The economic results of the gaming industry are significantly challenging the established view of e-sports as a limited investment and business opportunity in our latitudes. E-sports has become an investment colossus, with revenues expected to surpass EUR 670 million in 2023 in the European market alone. This indicates the potential for which it is worth getting involved in the game.

The professional playing of computer games via electronic devices, i.e., electronic sports or e-sports, originated in the 1980s. The first e-sports tournament, where players competed in the Space Invaders game, is considered to be the origin of e-sports. This tournament was won by a female player, only 16 years old, whose success was watched by four thousand viewers at the time. 40 years later, hundreds of thousands of viewers are watching similar tournaments.

Live advertising

According to statista.com, a statistics portal, sponsorships have been the most profitable part of the e-sports market in 2021. More and more businesses are leaning towards promoting their brand via e-sports tournaments, their live-streaming, but also through sponsoring the teams themselves.

Companies whose target consumers are men under 30 are catching this wave in a big way. These include large technology companies such as Intel Corporation, car companies such as Mercedez-Benz or, in the Slovak context, energy drink producers whose brands are promoted by players directly on their T-shirts or by consuming them.

At HAVEL & PARTNERS, we have been monitoring this market for a long time and we have the necessary know-how to make sure that no one plays us or our clients.

However, there are also a number of risks associated with sponsoring e-sports teams, such as the social behaviour of players may harm a company’s reputation. This as well as other risks can be significantly reduced by a well-chosen sponsorship agreement. A slightly safer option is to sponsor e-sport events such as the Intel Extreme Masters, but even this cannot be done without a properly set-up contract model.

Investing in the future of entertainment

If you consider associating a business name with a particular team or event to be risky, investing in e-sports itself can be taken into account. For example, the VanEck Vectors Video Gaming and eSports ETF, an index fund, was launched in 2019, and tracks the performance of several e-sports companies, such as Nvidia and Activision Blizzard.

Unlike other index funds, the eSports ETF grew in the tens of percentages during the pandemic, from March to September 2020, and a decline in interest in this area is certainly not anticipated over the next decade.

Exclusively non-television business

The second-largest share of the global e-sports market comes from media or broadcasting rights revenues. In the Czecho-Slovak market, specific revenues are not public information due to the relatively clear position of the largest local e-sports broadcaster, Twitch Interactive, Inc.

By comparison, in China, the world leader in e-sports revenues, competition is more visible. An example is the value of the contract between HUYA and TJ Sports for exclusive broadcasting rights to League of Legends tournaments. In this case, the contract was valued at approximately USD 310 million.

Develop and licence

A separate part of e-sports is the video games market itself, which according to statista.com has a market share of USD 2 billion. This market includes companies such as SciPlay, which develops games such as Jackpot Party Casino, Activision Blizzard with Call of Duty and World of Warcraft, and the manufacturers of the devices on which video games are played, such as Nintendo.

A successful business strategy in this area has been demonstrated by Riot Games, which, as the successful developer of the League of Legends video game, has retained all rights to the video game. Thus, if an organizer wants to hold a tournament in this video game, or if a broadcaster wants to broadcast it, they have to “purchase" the relevant rights and licences from Riot Games. This practice, based on a business-oriented legal analysis and anticipatory contractual setup, is also the reason why Riot Games surpassed the USD 100 million revenue threshold for its three largest video games a few months ago.

Visions and challenges

The Czech e-sports market is estimated to be worth CZK 50 million and has grown sixfold in the last six years and the growth rate is gradually accelerating. In Slovakia, despite insufficient statistics, the same can be relied on for at least medium-term growth.

HAVEL & PARTNERS has a stable team in this area, ready to advise on setting up licensing agreements with broadcasters of tournaments or events, contractual arrangements for sponsoring teams or events, copyright protection for developers, as well as other areas necessary for success in the e-sports market.