Market Consolidation Expected to Intensify in Esports

The esports industry has been experiencing a downturn since last year, with signs of a significant market correction. During the 2010s, investors poured millions into team organizations and other entities, captivated by the excitement of competitive gaming. However, the pandemic and subsequent economic uncertainty have led to a decline in investment and a reassessment of the industry's valuation metrics. The British Esports Federation's senior vice president, Dave Martin, notes that the valuation metric used for esports teams is often excessive, with some teams being valued at 30 times their turnover. He argues that esports teams should not be measured using the same metric as tech companies, as they are essentially marketing companies for brands and partners. The industry has seen significant consolidation, with many teams and organizations cutting staff, closing, or merging. The likes of FaZe Clan, 100 Thieves, and TSM have all undergone significant changes, while the Quake Pro League, Gamebattles, and Overwatch League have closed. Excel Esports and Giants Gaming have merged to form GiantX, and Evil Geniuses and Golden Guardians have left the League of Legends Championship Series in North America. Despite the challenges, some organizations are adapting and diversifying their revenue streams. Guild Esports CEO Jasmine Skee believes that esports teams are evolving into esports-and-gaming-led entertainment brands, which is a more viable business model. Guild has transitioned away from a pure-play esports brand and is now focused on a wider media and gaming approach, which has positioned the company to take advantage of the consistent popularity of video games and gaming entertainment. The rise of Saudi Arabia as a major player in the esports industry has also been a significant development. Savvy Games Group, owned by Saudi Arabia's Public Investment Fund, has acquired ESL and FACEIT for $1.5 billion and is investing heavily in the industry. The country is also hosting a new Esports World Cup, which promises to offer significant prize pools. While some business owners in esports welcome Saudi Arabia's investment, others are concerned about the country's human rights record. Dave Harris of Guinevere Capital believes that Saudi Arabia's investment in esports is a strategic move to diversify its economy and reduce its dependence on oil. He notes that the country has had significant success in disrupting traditional sports, such as golf and football, and that esports is likely to be next. The esports industry is expected to continue growing, with a forecasted value of $1.87 billion by 2028. However, the industry is likely to undergo significant changes, with a focus on data-driven monetization, emerging regions, and diversity. Guild Esports CEO Jasmine Skee believes that the industry will continue to evolve and that organizations with strong fundamentals will emerge stronger and leaner. The community and stakeholders working together will be crucial for the future of esports. Dave Martin of British Esports believes that the industry needs to find a way for athletes, organizations, and the ecosystem to work together to increase interest, participation, and investment in esports. He notes that the industry has great people and experienced professionals, but it needs to be backed by good investors with sensible expectations. Overall, the esports industry is undergoing a significant transformation, with market consolidation, changes in valuation metrics, and a shift towards a more sustainable business model. While there are challenges ahead, the industry is expected to continue growing and evolving, with a focus on data-driven monetization, emerging regions, and diversity.