The Multi- Million Dollar ‘Video Game’ Industry

From a few casual arcade games to a multibillion-dollar industry, gaming has taken the world by surprise in the last few decades. Esports, short for electronic sports is competitive gaming at a professional level by players all around the globe. From taking a trip to the arcade room to the global stage with viewers across nations rushing in to watch the biggest players in the industry showdown in a virtual arena. In this write up, we’ll be diving into the one of the most popular topics in our day and age.

Starting off in Stanford University when at the time, the biggest breakthrough in video gaming history, space invaders, was invented in 1962. Students rushed to compete against each other for the highest score to win a one year’s subscription of the Rolling Stone magazine. Bruce Baumgart, allegedly could be the very first winner of an Esports event, winning the space invader competition and joyfully taking home a one-year subscription worth of the world-renowned English rock band – The Rolling Stones.

Baumgart’s skills and endeavours did not stop there, a Rolling Stone writer Stewart Brand and Bruce Baumgart were the pioneers of the very first Esports event in history naming it ‘The Intergalactic Spacewar! Olympics’, this piece of history was the key driving force to what the multibillion-dollar gaming industry is able to achieve today. 

Top eSports games now include League of Legends, Call of Duty and Defense of the Ancients 2 (DOTA 2). As of now, League of Legends is one of the hottest games that can draw crowds from all around the world. Riot Games, the developer of League of Legends, has been able to do something right, as of 2018, the game peaked to have approximately 100 Million players daily playing the game, overthrowing its pioneering competitors. In 2017, the League of Legends (LoL) competitive season invited 24 teams to play for a prize pool of $4,596,591, by 2018 the LoL World Championships had a prize money of $6,450,000.00.

To the general public, playing online video games for a prize pool of millions sounds absurd! However, the newest game in town, Fortnite by Epic has placed its mark in history of Esports by announcing they will provide $100 million to fund prize pools for Fortnite during its first year of competition! The prize pool at the 2018 US Open Prize money reached a record of $53 million, behind an online video gaming competition by considerable amplitude.

As the accessibility of internet is now an essential to our everyday lives, the birth of platforms and bridges for the world to be involved in the gaming scene has only become easier. Live streaming – where you can watch other people including your favourite players to the global stage of gaming competitions being streamed on dedicated platforms.

Twitch, an amazon owned company is a live streaming platform for streamers to showcase their skills to the world, in 2017 it received over 15 million visitors with 355 billion minutes watched. Tyler Blevins, also known as ‘Ninja’ on twitch, streams the ever-popular game Fortnite and has over 160K peaked viewership as well as over 14million followers on the platform. Large numbers on his profile does not stop there, Tyler Blevins has an estimated net worth of $10 million as of 2019 due to sponsorships from companies as well as various other sources.

How much exactly is the gaming industry worth? In 2017, the gaming industry made $116 billion in 2017, with an estimated growth of 10.7% from 2016. With console and PC gaming at popular demand, but as mobile gaming was introduced in 2016, it experienced the largest growth with revenue of $50.4 billion. Gaming growth did not stop there, in 2018 the industry generated almost $135 billion, a 10.9% increase since 2017. With these figures, there has to be astonishing numbers of viewers to support these large values, and indeed there are, global Esports audience is expected to reach a total of 456 million. Large competitions can hardly keep up with the numbers, the LoL Worlds 2018 had over 200 million viewers at once, in comparison, the record for the US Open in 2018 of Naomi Osaka and Serena Williams had 3.1million viewers at once.

Many of us do wonder, how exactly is the global gaming industry able to generate the revenue it shows? Razer Inc. a global gaming hardware company founded by a Singaporean entrepreneur named Min-Liang Tan and Robert Krakoff, is one of the giant factors as to why the numbers are where they are. From laptops to gaming keyboards to software innovation and many more, made ‘by gamers for gamers’, razer has managed to become one of the elite images in the gaming industry for the gamers when looking for new hardware to perk out their rigs. As of 2015 to 2018, Razer’s total revenue has experienced a staggering growth of 123% similar to the time when the global gaming industry experienced its largest growth in 2016 and managed to secure itself a valuation of $4.4 billion.

Early 2019, Min-Liang Tan launched the announcement of making Malaysia its fintech hub, making the step in for the e-wallet craze with over 500,000 sign ups in interest of RazerPay. With the launch of their head office at the Vertical, Bangsar South, Razer Malaysia will be working closely with convenience store 7-11, Kenny Rogers as well as mobile network provider, U-Mobile to drive customers to incentivise on these new rewards.

Esports was able to make step foot into the 2019 South East Asian (SEA) Games, now pioneering as the very first event to incorporate a medal-sport category for Esports. The Esports Malaysia Association (ESM) organised a nationwide search for the best players to compete in the 2019 SEA games in Philippines in November. Five medals are offered in total for Esports including games such as Defence of the Ancients (DotA) 2 as well as Starcraft II.

According to statistics, a decade ago one-off sales of packages home console software dominated 64% of the gaming market. Since then it has fallen drastically to 30%. With the introduction of Esports into the SEA games as well as 2022 Asian Games, gaming companies and live streaming platforms are able to generate revenue through live broadcasts of the epic showdown. As of 2017, the global revenue per stream is $696 million with a growth of 41.3% year on year. 60% of the revenue derives from sponsorship and advertising. One of the core reasons as to why large companies are driving gaming sponsorship as a marketing strategy is the demographic that gaming is able to reach. As of 2017, sponsorship generates $266.3 million revenue for the global revenue per stream, by 2020, it is expected to reach to $655 million.

Malaysia has placed its mark in the eSports scene through a RM 10mil budget during 2019 allocated to Malaysian Digital Economy Corporation (MDEC) for use in developing eSports in Malaysia. Investment opportunities lies within the framework that is set to thrive gamers and eSports, supporting the gamers, building the ecosystem for gamers to be in a competitive environment and ultimately making Malaysians a fierce competition to face internationally.

Kitamen Group, a Malaysian Esports company, strives to educate and change the perceptions within Malaysians that gaming is more than just mashing buttons on a controller. As the popularity grows along with the market, competition is a shear factor that is the downfall for players as well as the uprising for the few. Kitamen provides the space and learning facilities for gamers in Malaysia to train and through educating generating a revenue stream through space rental, event consultancy, membership, franchising, marketing, sponsorship and advertisement.

The future for Esports is filled with endless potentials and opportunities, with the rise of Virtual Reality (VR) and the reliance and our nature in habit to use our mobile devices daily, mobile gaming may soon be the largest contributor to the gaming industry. According to a study by Electronic Entertainment Design and Research, about 67% of Americans play video games on at least one type of device with more than half of those playing on multiple platforms.

World-renowned brands such as Nike and K-Swiss are getting ecstatic with the growth in Esports too, launching specially designed sneakers for Esports players as well as signing sponsorship deals with the big players of the industry, Riot Games and Tencent. According to K-Swiss president Barney Waters, the gaming livestreaming platform, Twitch has more viewers than HBO, Netflix, Hulu and ESPN combined. Companies are looking into the gaming industry to tap into its consumer pool and young men as well, according to Barney, the hardest to reach demographic. 

In my experience, gaming as been able to capture a younger audience more seriously in the past few decades, this depicts the variety of games that are available in the world and the ease of which the audience can connect with these games. However, a few may also argue that the rise of gaming has led to unintended consequences such as addiction, strain to the physical body as well as allegedly violence. Perhaps the future of gaming would be investing in the post gaming careers, services and industry that gamer’s can be fully utilised after their career has ended. Malaysia should focus more on educating Malaysians and opening possibilities to the youth on the future of gaming. Not just within playing games, on the contrary utilising the existing platform to monetise to contribute back to Malaysia’s economy and producing competitive Malaysians putting Malaysia as an internationally competitive opponent.

Written by Kenrick Tan Jin Yau, Intern at 27 Advisory, Studying Mechanical Engineering with Business Management at The University of Manchester. Love travelling around the world to discover more food. Started venturing into different types of games including the major hit, League of Legends at the age of 12. Spending countless hours with friends in honing our mechanical skills and knowledge to the next level. Over time with more discipline I’ve channeled that passion in gaming into taking up a research article on how it has managed to climb to the top in industry today.

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