectation it will lead to greater innovation and direct competition from the major players.
Live streaming also saw post-pandemic market corrections. The global COVID-19 pandemic period in 2020 and 2021 saw unprecedented growth across live streaming services but also a corresponding decline into 2022 as the world emerged from restrictions. Facebook Gaming has seen the largest decline in viewership with YouTube Gaming flattening and Twitch trending back towards 2021 highs. Currently, Twitch is the dominant live streaming platform with 6.1 billion live streaming hours watched in Q1 2022 (76% of total), followed by 1.1 billion hours on YouTube Gaming (14%) and 0.8 billion hours on Facebook Gaming (10%).
Current integrations of blockchain into gaming will continue to develop over time; today, esports and gaming are at the vanguard of realizing the future of the metaverse.
The overwhelming majority of experts interviewed identified that blockchain-powered initiatives, including the integration of cryptocurrencies and Non-Fungible Tokens (NFTs) into gaming, are still in the incubation phase, and they need more time to develop.
However, the experts are bullish on the overall impact of Web3 and the metaverse for the industry going forward. Gaming and esports present the most tangible experience of an immersive, open platform metaverse (or metaverses) that we have seen so far. Gaming and esports combine the underpinning technology, such as game engines and VR, with a digitally native fan base.
Investment and M&A activity are increasing in this space, with $2.3 billion raised for Web3-related startups in the first half of 2022. For example, metaverse technology specialist Infinite Reality completed a $470 million acquisition of esports/entertainment company ReKTGlobal in July 2022, with a post-close valuation of $2.47 billion.
“We are really interested to see how more B2B companies start to engage meaningfully with Web3 and the metaverse. We power some of the most creative and innovative companies in the digital world to enable creators, influencers, photographers, artists and musicians to really focus on what matters to them most and that’s their craft,” said Paco Suro, GM of Global Partner Payments at Tipalti “So we’re asking what kind of presence could or should we have and what is the benefit going to be to our company and our customers. How can we enter this next stage of modern technology and how can we do it in a way that stays authentic to our brand and to what got us to the point we are at today?”
Tipalti comes from the Hebrew expression for “We handled it.” Tipalti is the only company handling both Global Partner Payments and Accounts Payable workflows for high-velocity companies across the entire financial operations cycle: onboarding and managing global suppliers, instituting procurement controls, streamlining invoice processing and approvals, executing payments around the world and reconciling payables data across a multi- subsidiary finance organization. Tipalti enables high-growth companies to scale quickly by making payables strategic with operational, compliance, and financial controls. Companies can efficiently and securely pay thousands of partners and suppliers in 196 countries within minutes. 2,500+ companies, such as Amazon Twitch, Roblox, Gen.G, GoDaddy, Roku, WordPress.com, and ZipRecruiter use Tipalti to reduce operational workload by 80% and accelerate the financial close by 25%, while improving partner visibility and strengthening financial and spend controls.
For more information, visit tipalti.com.
About Business In Games (BIG)
BIG is a fast-growing esports and gaming strategy and marketing firm backed by the largest Australian publicly-listed video game developer, PlaySide Studios (ASX:PLY). Our experience spans high-level global and local campaigns with global brands such as Fox Sports, Intel, NVIDIA, Corsair, and many more. We also work with videogame developers, software & hardware companies, and on blockchain projects.
For more information, visit businessingames.com.
A trusted and experienced advisory and consulting services firm, delivering solutions to grow organizations in sports technology and adjacent markets including Fitness, Health, Media, Gaming & Web 3.0
For more information, visit sportstechworldseries.com