The Miami Heat, the Philadelphia Sixers, Paris Saint-Germain, AS Monaco, AS Roma, Schalke 04, FC Copenhagen are among the sports franchises that recently got involved in esports.

While some clubs such as Manchester City or Monaco are carefully moving forward with a few FIFA players, other organizations like the PSG or Copenhagen have placed heavy investment and recruited top teams from League of Legends to Counter-Strike. But why are these clubs investing in esports?

It’s Cheap

The Philadelphia Sixers acquired Team Dignitas and Apex Gaming for a total sum ranging between 5 and 10$ million. James Palotta, co-owner of AS Roma and Boston Celtics, took part in the $7 million fundraising by Fnatic while the Milwaukee Bucks bought a League of Legends (the most popular game in esports) Championship slot for 2.5 $million.

These amounts may at first appear high but are in reality quite a good deal when put in perspective with the financial strength of these groups, the costs to purchase championship slots and invest in established teams. Fnatic is the largest structure in the world. With a dozen teams, the group is present on every continent and even owns its own brand of gaming gear. In contrast, PSG has supposedly paid $70,000 to get the Huma slot in the Challenger Series, a team that was left with no players. More investments have certainly been required in terms of branding and the players’ salaries.

The costs related to the payroll are also lower than in traditional sports.

First, an esports team traditionally has fewer players than in a basketball or football team, not to mention the technical support that surrounds the players in these sports. Secondly, the salaries of the best European and American LoL players range from $500 000 to $800,000 a year (they range between $200 000 to$300 000 a year for the best CS players). While they are not negligible and are increasing strongly from year to year, they remain, for now, lower than what we have been accustomed with traditional sports. For comparison purposes, the club with smallest payroll of Ligue 2 (French Football second division) in 2015 was GFCO Ajaccio with $3.5 million.

Finally, the numbers mentioned above concern the best teams in the world, lower investments are possible for the clubs with less means. It is also necessary to understand these figures from a futuristic perspective, the revenues from esports and the number of spectators are increasing each year. If the growth continues (which is more than likely), the $5 million or $6 million invested by these major groups may triple in the next five years.

A Billion-Dollar Revenue

In 2017, the professional esports industry is expected to generate $ 492 million in revenues, an increase of 51% from 2015. These revenues include media rights, merchandizing & ticket sales, advertising & sponsorship.

Obviously, this is far from the 13 billion generated by the NFL (American Football League) and even the 1.5 billion euros generated by the Ligue 1 in football. A gap that could, however, be reduced rapidly since the esports industry is expected to generate $ 1.5 billion by 2020.

This image and numbers from the article come from Newzoo.

These numbers have nonetheless to be understood correctly. We are talking about the Ligue 1, which is a specific league regarding a specific a discipline in a specific territory. On the contrary, the figures for esports are global and for every game or championship. Even though this might be an explanation for the steady and rapid increase in revenues, this growth may also result in a growing interest (as the authors of this believe) from the general public and the players of the industry. The investors in esports are for most of them not looking for immediate profitability and betting on the long-term returns.

It’s Global

And what if you could access the yen, the won and the yuan through esports? If the PSG has recruited two Korean players on League of Legends, it is with the goal of touching the Asian markets. The same markets that European football clubs are trying to reach with their yearly summer tours.

The PSG’s approach is reinforced by the global image of esport, which doesn’t know any borders. A significant part of the action takes place on the Internet and few people know where the headquarters of the biggest organizations like G2, Fnatic or Liquid are located. These acclaimed brands are not limited to countries and benefit from a worldwide support and exposure. Esports therefore allows sports teams to benefit from this international aura.

It Has A Young Audience

52% of sports fans are aged between 21 and 35 years old and 20% of them are between 10 and 20 years old according to a study by Newzoo. The interest for esports from young people should grow in the coming decades with the popularization of mobile video games. It is estimated that 92% of American youth play video games at least once a week. Unlike traditional sports, the public is very young. That’s the best part, sport teams can get a fan and customer for life.

Credit : Meltdown Montreal

Demography is the most attractive element for investors. Through electronic sport, these sports clubs hope to rejuvenate an audience that keeps getting older. It is no coincidence that basketball, the only American sport to resist this aging, is also the one that invests the most in sports and social networks.

Esports allows clubs to communicate with their fans digitally, to touch the millennial who no longer watch TV and thus to keep them loyal to their brand.

They can reach a public interested in sport, 50% of the esports fans watch the NBA for example, but also allows to reach the other half of this public who is not interested.

How Can You Invest In Esports

Even though investing in esports is more complicated if you’re not a sports team or an investment fund, there are a few ways accessible to anyone.

First, you could create your team (or find an existing one), use some of your resources to grow it and attract sponsors to come once your team reach a certain level of success. Being very time-consuming and risky, it would be more suitable to people passionate about esports than someone merely looking for financial rewards.

Another way to enter the market of esports is to invest in the companies that are likely to benefit from the growth of the industry, the video games developers. We can mention Tecent Holding — which owns Riot Games, the developer of the most popular esports game, League of Legends , there‘s also — Activision Blizzard — which develops games such as Warcraft, Call of Duty, Starcraft and League of Legends — and of course, Electronic Arts — which develops games such as FIFA, Madden and Battlefield.

Prospective investors could also bet on the companies manufacturing gaming gears. You might want to watch BENQ which is becoming a fan favorite in

esports thanks to their gaming brand, Zowie. Pro players praise it for their monitors and gaming accessories. There’s also Razer which specializes in computer hardware marketed specifically to gamers, the company is not

public yet but is considering an IPO in Hong Kong.

If you want to reply to this article, or have a conversation about Esports, feel free to email us at conversation@wearetumult.com

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(This article does not intend to be financial advice)

Numbers come from Newzoo : https://newzoo.com/insights/trend-reports/global-esports-market-report-2017-light/

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