Thanks to the astounding growth in the eSports industry, investors are increasingly showing interest in getting into the action. According to the research data analyzed and published by Safe Betting Sites, investments in the sector exceeded $1 billion in 2019.
Quantum Tech Partners and other investment firms also predict that revenues in the eSports space will hit a whopping $4 billion by 2022. This figure is much higher than Newzoo’s estimate of $1.79 billion and Goldman Sachs’ prediction of $2.96 billion.
July 2019 Recorded $557M in eSports Investments
The year 2019 saw eSports mergers and acquisitions reach $457 million, a figure that covered a total of 33 deals. Of these deals, 13 were acquisitions of teams, accounting for 39.4% of all M&A. Streaming rights and platform-related deals also accounted for a significant cut of the pie, which was at 24.2%. Media deals took 18.2% while hardware deals accounted for 12.1%. Real estate and developer-related deals had 3% each.
Disclosed investments in 2019 reached the highest peak in July with a total sum of $557 million. Moreover, during the period between September and November, eSports investments for each month surpassed the $200 million mark.
For all other months, the sum ranged between $40 million and $100 million. The largest investment for the period was on the Chinese live streaming platform DouYu. In July 2019, the service went public on Nasdaq, raising $517 million.
Fast forward to 2020 and in the month of March, major investments, mergers and acquisitions amounted to $13.8 million. Among the largest deals of the period, Veritas Entertainment raised $10 million with the unveiling of its LVL Gaming Center. Moreover, Anybrain, an AI startup received an investment of €1 million from Trust Esport while Rally Cry raised $1.2 million from Riot Games, Blizzard and Twitch.
Epic Games Raises $1.78B in August 2020 Funding Round
It is interesting to note that the trend seems to be taking over the gaming industry as a whole, not just eSports. In 2019, investments in gaming amounted to $7.2 billion, an improvement from $6.8 billion in 2018.
However, eSports is one of the most significant parts of the space, accounting for at least 20% of all 2019 M&A. Despite the ravages of the global pandemic, the first quarter of 2020 saw investors pump over $700 million into the space.
Though this is a significant dip, it comes as no surprise in view of the impacts of lockdowns as well as stock market downturns. Merger and acquisition deals during the same period were worth $1.6 billion. This is an impressive figure considering that in the first half of 2019, similar deals amounted to $1 billion only.
In one of the largest deals so far, Epic Games raised $1.78 billion following a post-money valuation of $17.3 billion in August 2020. This is approximately 15% higher than its 2018 valuation of $15 billion when the firm raised $1.25 billion. Among the participants in the round were Fidelity Management and Research Company, BlackRock and Baillie Gifford, a UK investment management firm.
eSports Ad Spend to Rise 9.9% to $844M in 2020 But Revenue Could Drop
It is interesting to note that the reach of eSports has extended beyond gaming. The space is attracting a significant amount of ad spend, and its value in this regard is rapidly expanding. The global ad spend on eSports in 2020 is set to rise to $844 million, an increment of 9.9% according to a WARC study. The same study goes on to predict that sponsorship spend in the sector will surpass $1 billion by 2022.
Even though eSports had a great year in 2019, the immediate outlook on revenue is shrouded in uncertainty. Revenues for 2019 were above $957 million and according to Newzoo estimates, were expected to surpass $1 billion in 2020. However, in view of prevailing circumstances, the research firm has reviewed its figure downwards, to $973.9 million only.
The firm predicts that tickets and merchandise will raise revenues of $76.2 million, a drop from its February prediction of $121.7 million. Media rights are expected to generate $163.3, down from $185.4 million in February. And while in February it had estimated media rights and sponsorships to generate $636.9 million, its latest estimate is $584.1 million. It explains that the revision is based on cancellations and delays of international activities as well as a shift to alternative event formats.