eSports market to reach $1 bln in 2017

Event hosts will earn most of their revenue through the sale of commercials

According to analytical company SuperData, global revenue for the worldwide eSports market will increase by 19 percent and total $892.8 million in 2016. In 2017, the market will reach $1 billion, the company says.

This year, consumers and advertisers spent $328 million in Asia, $275 million in the U.S., $269 million in Europe (including Russia) and $19 million elsewhere on eSports competitions.

Most of the money – $661 million – came from advertising and sponsorships. About $78 million made up the prize pool for eSports teams, while $59 million went to bookmaker sites, $40 million to amateur eTournament platforms, $34 million to tournament ticket sales, and $19 million to merchandising.

Bureaucracy is very resilient; it's like a virus, and many large companies fell victim to their own success

eSports involve competitions among players of popular computer games like "Dota 2," "StarCraft" and "League of Legends." Although the first "StarCraft" competitions took place at the end of 1990s, eSports only recently started to attract large audiences, making it a new phenomenon.

eSports are becoming more and more mainstream and attracting traditional media, including U.S. cable channels like TBS and ESPN, and advertising.

SuperData also predicts that 213.8 million people will watch competitive gaming this year. By the end of 2019, the global audience will grow to 303 million, the company says in its report.

The eSports audience is mostly male (85 percent), more than half of which are men between 18 and 25 years old, says SuperData.

According to the report, the most popular game of the first part of 2016 was "League of Legends" by Riot. At the height of its viewership, the game's monthly audience hit 98 million spectators, with viewers spending 450 hours watching the game via streaming service Twitch.

The runner-up was "Call of Duty," which drew an audience of 75 million people. Third place went to "FIFA 16" with 23 million viewers.

Vasily Magurian, head of IT-Territory, Mail.Ru Group, says there are three key participants in the eSports market: game makers, spectator platforms and teams.

"Game makers benefit from in-game purchases, for which eSports is the main driver. Spectator platforms earn revenue though the sale of commercials and micro-transactions related to monetizing the video content created in the game. The top teams make money by winning tournaments, making business deals with game makers and event-hosting platforms, and securing sponsorships," says Magurian. "The most successful teams create their own brand of products, which can include souvenirs, in-game objects and so on."

Bloggers that create video content related to games and events are also important participants in the eSports phenomenon, says Magurian. These 21st century journalists benefit via advertising (including product placement) and donations from end users.

Investors are actively pouring money into eSports-related ventures. One of the largest investments in this market is Amazon's $1 billion purchase of videogames streaming service Twitch. Last year, Swedish media holding MTG paid $28 million for eSports events planner Turtle Entertainment.

Russia has been the focus of substantial investments in eSports. Alisher Usmanov put $100 million into Virtus.Pro, an eSports tournaments planner. Earlier, Yuri Milner invested $26 million in Super Evil Megacorp, the creator of "Vainglory," an online strategy game and the tournament platform of the same name.

In addition, in 2017, the Ministry of Sports in Russia recognized eSports as an official sport.

In Russia, the primary source of income for hosting events is in-game merchandise, says Alexey Krainov, head of the Russian branch of game publisher Riot Games. Sponsorships and financial support from game makers help as well, Krainov says, and there's great potential in betting on eSports and selling tickets.

Krainov found it difficult to estimate the costs involved in supporting the Russian eSports market and potential revenues.