The $1bn esports market is growing rapidly; however, so are its challenges. A lack of transparency and any meaningful analytics means games can be subject to manipulation. Here, we explore what the future holds.

According to market research, the global gaming industry has now reached more than a decade of double-digit growth, but the esports niche is expanding at an even faster rate. The year 2019 marks a major milestone for the global esports market, which will exceed the billion-dollar revenue mark for the first time. In its 2019 Global Esports Market Report, research company Newzoo predicts further growth of nearly 80% growth by 2022, which it states is a conservative estimate.

Despite the positive news on the growth forecasts, like many markets that undergo such rapid expansion, the esports sector is susceptible to growing pains. Games like Fortnite, League of Legends, and World of Warcraft dominate the markets, making it difficult for smaller developers to get their creations in front of audiences.

A Gap in the Market

Money is pouring into the space; however, insiders are concerned that team organizations are being overvalued compared to their revenues. Sports Business Daily reports that teams with revenues of around $25m are attracting valuations of over $300m, leading to worries that a market correction may be in order.

This issue is compounded by the fact that a lack of effective analytical capability is a critical industry challenge. Esports games are hosted on centralized servers, there’s no meaningful way to collect in-game analytics, and little to stop anyone from manipulating their numbers. The right tools could equip industry participants with insights about player and team performance and demographics, money flows, potential growth opportunities, and so much more. The industry is aware that it’s lacking in this regard, with Deloitte reporting that analytics accounts for over a third of all investment in esports developers.

Perhaps inevitably, with so much money pouring into the space, corruption is also on the rise in esports. Betting on game outcomes means that there’s an increasing prevalence of practices such as cheating by interfering with opponent’s internet connections, for example, or match-fixing. Again, an effective analytics platform could help to solve issues like these by providing the ability to spot suspicious patterns.

Account hacking and theft of in-game assets is another industry challenge. Credit rating agency Experian even highlighted the risks of gamer account hacking in its 2019 Data Breach Industry Forecast, stating that the tendency for online gamers to operate anonymously creates fertile ground for hackers and fraudsters. Furthermore, a player never really “owns” their in-game assets – a developer or publisher could revoke their account at any time.

Is Emerging Technology the Answer?

Taken by themselves, challenges such as the ones outlined here are damaging to the esports sector. However, they also detract from the ability of industry participants to focus on driving further growth and value creation.

With those opportunities in mind, one company is now proposing to use blockchain technology to help overcome some of these issues, while generating unprecedented opportunities for market expansion. Kronoverse believes that blockchain can bring much-needed transparency to the esports sector while introducing new features such as a universal marketplace.

For the benefit of the uninitiated, blockchain technology is simply a ledger of transactions, that’s available publicly for anyone to scrutinize. Digital tokens on the blockchain can be traded between anyone on a peer-to-peer basis. Transactions are witnessed and verified by the computers operating the blockchain network, known as nodes. Once a transaction is complete, it cannot be undone.

Increasing Transparency

Kronoverse is applying these features to esports, bringing a multitude of benefits. The company wants to put esports games themselves on the blockchain, so each player has their own account, each in-game move is recorded as a transaction, and in-game assets are underpinned by digital tokens. All this is archived forever, visible to anyone to see, and cannot be manipulated.

The end result is that games become provably fair, and any aspect of the game or any transactions within it can be analyzed, creating unprecedented transparency for all industry participants. Speculators can bet on any action or outcome, as all data is available in real-time. Players will also own their in-game assets, protecting them from theft or account shutdown.

Furthermore, Kronoverse plans to introduce game interoperability, so that gamers on different games within the network could trade their assets in a universal marketplace. Assets can be utilized from anywhere.

The platform will also offer developers the infrastructure for opening up skills-based tournaments with cash prizes, bringing the opportunity for new revenue streams to game developers.

Blockchain is often thought of as Bitcoin and cryptocurrencies, but it can do so much more. Its peer-to-peer capabilities can solve many of the challenges facing the growing esports sector. Given that the current growth forecasts are classed as conservative, perhaps developments in blockchain could push esports future revenues even higher than originally anticipated.