ESPORTS &

GAMING
MARKET
REPORT
PRESENTED BY TIPALTI & BIGR

2023
TABLE OF
CONTENTS
INTRODUCTION
03 STWS • Tipalti • BIGR • Industry Experts

DEFINING THE ECOSYSTEM

07 Definitions: Esports • Gaming • Streaming

STATE OF THE INDUSTRY

15 Market Outlook: Esports • Gaming • Streaming

EXPERT PREDICTIONS
46 Key Trends • Startups to Watch

1 © STWS
© Sports 2023
Tech World Series 2022

EXECUTIVE
SUMMARY
1
Esports Winter
Esports witnessed explosive growth over
the last five years with substantial
investments leading to inflated valuations.
But in 2023 economic downturn, combined
with high operating costs and a lack of
diversified revenues, has led to a collapse
in team valuations. The "Esports Winter"
prompts a chance for the industry to reset,
emphasizing viable business models for a
leaner and more sustainable future.
3
Live Streaming Wars
While Twitch maintains its live streaming
crown, upstart newcomer Kick has surged
in market share since its 2023 launch.
Boasting unrivaled creator revenue
sharing and high-profile deals, Kick has
attracted streamers and viewers alike.
Further exacerbated by Twitch's rocky
relations with its creators after attempts to
stifle content monetization. However,
questions remain on Kick's long-term
viability as an alternative to Twitch and
YouTube Live.
2 ©©Sports
1 STWS Tech
2023 World Series 2022
INTRODUCTION
2
Gaming IP Crossover
The seamless infusion of gaming IP into
movies and TV highlights gaming's central
role in the media and entertainment
industry. A prime example is "The Super
Mario Bros. Movie" surpassing $1 billion in
global box office earnings entering the top
20 highest-grossing films of all time, and
HBO’s critically acclaimed adaptation of
“The Last of Us”.
4
AI Disruption & Benefits
Unlike disappointments with Metaverse
and Web3 use cases, Artificial Intelligence
(AI) is having an immediate and tangible
positive impact on esports, gaming, and
streaming. Current and future applications
encompass efficiencies for creators, cost
cuts in game development, democratized
dev tools, and enriched gaming
experiences. However, concerns exist
about copyright infringement for creators
and job obsolescence for game
developers.
 INTRODUCTION

THE AUTHOR
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3 ©©STWS
1 Sports2023
Tech World Series 2022
 INTRODUCTION

HEADLINE SPONSORS

Tipalti Payment Automations

Tipalti comes from the Hebrew expression for “We handled it.” Tipalti is the only company
handling both Global Partner Payments and Accounts Payable workflows for high-velocity
companies across the entire financial operations cycle: onboarding and managing global
suppliers, instituting procurement controls, streamlining invoice processing and approvals,
executing payments around the world, and reconciling payables data across a multi-
subsidiary finance organization.

Tipalti enables high-growth companies to scale quickly by making payables strategic with
operational, compliance, and financial controls. Companies can efficiently and securely pay
thousands of partners and suppliers in 196 countries within minutes. 2,500+ companies, such
as Amazon Twitch, Roblox, Gen.G, GoDaddy, Roku, WordPress.com, and ZipRecruiter use
Tipalti to reduce operational workload by 80% and accelerate the financial close by 25%,
while improving partner visibility and strengthening financial and spend controls. For more
information, visit tipalti.com.

BIGR
BIGR.AI is an AI application that wholly automates social media posting and content for small
to medium businesses. It is set for launch in Q4 2023 and is created by esports and gaming
veteran Chris Smith, who has over 15 years of marketing experience in the industry. Most
recently Chris and his team worked with global clients across videogames, esports, and
WEB3, under the company Business in Games. Chris maintains a position in the industry as a
leading LinkedIn profile and an advisor to multiple projects. If you’d like to stay up to date
with the progress of BIGR or sign up for the beta, please visit bigr.ai.

4 © STWS 2023
 INTRODUCTION

INDUSTRY EXPERTS
Special thanks to our global industry experts and innovators for their
contributions to this report.

Agnes Wasikowska Marcus Luer Alex Gonzalez Alison Alexander

Bayes Esports Total Esports Enthusiast Gaming Metacampus

Ryan Fairchild Nikko Krättli Michael Ashford Vas Roberts

Odin Law & Media OverActiveMedia Esports Awards Misfits

Jacqueline Garrett Sam Cooke Sam Molloy Harry Clark

GGWP Academy Esports Insider Natizv Racing Mishcon de Reya LLP

Justin M. Jacobson Evan Heby Chris Smith

JMJ Law Tipalti BIGR

5 © STWS 2023
 INTRODUCTION

INDUSTRY EXPERTS

Stefy Bau Hayden Shiels Justin Stefanovic Nate Schanker

Init Esports Kanga Esports Misfits M80

Klaus Kajetski Talia Hurrell Ali Mahvan Caleb Agbenyeaga

YaLLa Esports DreamHack Terasynth Esports Africa

Stuart Smyth Atsu Sikanku Trent Knox Danny Martin

Cassie Agency Esports Africa EBN Esposure

Brendan Growden Adam Bax

Queensland Dept. of Education BIGR

6 © STWS 2023
2 INDUSTRY
Defining the
SCOPE
Ecosystem ESPORTS • GAMING • STREAMING

7 © STWS 2023
DEFINING THE ECOSYSTEM
The terms “esports,” “gaming,” and “streaming” are often used
interchangeably when discussing professional video gamers, social
gaming, and content creators. This fails to grasp the nuances
between each area of the industry. In this section, we will attempt to
define each sub-sector to better understand the market scope,
trends, and growth drivers for each.

ESPORTS GAMING STREAMING

Professional Creative video content

competitive video Social / amateur video of individuals or groups
FORMAT
gaming by teams or gaming playing video games
individuals (usually live streamed)

FAN'S Spectator &

Spectator Active Participant
ROLE Occasional Participant

Sponsorship In-game micro- Views (Ads)

Tournament transactions e.g. Subscriptions
Winnings skins, emotes Fan Donations
PRIMARY
Merchandise Subscriptions e.g. Merchandise
REVENUE
Event Ticket Sales online multiplayer Affiliate Marketing
SOURCES
Media Rights access Sponsorship
Games sales
Hardware sales

8 © STWS 2023
 SECTOR DEFINITION - ESPORTS
ESPORTS
“Professional or semi-professional competitive gaming in an
organized format (tournament or league) with a specific goal/prize,
such as winning a championship title or prize money.”

Source: Newzoo (2022)

TEAMS > GAMES > TOURNAMENTS > PLATFORMS > FANS

play organized in distributed on for viewing by to enjoy

DEVELOPERS BRANDS &

& PUBLISHERS ADVERTISERS INVESTORS
Want the ecosystem to
Use esports marketing Use esports as a
grow to increase their
for extended communication channel
return on investment
monetization to reach an engaged
young audience

BUSINESS SUPPORT
FUNCTIONS
Strategic Planning
Logistics & Event Delivery
HR & Contracting
PR & Comms
Sales & Marketing
Cybersecurity
Payment Systems
Coaching & Training
Compliance
Finance

9 © STWS 2023
 SECTOR DEFINITION - ESPORTS
OVERVIEW OF THE
ESPORTS VALUE CHAIN
The esports value chain is a deeply interconnected ecosystem with no
single dominant element or segment.
The diagram below illustrates the value and money exchange that flows between the
composite parts of the ecosystem including, video platforms; game publishers;
sponsors/advertisers (brands); tournament organizers; esports teams; consumers/fans; and
esports players/creators.

BROADCASTING SPONSORS/
PLATFORMS ADVERTISERS
GAME
PUBLISHERS

ORGANIZERS

TEAMS PRO-PLAYERS/
FANS / CREATORS
CONSUMERS

Notes:
1. Game Publishers can own multiple game titles and be organizers of tournaments for the
games they own themselves.
2. Pro-Players and Content Creators can be independent of a team.
3. Revenue share includes a share of subscription, donation, and advertisement revenues.
4. Revenue share includes a share of sponsorship and media rights revenue.
5. Revenue share includes a share of in-game digital goods.
Source: Newzoo (2022)

10 © STWS 2023
 SECTOR DEFINITION - GAMING
GAMING
"Individual or group participating in amateur or social video gaming."

Arguably “gaming” is no longer merely an entertainment medium or sector of the broader

entertainment market but has rapidly evolved to be an all-encompassing lifestyle. However,
the strict market scope refers to game publishers, game developers, software developers,
gaming hardware, and accessories.

RIBUTORS/RETAILERS
DIST
ST
ERS RE
AM
OP
EL I

NG
V
DE

SE
ME

RV
GA

ICE
S
HARD
GAME PU ISHERS

WARE DEVELOPERS
BL
S
PER
O
VEL
E

D
E
AR ES
W PO
OFT RTS
S

Source: Hackernoon (2022)

11 © STWS 2023
 SECTOR DEFINITION - STREAMING
STREAMING
"Transmitting the screen view of a video game being played along
with a video of the player to an online audience."

Streaming can be divided into “live streaming” and “video on demand” (VOD). Twitch is the
dominant platform for live streaming and also has a VOD archive of previously streamed live
content. YouTube is the dominant platform for VOD content and its YouTube Live Gaming is
the second most popular live streaming platform behind Twitch. Other popular game
streaming platforms include South Korea's AfreecaTV; Rooter, a sports community startup
that pivoted to live streaming during the global pandemic and is now India's largest
streaming platform; and Kick, a new well-funded competitor looking to disrupt Twitch's
dominance through higher creator payouts and less stringent moderation standards.

VIDEO ON DEMAND (VOD) LIVE STREAMING

The gaming content streamed does not need to be exclusively competitive play but can also
include challenges, humorous sketches, and “speed runs” where players attempt to finish a
game as quickly as possible. Many gaming streamers will also create additional content not
related to gaming, but the majority of their videos will have some sort of focus on gameplay.
For example, 74% of all content viewed on Twitch in Q2 2023 was gaming, with Valorant and
League of Legends the most popular game titles.

Source: Twitch (2023)

12 © STWS 2023
 SECTOR DEFINITION - STREAMING
STREAMING
THE CREATOR ECONOMY
The streamers who successfully translate the creation of gaming content into significant
revenue streams are understood as part of the much broader Creator Economy. The Creator
Economy is defined as the class of businesses built by independent content creators,
curators, and community builders, including social media influencers, bloggers, and
videographers, plus the software and finance tools designed to help them with growth and
monetization (Source: Signal Fire).

As with esports athletes being recognized as professionals rather than just amateur gamers,
gaming content creators’ audience and subsequent revenue generation elevate them beyond
amateur gamers sharing videos with a small group of friends.

THE CREATOR ECONOMY TECH STACK

CREATOR CATEGORY TOOLS

BUSINESS BACKEND SOCIAL SCHEDULING +

DISTRIBUTION

FRONT PAGE + LINK PAGE COMMERCE EVENTS

FAN MONETIZATIONS + SUBSCRIPTIONS ADVERTISING + COMMUNITY

AFFILIATE

Source: Shopify (2021)

13 © STWS 2023
 SECTOR DEFINITION - STREAMING
CREATOR ECONOMY
NEW REVENUE SOURCES
Social media and streaming platforms are where content creators have built and monetized
their communities through traditional revenue channels of brand endorsements,
subscription and ad payouts, as well as merchandise sales. However, entrepreneurial
creators have recently seen success in making the leap outside of these channels to
diversified revenue streams. Some of the most notable examples are below:

Company,
Creator Brand, Category Impact
or Project

PRIME Hydration is the official sports drink of UFC, Arsenal

FMCG – FC, and Barcelona FC. The energy drink counterpart
KSI &
PRIME Hydration & PRIME Energy is attracting controversy and potential
Logan Paul
Energy Drink product recalls due to the amount of caffeine and the
perception of marketing to children.

FMCG – In major US big box stores, such as Walmart, and recently

Mr Beast Feastables
Snack Bars launched into UK via supermarket chain Asda.

Formed with ex-Spanish national player Gerard Piqué, the

Sporting League; 7-a-side soccer competition features 12 teams of high
Ibai King’s League
Live Events profile ex-players and streamers. The 2023 final saw
92,000 fans at Camp Nou, home stadium of Barcelona FC.

Dude Perfect 2022 North American arena tour drew over 300,000 people
Media &
Dude on Prime; with 21 of 24 cities sold out. Revealed plans for Dude
Production;
Perfect Dude Perfect Perfect World, a $100M theme park and corporate HQ.
Live Events
World

Over- Media & The Instragram and TikTok creator will write and act in a
Benny Drama
compensating Production scripted Amazon comedy TV series produced by A24.

2.6 million concurrent viewers tuned in to the 2022 edition

Sidemen Sporting League; of the soccer match which raised over $ 2.5 million for
Sidemen
Charity Match Live Events charity. The 2023 match at the 62,500-capacity London
Stadium is already sold out.

Midnight Game Studio has grown to over 50 AAA developers with their first
DrDisrespect
Society Development game title, Deadrop, currently in development.

14 © STWS 2023
3 STATE OF THE
Market
INDUSTRY
Outlook MARKET SIZE & GROWTH

15 © STWS 2023
 MARKET OUTLOOK - ESPORTS
PRIZE MONEY
BY GAME TITLE
The highest-earning esports titles are also some of the oldest with
two of the top five first released over a decade ago.

League of Arena of
Dota 2 Fortnite CS:GO
Legends Valor

Total Prize
$319.7M $163.3M $155.3M $102.4M $74.2M
Money

Valve Epic Valve Riot Games TiMi Studio

Publisher
Corporation Games Corporation (Tencent) (Tencent)

Release
2013 2017 2012 2009 2015
Date

Multiplayer
Real Time Battle First Person Real Time
Genre Online Battle
Strategy Royale Shooter Strategy
Arena

Lazarus T1 eStar Gaming

OG Astralis
Top Cooler Invictus Qiao Gu
Team Liquid Natus Vincere
Teams Esports Gaming Reapers
Evil Geniuses FaZe Clan
Sentinels Samsung Hero JiuJing

Top
Country

The Fortnite World PGL Major LoL 2018 Honor Of

Largest
International Cup 2019 Stockholm World Champ. Kings Int.
Prize Pool
2021 ($40M) ($15M) 2021 ($2M) ($6.4M) 2022 ($10M)

Earnings All Time. Source: esportsearnings.com

16 © STWS 2023
 MARKET OUTLOOK - ESPORTS
PRIZE MONEY
BY AGE
Professional esports is dominated by younger athletes, with over
$91M worth of prize money earned by 21-year-olds and a marked
drop off in earnings after 24 years of age.

PLAYER TOTAL WINNINGS BY AGE

Age when prize money won. Millions. (All time)
$100

$75

$50

$25

$0
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33

Source: esportsearnings.com

17 © STWS 2023
 MARKET OUTLOOK - ESPORTS
ESPORTS WINTER
THE PARTY'S OVER
Once billed as investing in the future of sports, esports is now a
cautionary tale to many would-be investors.
Esports underwent a frenetic period of rapid growth driven by high-profile investments at
inflated valuations. According to Deloitte, investment by Venture Capital (VC), Family Office,
and Private Equity firms in esports teams exploded from $1 million in 2016 to $65 million in
2017 and $193 million in 2018. This was further fueled by game publishers happy to hype the
growth prospects of their leagues.

These unrealistic valuations and inflated costs have hurt the sustainable growth of the
industry resulting in a collapse of team valuations and curtailing further investment.
Excluding the pandemic year of 2022, VC investment in esports is the lowest it’s been since
2016.

“They [Game Publishers] certainly pitched us that the growth of these leagues would
be meteoric, and we all drank the Kool-Aid. What has happened is that growth has not
materialized as fast as we had hoped.”
Ben Spoont, CEO, Misfits (Source: NY Times, Nov 2022)

Investment from VC, Family Office, PE firms.

>

Inflated valuations and focus on "growth" over profit.

>

Player/staff salary and marketing expenses increase.

>

Revenue does not keep pace with increased expenses and valuations.
>

Tough macroeconomic climate causes pullback from brands/sponsors.

>

High costs, low returns causes pullback on further investments.

>

Industry consolidation (fold/merge/sell).

18 © STWS 2023
 MARKET OUTLOOK - ESPORTS
REVENUE SOURCES
ESPORTS VS. TRADITIONAL SPORTS
Sponsorship accounts for over 60% of total revenues for esports
teams, indicating a lack of diversified revenue streams which has left
teams especially vulnerable to economic downturn and drying up of
outside investment.
The majority of esports teams are facing the challenge of generating consistent revenue
streams outside of sponsorship and advertising. Sponsorship deals are typically on shorter
terms than 5-10 year media rights deals in traditional sports, giving esports less long-term
stability over guaranteed revenues.

Another complication compared to traditional sports is that the majority of esports fans are
digital natives and accustomed to streaming content for free via online platforms like Twitch,
rather than linear TV. This makes the prospect of traditional media rights deals more unlikely.

If we compare the distribution of revenue sources below it illustrates the difference in

business models and the precarious financial position many esports teams find themselves in
without this guaranteed annual media rights revenue.

TOP US SPORTS LEAGUES VS. ESPORTS

Revenue Distribution %

NBA Media Rights

Sponsorship
NFL
Licensing

MLB Ticket Revenue

Other
NHL

Esports

0% 25% 50% 75% 100%

Source: Goldman Sachs Global Investment Research, Rockwater, Newzoo

19 © STWS 2023
 MARKET OUTLOOK - ESPORTS
ESPORTS LEAGUES
MISALIGNED INCENTIVES
Unlike traditional sports, where the league and team work
collaboratively to grow the value of the entire ecosystem, game
publishers’ incentives are not always aligned with their teams'.

The game titles played by esports teams are the intellectual property (IP) of the game
publishers that create them. Because esports do not control the IP of the games played, they
are limited in how they can generate revenue and have limited power to influence the
publishers to direct resources toward growing their league.

The purpose of a league in traditional sports is to grow the valuation of each franchise by
generating league-wide revenues that wouldn't be feasible for an individual team to pursue,
as well as the efficient administration and growth of the game.

However, Game Publishers can afford to operate esports leagues as loss-leading marketing
initiatives to drive interest and participation in their revenue-generating video game titles.
This means publishers can sometimes prioritize growth and exposure over sustainable
revenue for the league.

This is highlighted by news earlier this year that the majority of teams in the Overwatch
League, owned by game publisher Activision Blizzard, retained a law firm to begin a
collective bargaining process against the league. Each franchise spent in the range of $7.5 to
$10 million in franchise payments since 2018 and are seeking financial relief from the league
for missing promised revenue goals.

Whereas Activision Blizzard’s Q2 2023 financial statement states that the total revenues from
their Overwatch League “comprise less than 1%” of the company’s consolidated net
revenues”. Furthermore, the company cautioned a risk in their “ability to effectively manage
the scope and complexity of our business, including risks related to our professional esports
business model.”

20 © STWS 2023
 MARKET OUTLOOK - ESPORTS
ESPORTS TEAMS
LAYOFFS
In the last 12 months there has been a 17% reduction in headcount
across the Top 10 most valuable esports teams.
Due to persistent economic uncertainty, reductions in revenue, ongoing high costs and lack
of outside investment, there have been widespread layoffs to team and league support staff
as esports organizations try to reduce their cost base and weather the esports winter.

For example, in 2023 roughly 50 employees in Activision Blizzard’s esports department and
up to 65 employees from subsidiaries of Tournament organizer ESL FACEIT Group (EFG)
were laid off. These layoffs are part of a trend in the broader technology sector with over
222,000 people laid off from tech companies in 2023 so far.

On the “talent” side of the business, teams are slashing player salaries and culling the
number of teams on their rosters to focus on core games, rather than spread thinly over
multiple titles. Unfortunately for some smaller to medium-sized teams cost cutting is not
enough and some teams have ceased operations entirely. Recent examples include
Australian-based organization ORDER and US-based organizations eUnited and Torrent.

ESPORT TEAM HEADCOUNT

Approx. July 2022 vs. July 2023
2022 2023

250

200

150

100

50

0
Ze

id

d9

ic

RG

T1

es
ve

rt

n.
at
TS

qu

us
Fa

ou

po

N
ie

Ge
Fn
Li

ni
Cl
Th

Es

Ge
am

G2
0
10

il
Te

Ev

Source: LinkedIn, STWS Analysis

21 © STWS 2023
 MARKET OUTLOOK - ESPORTS
HYPE CYCLE
HOPE FOR AN ESPORTS SPRING
Does the "Esports Winter" give the industry an opportunity to make a
new start with a focus on sustainable business models?
As previously stated, outside investment through the latter part of the 2010’s rapidly
accelerated the valuations and aspirations of teams and leagues. But professional esports
and the communities that support it had been organically growing for decades prior to this.
With the reset offered by the pullback in investment, esports teams have the opportunity to
focus on a leaner business model whilst investing in the more profitable aspects of their
business, including those enabled by the creator economy.

ESPORTS HYPE CYCLE

Long term growth model of the esports industry

Inflated
Valuations High Costs
Revenue Losses
Sustainable
Rapid Growth
Investment

Valuation
Renewed
Collapses
Investment

Organic New
Growth Cost Cutting Biz Models

22 © STWS 2023
 MARKET OUTLOOK - ESPORTS
CASE STUDY
FAZE CLAN UPDATE
FaZe Clan's boom and bust is a cautionary tale for the industry. The
share price plummeted by 98.5% from its high and is at risk of being
delisted from the Nasdaq.
Founded in 2010, FaZe Clan brands itself as the “most popular esports and entertainment
organization in the world” and claims to have an audience of 350M. On July 20th, 2022, FaZe
Clan became the first Esports and Gaming Lifestyle brand listed on the Nasdaq, trading under
the ticker symbol FAZE through a SPAC merger with B.Riley Principal 150 Merger Corp.

The IPO valued FaZe at $725M but a rapid collapse in the stock price has prompted Nasdaq to
issue a “notice of Delisting” in March 2023 after the company failed to close trading above the
$1 minimum compliance threshold for 30 consecutive days. FaZe was given until September
19th, 2023 to rectify this. At the 2023 Annual Meeting, shareholders voted to approve a
reverse stock split that will lift the per-share price above the $1 threshold once completed.

FAZE CLAN SHARE PRICE

Daily High and Low (July 2022 - July 2023)
$25
Peak: $24.69

$20

$15

$10

$5
Low: $0.37
$0
Au l 22
22

22

22

23

23

23

23

23

3
t2

c2

r2

l2
g

ov

ar

ay

n
Ju

Ju
Oc

Ap
De
Se

Ja

Fe

Ju
M

M
N

Source: FaZe Holdings Inc, SEC Filings

23 © STWS 2023
 MARKET OUTLOOK - ESPORTS
CASE STUDY
FAZE CLAN UPDATE
Is the collapse of FaZe Clan symptomatic of the headwinds facing the
broader esports ecosystem or a failure of their own creation?
In last year’s report, we stated that “FaZe Clan typifies the potential growth but also the
struggles of esports teams to become sustainable, diversified businesses.” This was
specifically referencing their overreliance on sponsorship with nearly 50% of FaZe Clan's
total revenues in 2021 from that category. This also referred to the opportunity for FaZe's
diversification into new revenue streams, including leveraging the Creator Economy through
their roster of talent and influencers and strong brand affinity amongst fans.

In the October 2021 press release announcing the planned Nasdaq listing, CEO Lee Trink
stated that “FaZe Clan plans to further diversify its revenue streams with user monetization,
expansion of its global footprint, and investment in new growth opportunities across the
Creator Economy.” However, these new revenue streams have not materialized.

Furthermore, a series of controversies and negative public statements involving FaZe

founding creators has led to potential brand damage and jeopardized core sponsorship
revenue. Since January 2023 when it announced deals with Nike and Porsche, FaZe has not
announced any new partnerships. During the same period in 2022, FaZe announced seven
new brand partnerships, including deals with Disney and the NFL.

Source: FaZe Clan (2023)

24 © STWS 2023
 MARKET OUTLOOK - ESPORTS
CASE STUDY
FAZE CLAN UPDATE
FaZe Clan’s perceived edginess is part of the draw for much of their
young, male audience. But also presents a risk for major brands
hyper-focused on protecting their reputations when deploying
diminished sponsorship budgets.

Team founders and current high-profile creators such as Richard “FaZe Banks” Bengston and
Nordan “FaZe Rain” Shat, have publicly criticized the company and executive leadership.
Additionally, Shat has been accused of making sexist comments towards women in gaming,
including misogynist comments about actress and streamer Grace Van Dien upon her signing
with FaZe Clan. Only days after signing with the team in May 2023 and the negative public
comments from Shat, Van Dien removed the team from her social media profiles and has not
been active with the organization since.

Shat recently stated that when discussed with four fellow founders, the consensus was they
didn’t really care if the team would lose several sponsors, including McDonalds and Porsche,
if Van Dien wasn’t kept on the roster. The comments from Shat highlight the friction teams
like FaZe have in attempting to broaden their mainstream appeal to satisfy sponsors whilst
not alienating their existing fan base and creators.

Incidents like this also reinforce mainstream perceptions of the esports industry as an
unwelcoming place for women. The lack of female esports players is a persistent issue and
comes at a time of increasing growth, investment, and sponsorship in women’s sports.

25 © STWS 2023
 MARKET OUTLOOK - ESPORTS
CASE STUDY
ESPORTS IN THE OLYMPICS
The Olympic Esports Series (OES) is a new global virtual and
simulated sports competition created by the International Olympic
Committee (IOC), in collaboration with various international sporting
federations and game publishers.
The inaugural series took place from March 2023 with online qualification rounds across the
10 featured “sports” and culminated in a live, in-person final in Singapore in June as part of
the “Olympic Esports Week”. The OES builds upon the “Olympic Virtual Series” (OVS)
introduced at the 2021 Tokyo Olympic Games. The OVS became the first-ever Olympic-
licensed event for physical and non-physical virtual sports, and according to the IOC,
featured nearly 250,000 participants from more than two million entries.

Sport International Sporting Federation Game Title

Archery World Archery Federation Tic Tac Bow

Baseball World Baseball Softball Confederation WBSC eBASEBALL: POWER PROS

Chess International Chess Federation Chess.com

Cycling Union Cycliste Internationale (UCI) Zwift

Dance World DanceSport Federation Just Dance

Motor Fédération Internationale de l’Automobile

Gran Turismo
Sport (FIA)

Sailing World Sailing Virtual Regatta

Taekwondo World Taekwondo Virtual Taekwondo

Tennis International Tennis Federation (ITF) Tennis Clash

Sport International Shooting Sport Federation

Fortnite
Shooting (ISSF)

26 © STWS 2023
 MARKET OUTLOOK - ESPORTS
CASE STUDY
ESPORTS IN THE OLYMPICS
The IOC’s remit is to grow the impact and value of the Olympic
movement, including engaging with younger audiences which
esports and gaming naturally skew to. However, the game titles
selected for the OES led to blowback from core esports fans.
The decision by the IOC to exclude major esports titles such as Dota2, Counter-Strike: Global
Offensive (CS:GO), and League of Legends (LoL), and therefore the most high-profile pro
players, prevented the OES being seen as a legitimate competition by many esports fans and
those working in the industry. Until the late inclusion of Fortnite, none of the highest-earning
competitive esports titles were included in the OES.

Unfortunately, the way Fortnite was included as “sport shooting” rather than the core game
mode of Battle Royale, further alienated existing esports fans. The IOC is renowned for
incredibly strict controls over its brand. The violent nature of many of the most popular
esports game titles, including FPS and Battle Royale titles like Fortnite, is the intractable
issue with their inclusion in anything connected with the Olympic brand.

The inaugural OES finals also featured exhibition matches in Rocket League, Street Fighter 6,
and NBA2K23. Indicating that with the caveat on violence as above, the IOC may be open in
the future to including some of the more established esports titles.

“It is important to us that the featured games align with the Olympic values. This includes
participation inclusivity, such as technical barriers to entry, the gender split of the player
base, and avoiding any personal violence, against the backdrop of the IOC’s mission which
is to unite the world in peaceful competition.”

Source: IOC Official Statement (2023)

27 © STWS 2023
 MARKET OUTLOOK - GAMING
GAMING
GLOBAL MARKET SIZE
The global gaming market is estimated to be the most valuable media
and entertainment category, worth between $175B and $335B
annually, with Mobile Gaming generating over half total revenue .
The market size most frequently cited for the global games industry comes from Newzoo,
which puts it at $175.8B in 2021 and $182.9B in 2022. Gaming and esports investment fund
Bitkraft Ventures estimate a total global market size of $335.5 billion in 2021 and Statista
estimates the same amount in 2022 — nearly $160B higher than Newzoo’s estimate. Taking
any of the listed estimates, the gaming industry is still bigger than any other media and
entertainment category, including linear TV, on-demand/streaming media, box office
movies, or music.

GLOBAL GAMING INDUSTRY REVENUE

By market segment. Billions (2022)

Cloud tream
eS
ing

$4.34
Liv

$11.69

wnloads
Mobile Games Do

$19.98

e Advert
am i
g

sin
In-

$286.50 $32.51

ne Game
nli
O

$26.14
ysical
Ph
wo
et r $11.32
…
N

$3.65

Source: Statista

28 © STWS 2023
 MARKET OUTLOOK - GAMING
GAMING
TOP 10 GLOBAL MARKETS
Of the top 10 largest gaming markets, the USA accounts for 33% of
total revenue whilst only having 16% of players. China has the second
most revenue with 31% but the highest amount of players at 55%.

GAMING REVENUE GAMING USERS

By country. Billions (2022) By country. Millions (2022)

USA China

$46.40

744.1

China

$44.00

USA Japan
77.1
Japan Germa… UK
Germa… Fran…
209.8
$6.50 $5.50
49.5 38.8
$19.10
France Italy UK Sou…
38.5
$4.10 $3.10 Brazil 34.1
South Korea Italy
Canada Brazil 102.6 Can…
$7.40 $2.60 36.1

Source: Newzoo

29 © STWS 2023
 MARKET OUTLOOK - GAMING
GAMING
VALUE PER USER
Japan is the most valuable market per user with an average of $24.77
earned for each user, followed by the USA with $22.12 per user and
South Korea with $21.70 per user. Although China has the highest
amount of players there is a low amount of revenue per user.

GAMING REVENUE PER USER

By country. (2022)

Japan Canada UK

$24.77
$15.00 $14.29

USA South Korea

Germany Italy

$13.13 $8.59

$22.12 $21.70
China
France

$10.57 $5.91

Source: Newzoo

30 © STWS 2023
 MARKET OUTLOOK - GAMING
GAMING
FLATTENING GROWTH
US consumer spending on video game hardware, content, and
accessories was $56.6 billion in 2022, a decline of 5% compared to
2021 but still well above pre-pandemic levels.
Although consumer spending in 2022 didn’t reach the all-time highs of 2021, spending during
the past year was 30% higher than 2019 pre-pandemic levels. Cloud gaming, which allows
users to stream games over the internet via individual purchases or platform subscriptions,
has seen strong sustained growth. Although physically sold games still account for a
significant percentage of total revenue, they are in a steady decline and the only market
segment that has seen a negative growth rate in the last five years. Macroeconomic forces
including inflation, supply chain issues, and the rising cost of living are expected to flatten
growth in the market into 2023.

US VIDEO GAME SPENDING

Billions

$60

$40

$20

$0
2017 2018 2019 2020 2021 2022 2023E
Source: The NPD Group, Games Market Dynamics

31 © STWS 2023
 MARKET OUTLOOK - GAMING
MSFT X ATVI UPDATE
MICROSOFT EDGES CLOSER
TO ACQUISITION DEAL
Microsoft announced in January 2022 that it is acquiring Activision
Blizzard for $68.9B. However, the deal has been held up by regulatory
scrutiny over concerns it would stifle competition.
Microsoft has spent the last year negotiating with US and overseas antitrust regulators to
calm fears the deal would threaten competition in various gaming markets. The deal has
been approved by regulators in 40 countries, including the US Federal Trade Commission
(FTC) which recently withdrew its legal challenge to block the acquisition, leaving the UK's
Competition and Markets Authority (CMA) as the final hurdle.

After initially blocking the merger over concerns that Microsoft would gain too much market
dominance in cloud gaming, the UK's CMA agreed to reopen negotiations with the tech giant.
In a concession to allay anti-trust concerns, Microsoft reached an agreement with rival
hardware makers Sony, Nvidia, and Nintendo to make Activision Blizzard’s popular Call of
Duty game title available on their gaming consoles. Even with this concession the UK CMA
expressed concerns that the merger would still give Microsoft too much dominance in cloud
gaming and gaming subscriptions.

Microsoft was originally set to finalize the acquisition on July 18, 2023, but due to regulatory
scrutiny, the companies set a new October 18, 2023 deadline to close the deal.

32 © STWS 2023
 MARKET OUTLOOK - GAMING
MSFT X ATVI
GAMING BEHEMOTH
If approved, the acquisition of Activision Blizzard will make Microsoft
the second-largest game company by revenue globally.
If the deal is completed Microsoft will become the world's second-biggest gaming company
by revenue, behind China's Tencent Holdings Ltd. and jumping ahead of Japan's Sony Group
Corp. Through its Xbox division, Microsoft is already one of the largest game console
manufacturers globally, and the proposed acquisition would be the largest in Microsoft's
history, coming in at over double the $29 billion it paid for LinkedIn in 2016.

GAMING COMPANY REVENUE

Billions (2021)
$40

$30

$20

$10

$0
EA
t

ny

ft

le

se

o
I

rd
TV
en

pl

nd
so

og

za
Ea
So

Ap
xA
nc

te
ro

iz
Go

et
Te

in
ic

Bl
ft

N
M

N
so

n
io
ro

is
ic

tiv
M

Ac

Source: Newzoo

33 © STWS 2023
 MARKET OUTLOOK - GAMING
GAMING
CROSSOVER IP: FILM & TV
This year the Super Mario Bros. Movie became the first film based on
gaming IP to gross more than $1 billion.

A major trend to emerge in 2023 is the success of gaming IP crossing over into other parts of
the broader entertainment industries, most notably film, and television. Hollywood is no
stranger to dipping back into existing IP with reboots, prequels, and sequels. For example,
some of the biggest blockbuster films of 2023 include Top Gun 2, Indiana Jones and the Dial
of Destiny, Avatar: The Way of Water, and Dune: Part Two. The preference of studios to
greenlight franchises is obvious they come with known characters and an existing engaged
audience.

Gaming IP is being mined as a rich source of material that also brings with it an established
universe of characters and a base audience. Using gaming IP for movies isn’t a new
phenomenon. The Tomb Raider, Resident Evil, and Mortal Kombat franchises are notable
examples. Many films have also featured gaming IP contiguous to the central story, such as
Ready Player One, Wreck It Ralph, and Fall Guy. However, the scale of success of the explicit
use of gaming IP, including characters and storylines, in film and TV is new.

2022 was a record year at the

US box office for films based
on gaming IP, driven by the
success of Sony’s Uncharted
and Paramount’s Sonic the
Hedgehog 2. This has
continued into 2023 with The
Super Mario Bros. Movie box
office gross of over $1 billion
making it one of the top 20
highest-grossing films of all
time. A far cry from the 1993
live-action Super Mario Bros
film which was a critical and
financial failure

34 © STWS 2023
 MARKET OUTLOOK - GAMING
GAMING
CROSSOVER IP: FILM & TV
Gaming IP has traditionally been used for action films and comedies
but in 2023 it is also seeing success with serious dramas targeted at
adult audiences.
On the small screen, HBO Max gained critical and commercial acclaim for The Last of Us, a TV
series based on Sony’s 2013 eponymous game with the series averaging over 30 million
viewers per episode. Netflix saw recent success with their animated series Arcane, based on
Riot Games’ League of Legends, winning the 2022 Emmy for Outstanding Animated Program.
This was the first Emmy win for a TV series based on gaming IP.

Netflix is continuing to invest in this area with at least five gaming IP movies or series in the
planning or production stage including based on Epic Games’ Gears of War and 2K’s
BioShock.

Film / Series Game Publisher Studio Status

Uncharted Naughty Dog (Sony) Sony Released 2022

Sonic The Hedgehog 2 Sega Paramount Released 2022

Super Mario Bros. Nintendo Universal Released 2023

Twisted Metal Sony Sony Released 2023

Borderlands 2K (Take-Two Interactive) Lionsgate Films 2024 Release

Bioshock 2K (Take-Two Interactive) Netflix TBA

The Last of Us Part II Naughty Dog (Sony) HBO TBA

Gears of War Epic Games Netflix TBA

Minecraft Mojang Studios (Microsoft) Warner Bros TBA

Metal Gear Solid Konami TBA TBA

Duke Nuke Em Embracer Group TBA TBA

35 © STWS 2023
 MARKET OUTLOOK - STREAMING
STREAMING
UNDERSTANDING THE MARKET
Live streaming platforms continue their decline from 2020 and 2021
highs but still remain well above pre-pandemic levels.
Twitch remains the dominant live streaming platform, with 71% of live streaming hours
watched in Q2 2023, followed by YouTube Live Gaming with 16%. Facebook’s stand-alone
gaming platform was discontinued in Q3 2022 which has corresponded with a sharp drop in
their market share. Controversial upstart Kick made an impact by attracting talent and
viewers through an industry-best creator revenue share and high-profile but non-exclusive
deals with streamers such as xQc and Amournath. Kick has 2% of hours watched, a 79%
increase over the course of Q2 2023. However, questions remain on its long-term viability as
an alternative to Twitch and YouTube Live.

LIVE GAMING HOURS WATCHED

Millions.

Twitch YouTube Gaming Facebook Kick

7,500

5,000

2,500

0
20 Q2
20 Q3
20 Q4
20 Q1
20 Q2
20 Q3
20 Q4
20 Q1
20 Q2
20 Q3
20 Q4
20 Q1
20 Q2
20 Q3
20 Q4
20 Q1
20 Q2
20 Q3
20 Q4
20 Q1
Q2
18
18
18
19
19
19
19
20
20
20
20
21
21
21
21
22
22
22
22
23
23
20

Source: Stream Hatchet; Statista

36 © STWS 2023
 MARKET OUTLOOK - STREAMING
TWITCH
GROWTH CORRECTION
Although the number of concurrent viewers and active channels on
Twitch has declined from the pandemic-induced highs of 2021 and
2022, it is still showing strong growth from 2019 pre-pandemic
levels.

AVG CONCURRENT VIEWERS AVG CONCURRENT CHANNELS

Millions Thousands
2023 2023
2022 2022
2021 2021
2020 2020
2019 2019
2018 2018
2017 2017
2016 2016
2015 2015
2014 2014
2013 2013
2012 2012
0 1 2 3 0 25 50 75 100 125

Source: Twitch Tracker

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 MARKET OUTLOOK - STREAMING
STREAMING
UNDERSTANDING THE MARKET
Live streaming platforms have recently introduced several changes in
creator compensation in the face of criticisms from creators as to the
financial viability of current monetization arrangements.
Twitch announced in June 2023 they would be introducing a new “Partner Plus” tier for
creators to earn a 70% revenue share, up from the existing 50% arrangement. However,
data shows that from the approximately seven million monthly total Twitch streamers,
42,000 qualify for the Partner tier and only around 1,000 (2.5%) will qualify for Partner Plus.

YouTube announced it was lowering the eligibility thresholds for the YouTube Partner
Program (YPP) in the US, US, Canada, Taiwan, and South Korea. It plans to gradually roll out
these changes to other countries where YPP is available.

Kick has continued to directly attack Twitch's market dominance with an industry high 95%
revenue share to creators. Kick Co-Founder, Ed Craven, announced in June details of a
soon-to-be-released "Creator Programme" that pays creators hourly for their streaming
efforts. Creators on Kick will receive a guaranteed payment for each hour they stream, with
a formula determining the amount paid based on the number of hours streamed, average
viewers, and viewer demographics and engagement.

YouTube Live
Twitch Kick
Gaming

Primary Revenue
Subscriptions Advertisements Subscriptions
Source

Base Revenue Split 50/50 Creators 30/70 Creators 5/95 Creators

Live Gaming Hours

5.09 Billion 1.15 Billion 176 Million
Watched (2023 Q2)

Total Monthly Users 140 Million - 12 Million

38 © STWS 2023
 MARKET OUTLOOK - STREAMING
TWITCH
CREATOR COMPENSATION
Twitch has the lowest revenue share payouts of any major live
streaming platform.

AFFILIATE PARTNER

CRITERIA
To qualify, your channel must have had the following during the previous thirty days:

At least 50 followers An average of at least 75 concurrent viewers

An average of three or more concurrent At least 12 unique broadcast days
(simultaneous) viewers At least 25 hours of broadcast
At least seven unique broadcast days Partner Plus: At least 350 monthly recurring paid
At least 500 minutes of broadcast subscriptions for three consecutive months

PRIMARY REVENUE SOURCES

1. Subscriptions
Viewers can pay to subscribe to a Twitch
channel. Subscriptions start at $4.99 per
month.
When viewers subscribe, they receive perks
like ad-free viewing and access to live chats.
In addition, many Twitch streamers also
entice subscribers with exclusive content.
Affiliates receive 50% of subscription
revenue.
2. Donations
Viewers can donate to streamers by giving a
piece of Twitch currency, called a “Bit.” Each
Twitch Bit is worth one cent.
Unlike with subscriptions, Twitch Affiliates
receive 100% of their Bit donations.
3. Game Sales
During each Twitch stream, Streamers can
choose to add a “Buy Now” button for the
game they’re playing. The streamer will
receive 5% of every sale that originates from
their stream.
1. Subscriptions
50% of subscription revenue.
Partner Plus: From October 2023, qualifying
streamers with receive 70% of their
subscription revenue on the first $100,000
earned. Above that $100,000 threshold, they
will only receive 50% of revenue.
2. Donations
Same as Affiliates.
3. Game sales
Same as Affiliates.
4. Advertisements
Each Twitch Partner earns 55% share of ad
revenue every time an ad plays during their
stream.
5. Other
Becoming a Twitch Partner opens up
additional revenue-making opportunities,
including promotions and sponsorships.
Partners also receive custom channel emotes
and heightened support services.

39 © STWS 2023
 MARKET OUTLOOK - STREAMING
YOUTUBE
CREATOR COMPENSATION
YouTube has paid out more than $30 billion to creators in the past few
years from ads, merchandising, and other service features.

YOUTUBE PARTNER PROGRAM

CRITERIA
To qualify, your channel must have had the following during the previous 12 months:

Be “in good standing” with YouTube

A minimum of 500 subscribers (previously 1,000)
At least 3,000 hours of watch time (previously 4,000)
YouTube will pay out streamers when their video views reach a balance of $10

PRIMARY REVENUE SOURCES

1. Advertising Revenue
Google places display, overlay, and video ads on creators' videos.
YouTube keeps 45% of advertising revenue with 55% going to the video creator. Estimated creators
earn between 0.3 cents to 1 cent per video view.
2. Subscriptions / Donations
Access to subscription tools like channel memberships and donation tools like Super Thanks, Super
Chat, and Super Stickers.
Partners receive 70% of subscription and donation revenue.
3. YouTube Shopping / Affiliate Marketing
YouTube Shopping is the creator's storefront on YouTube where they can directly sell their products
such as merchandise to their fans.
Affiliate marketing has a link in the creator's video description directing viewers to a third-party site
where they can purchase the recommended product or service. If the viewer ends up making a
purchase, the YouTuber will receive a percentage of the purchase price.
4. Sponsorship / YouTube BrandConnect
BrandConnect uses Google technology to understand the creator's audience and matches them with
brands looking to advertise on branded content campaigns.

40 © STWS 2023
 MARKET OUTLOOK - STREAMING
KICK
CREATOR COMPENSATION
Kick has the highest creator payout and lowest monetization
requirements of any major live streaming platform.

AFFILIATE VERIFIED

CRITERIA
To qualify, your channel must have had the following in the last 30 days:

At least 75 followers An average of at least 75 concurrent viewers per

At least 5 hours of stream time
stream
At least 12 unique stream days
At least 30 hours of stream time
At least 20 active subscribers
At least 300 "Chatters" (viewers interacting in the
stream's chat)

PRIMARY REVENUE SOURCES

1. Subscriptions 1. Subscriptions
Viewers can pay to subscribe to a Kick Same as Affiliate
channel. 2. Donations
Affiliates receive 95% of subscription Same as Affiliate
revenue. 3. Payouts
2. Donations Same as Affiliate
Viewers can donate to streamers by giving a
piece of Twitch currency, called a “Bit.” Each
Twitch Bit is worth one cent.
Unlike subscriptions, Kick Affiliates receive
100% of their donations.
3. Payouts
Kick will pay streamers via Stripe once a
month, or on the same day after their stream
ends via the cryptocurrencies Bitcoin or
Ethereum.

41 © STWS 2023
 MARKET OUTLOOK - STREAMING
STREAMING
TWITCH TENSIONS
Twitch has made a series of public missteps in engaging its creator
community, especially around restricting creators' ability to monetize
their own content on the platform.
Twitch revoked its new branded-content guidelines in June this year only a day after
announcing them following a backlash from creators. The planned changes would have
completely banned “burned-in” in-stream video, audio, and display ads on the platform as
well as restricting on-screen logos to a maximum of 3% of the screen size. Limiting creators'
ability to maximize revenue from external sponsorship deals.

In the announcement of their reversal, Twitch stated the new Branded Content Guidelines
“impacted your ability to work with sponsors to increase your income from streaming. These
guidelines are bad for you and bad for Twitch, and we are removing them immediately.” The
practically unattainable requirements for the new Partner Plus program further strained an
already tense relationship between Twitch and its creators.

These frustrations are exemplified by Kaitlyn “Amouranth” Siragusa's tweets from her
personal account criticizing Twitch's business model and how it works against the streamers
on which the platform relies.

The perception of Twitch as being "anti-creator" has led many to actively look to alternative
platforms including Kick, where they receive a significantly higher cut of their own
subscription revenue, or those unsure of the reputation of the new platform are looking
toward more established platforms like YouTube Live.

42 © STWS 2023
 MARKET OUTLOOK - STREAMING
KICK
RAPID GROWTH
In July 2023 Kick announced it had reached 12 million accounts and is
intentional about using its 95% creator revenue share to attack
Twitch's market dominance.

Source: Twitter/X

43 © STWS 2023
 MARKET OUTLOOK - STREAMING
KICK
OWNERSHIP
Kick is a sub-brand of Easygo Gaming, an Australian-based company
founded in 2016 by Ed Craven and Bijan Tehrani. Other Easygo brands
include crypto gambling companies Stake.com, PrimeDice, and Twist.

Easygo states that its "core focus is in creating immersive online experiences, including well-
designed casino games, crypto platforms, and sportsbooks." Due to different regulatory
requirements for online casinos and sports betting, the Easygo brands are operated by
different holding companies. For example, Stake.com is operated by Medium Rare NV, a
company incorporated in Curaçao where it holds an online casino license. Although the legal
structures and entities underpinning the companies may be different, Stake.com and Kick’s
sports sponsorships illustrate how Easygo Gaming brands operate under the same umbrella
and can be best understood as sister brands to each other.

Stake.com and Kick both have sponsorships with English Premier League club Everton FC
and Formula 1 team Alfa Romeo that are largely being treated as interlinked. Staff working at
Easygo in partnership roles collectively list securing sports sponsorships for both Stake.com
and Kick as being in their job responsibilities. For example, in January 2023 Kick signed a
multi-year sponsorship deal with Alfa Romeo for Kick's name and logo to replace
Stake.com’s as the F1 team’s title sponsor in countries where gambling or sports betting ads
are not allowed. Stake.com is the front-of-shirt sponsor for Everton and in August 2023 Kick
signed on as the club's shirt sleeve sponsor. The Premier League’s ban on gambling sponsors
takes effect in the 2026-27 season, raising the possibility that Kick will replace Stake.com as
the club's main sponsor as it has with Alfa Romeo.

Source: Stake.com, Everton FC

44 © STWS 2023
 MARKET OUTLOOK - STREAMING
KICK
LONG TERM VIABILITY
The long-term viability of Kick as a genuine alternative to industry
incumbents Twitch and YouTube Live hinges on whether it can attract
and retain creators and their audiences, whilst finding revenue
sources to underwrite its high creator revenue share.
Some industry sources have theorized that Kick doesn’t need to focus on financial
sustainability due to the high profitability and complementary nature of its gambling sister
brands, such as Stake.com. According to data from Stream Hatchet, Kick’s second most
popular category is Slots & Casino with 39M hours watched in Q2 2023. In comparison, Slots
was Twitch’s 27th most popular category with 43.6M hours watched.

However, Easygo Cofounder Ed Craven has publicly stated that Stake.com and Kick will
remain separate entities and the goal for Kick is profitability, with advertising being the most
obvious path to a sustainable business model. Craven also stated the generous 95/5 creator
revenue split would always be a feature of the platform.

Kick’s large investment to lure high-profile creators to their platform has often been
compared to similar deals by Microsoft for their now defunct streaming platform, Mixer.
Microsoft shuttered the platform in 2020, less than a year after signing Fortnite streamer
Tyler “Ninja” Blevins to a $50 million deal to stream exclusively on the platform. Highlighting
how big-name deals are no guarantee of success.

Migrating an entire following or rebuilding an audience from scratch on a new platform is a

considerable task for creators. Therefore, taking the risk of moving to a new platform needs
to be weighed up against any potential benefits. By offering non-exclusive deals and a very
generous revenue share, Kick has been able to attract top creators without the risk of losing
their existing fan bases on other platforms. A few months before signing a non-exclusive
deal with Kick, Amouranth said she would “not go exclusive [to Kick as] at least right now,
the reputation is risky”. Seven of the top 10 Kick creators streamed primarily on Kick in Q2
2023, while xQc, Drb7h, and PaulinhoLOKObr had the majority of their streaming on Twitch.

As the platform irons out issues with content moderation, it will also likely attract more
creators who are confident in the long-term growth prospects of the platform.

45 © STWS 2023
4 EXPERT
Market Forecast
PREDICTIONS
& Who To Watch WHERE ARE WE GOING?

46 © STWS 2023
 EXPERT PREDICTIONS
KEY TAKEAWAYS

ESPORTS MONETIZATION
What is the greatest
challenge currently facing
the industry?

WEB3
What has been the most
overblown or overhyped
trend in the last 18
months?

What emerging ARTIFICIAL INTELLIGENCE

developments, changes or
trends are you most excited
about over the next 18
months?

47 © STWS 2023

INDUSTRY
CHALLENGES
ESPORTS
MONETIZATION
What is the greatest
challenge currently facing the
industry?
Experts this year echoed last year’s
sentiments that the monetization and
effective management of esports teams
is the biggest issue facing the industry.
As noted in last year’s report, esports
teams face a persistent problem with
sourcing diversified and sustainable
revenue sources, rather than an over-
reliance on sponsorship.
However, this year, experts also
highlighted the importance of game
publishers in supporting and growing
their competitive gaming ecosystems,
especially at a time when external
investment into this area has slowed.
Many experts indicated they believe
game publishers have an essential role
in helping teams develop sustainable
business models, which could include
sharing revenue generated at the
publisher level.
48 © STWS 2023
EXPERT PREDICTIONS
"If Esports is meant to help build the
longevity and importance of games, the
publishers/developers as "owners" of the
game IP need to treat other parts of the
ecosystem better. There is a fair model out
there and that is about transparency and
sharing the cake fairly. "
Marcus Luer
Total Esports
"The Esports industry is still struggling to
sustainably monetize its operations. The
tournament winnings and sponsorships
are not enough to cover the running
expenses of most esports teams with only
a few teams managing to break even. The
successful ones need to find alternative
revenue routes, such as creator rosters or
merchandise sales.
Agnes Wasikowska
Bayes Esports
"Overspending by esports orgs without
the revenue to sustain it.
Hayden Shiels
Kanga Esports
"Lack of esports revenue streams below
the publisher level, either because of lack
of creativity or lack of availability.
Ryan Fairchild
Odin Media & Law
 EXPERT PREDICTIONS
INDUSTRY CHALLENGES
ESPORTS BUSINESS MODELS
The long-term viability of esports is dependent on evolving business
models and monetization opportunities, including revenue shares at
the league and publisher levels.

“It’s important that publishers step in to find a solution to create digital revenue
opportunities for the esports ecosystem they have built and benefit from. It’s clear that
relying solely on media and sponsorship deals, especially in this kind of market,
simply will not work.”
Arnold Hur, CEO, Gen. G. (Source: Bloomberg)

A microtransaction is where players purchase virtual products and items for small sums of
money, usually via an in-game currency. These items are typically purely cosmetic such as
new skins which alter a player’s appearance or weapon, but can also give an advantage or
unlock new content in the game. The latter type is called “play-to-win” and is more common
in mobile games rather than competitive esports titles.

In-game microtransactions are a major source of revenue for game publishers. For example,
out of the $7.5 billion revenue Activision Blizzard generated in 2022, approximately 80% was
from microtransactions, downloadable content (DLC), subscriptions, and licensing royalties.
The other 20% was from game product sales.

Esports leagues and teams are beginning to see a share of the revenue from these
microtransactions. Skin bundles themed around Riot Games’ Valorant Champions Tour (VCT)
generated over $20 million in sales this year, with 50% of the revenue going to VCT partner
teams that competed at the 2023 LOCK//IN tournament. A similar revenue share
arrangement was in place for the 2022 VCT Champions event, with a limited-edition-themed
skin bundle generating over $16m in revenue split between qualifying teams. According to
John Needham, Riot’s President of Esports, “This is where we’re going to disrupt the
broadcast revenue formula, because that [microtransaction revenue share] scales”

CS:GO publisher Valve also has revenue share arrangements in place with their team and
players, announcing in August 2022 that over the last year, it had shared more than $70
million generated from the sale of in-game stickers and capsules.

49 © STWS 2023
 EXPERT PREDICTIONS
INDUSTRY CHALLENGES
ESPORTS BUSINESS MODELS
Rather than operating as pure-play professional teams driven by
sponsorship and prize money, esports teams are pivoting their focus
to be agencies, content creators, and developers.

Misfits (formerly Misfits Gaming Group)

In June 2023, Misfits announced a rebrand from an esports and gaming-centered company to
an “interactive entertainment and lifestyle company powered by creative formats”. According
to Misfits CEO Ben Spoont the rebrand "Really continues to push forward this shift internally
from this classic esports organization to what a new media and entertainment company
might look like.”

The rebrand is the culmination of an ongoing pivot away from esports competitions,
beginning with the sale of its European League of Legends team to Spanish esports Team
Heretics for around $35 million in July 2022. The company has also made a series of
investments into creator-backed gaming and development ventures, including a monetized
cross-platform Minecraft server, Tubnet; a Roblox development studio, Pixel Playground;
and a $20 million creator fund to support infrastructure on creator-driven projects.

100 Thieves
The team is currently developing its first game title, Project X, in the new Unreal Engine 5.
Also following the path of creators like KSI and Logan Paul into FMCG with Juvee, a sugar-
free energy drink brand. The team also owns gaming peripherals manufacturer Higround,
noted for their limited-edition keyboards.

TSM
Reported in April 2023 that the team is set to pull out of several esports titles, including its
League of Legends LCS slot. TSM’s CEO Andy ‘Reginald’ Dinh did not deny the reports but
stated the team “is always evaluating what esports ecosystems are best to invest in and will
continue to enter and exit games”. In the meantime, the team continues to develop their
gaming coaching and statistics tracking apps Blitz and Dyno.

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OVERHYPED
WEB3 &
METAVERSE
What has been the most
overblown or overhyped
trend in the last 18 months?
Although there was disappointment
with the integration of blockchain
technology into gaming in 2022, our
experts were bullish on the overall
impact of Web3 for the industry going
forward. In 2023 that sentiment has
soured, and most experts felt Web3 as a
whole had failed to live up to the hype.
The synergies between gaming and
web3 are obvious in theory but haven’t
worked in practice. The idea being
gamers are digital natives familiar with
purchasing virtual products and would
be a naturally complimentary audience
to blockchain initiatives such as play-
to-earn gaming which rewards players
with cryptocurrency tokens for
engaging in gameplay.
The collapse of the valuation of tokens
in the play-to-earn game Axie Infinity
illustrates how this audience adoption
has not materialized in a sustainable
way with the game's main token Axie
Infinity Shards (AXS) declining 96%
from a peak of $160 in November 2021,
to under $6 in July 2023.
51 © STWS 2023
EXPERT PREDICTIONS
"Nearly all of the Web3 activations that
have been attempted in esports have been
really poor. That's not because I don't
believe in Web3, but the execution within
esports has come across far too much like
a money grab and trend ride, rather than
part of a well-planned strategy to
integrate with new technology."
Sam Molloy
Nativz Gaming
"The rise of non-fungible tokens (NFTs)
and blockchain-based gaming"
Nikko Krättli
OverActive Media
"Some creators and teams cashed in on
the NFT phase without careful thought of
follow-up strategies. This has damaged
the brand equity of some and runs the risk
of alienating a core fanbase."
Stuart Smyth
Cassie Agency
"Web3 hype is fading away. I am still a
long-term believer that the next frontier
for gaming is blockchain technology.
Publishers just need to understand how to
utilize blockchain technology to monetize.
Klaus Kajetski
YaLLa Esports

EMERGING
TRENDS
ARTIFICIAL
INTELLIGENCE
What emerging
developments, changes or
trends are you most excited
about over the next 18
months?
Experts are excited about the current
and future applications of AI, including:
Efficiency tools for creators.
Reductions in game development
costs.
Democratization of advanced tools
to smaller studios and users.
Better overall gaming experiences.
How does this differ from last year’s
excitement about the Metaverse and
Web3, which ultimately did not come to
fruition? A major difference is how
widespread AI use is now. VC firm
Andreessen Horowitz (a16z) surveyed
243 studios in May 2023 with 87%
currently using AI and 99% planning to
do so in the future. Additionally, 64% of
studios are planning on training their
own in-house AI models.
52 © STWS 2023
EXPERT PREDICTIONS
"One of the most exciting trends is the
continued rise of creator-led IP. Content
creators have harnessed tremendous
brand power, leading to them to build
highly successful and revenue-driving
businesses, all driven by the deep
connections they forge with their
audiences."
Vas Roberts
Misfits
"AI is great at automating busywork and
completing menial data-heavy tasks.
Agencies will enjoy increased margins
through automation with AI more than
most."
Chris Smith
BIGR
"All the potential applications of AI."
Alex Gonzalez
Enthusiast Gaming
"AI continuing to develop and add value.
Streamlining of workloads allows for
innovation."
Michael Ashford
Esports Awards
"The use of AI to help businesses and
creators."
Nate Schanker
M80
 EXPERT PREDICTIONS
EMERGING TRENDS
AI FOR CREATORS
AI is easily the hottest tech topic of 2023 thanks to widespread
consumer access to generative AI programs, such as ChatGPT, driving
awareness of its current uses and excitement about its potential long-
term impact.
Content creation is at the vanguard of what’s possible with Generative AI as it enables users
to rapidly generate new content based on a variety of inputs, including text, images, sounds,
animation, 3D models, and other data. For content creators in the streaming, gaming, and
esports space, AI can also provide time and cost efficiencies on their business's operations
and marketing side. This enables creators to spend more time on their actual craft.

B2B companies are incorporating AI into their existing tools to make them more efficient and
user-friendly. For example, Tipalti is using chatbots to help customers ask free-form
questions about their payment processing.

Concerns have been raised as to potential issues of copyright infringement of work these
models are trained on and the ability of AI to create imitations virtually indistinguishable from
the original, cutting out the content creator. Expect to see issues of this nature litigated and
regulated over the next few years as generative AI tools become entrenched in every part of
the creator economy.

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 EXPERT PREDICTIONS
EMERGING TRENDS
AI IN GAMING
Although the most obvious uses of AI are in content creation, its
application to game development may have the most profound long-
term impact.

“Whereas studios before would have to choose between creativity and efficiency, AI
expands the possibilities frontier by obviating that trade-off allowing pipelines to
scale based on imagination rather than resources.”
Lightspeed Venture Partners

Costs for video games developed, produced, and distributed by major publishers, defined as
“AAA” games, have ballooned over the last five years. The UK’s Competition and Markets
Authority (CMA) released an extensive report in April 2023 accompanying its decision to
block Microsoft’s proposed acquisition of Activision Blizzard. According to this report, current
development budgets for AAA games are usually more than $200 million, as compared to
2018 when a typical AAA development budget was between $50 and $150 million. For
example, Activision Blizzard’s latest Call of Duty title already surpassed $300 million in
development costs and recent court filings revealed that 2020’s The Last of Us Part II had a
development budget of $220M. When including marketing and promotion costs, the total
budget for a new AAA game release can be over $1 billion.

AI tools can play a crucial role in game creation as well as quality assurance and testing. The
large number of people required for manual play testing can account for as much as 10% of
game development budgets. The hope is AI will reduce the requirement for human time on
the mundane aspects of development and allow more focus on bettering the quality of
gameplay. As with similar concerns about content creators being replaced or sidelined by the
rise of AI, game developers have expressed concerns that AI tools will make roles obsolete,
especially in the face of recent waves of layoffs.

54 © STWS 2023
 EXPERT PREDICTIONS
EMERGING TRENDS
AI IN GAMING
Generative AI for Games Market Map

Source: Andreessen Horowitz (March 2023)

55 © STWS 2023
 EXPERT PREDICTIONS
TIPALTI INTERVIEW
What is the greatest challenge EVAN HEBY
currently facing the industry? Tipalti

Efficient growth. Many companies in our

industry have grown too quickly over "Businesses can benefit from
the last few years. Fast growth is great,
but sometimes the business models
AI to help improve efficiency."
aren't ready to keep up with the cash
coming in. What emerging developments,
changes or trends are you most
Gaming companies need to continue
looking for synergies across industries excited about over the next 18
to future-proof their companies against months?
potential challenges such as economic
Artificial Intelligence (AI). Within gaming, we
downturns and fluctuations in
have seen titles like GTA and Zelda create an
engagement. Top gaming companies
immersive 'sandbox' environment, allowing
are dipping their toes into music, film,
players to truly choose their own adventure. In
entertainment, and many other
the future, I think players will be able to
complementary industries to create a
influence the outcome of their games even
more stable basis for their businesses
further with natural adaptability built into the
to grow strategically.
experience.

What has been the most
overblown or overhyped trend
in the last 18 months?
The Metaverse. Whilst there are some
interesting potential applications, there
is still a lot of work to be done before
the Metaverse becomes a viable,
mainstream option for companies to
invest in and monetize.
I'm also excited about the business efficiency
that AI can offer, specifically for finance and
payments. Gaming companies often need lots
of staff to manage complex and varied
payments. Whether you're a streaming
platform or an esports company, you'll have to
manage payments to a wide variety of
individuals and companies such as streamers,
developers, gamers, etc.
With AI you can automate processes that help
free up your time to focus on strategy, whilst
confident your partners are maintaining your
key payment processes.

56 © STWS 2023
 EXPERT PREDICTIONS

STARTUPS TO WATCH
These are startup or scale-up companies that have impressed our
global industry experts in the last year.

Gala Games Ready Player Me Bayes Esports

Game development Personalized avatar creator Official live esports data
platform that combines for apps and games. provider for teams,
play-to-earn mechanics tournaments, sportsbooks
and NFTs. and media companies.

GameSafer Kick eFuse

Building tools to scale Creator-centric disruptive Online platform for gamers
safety, positive and fair play live streaming platform. to meet, compete and get
experiences for the gaming discovered.
and esports industry.

Esports Coaching Platform

Academy Social gaming bar with two
Training and certification venues in the heart of
body for esports coaches. London, UK.

57 © STWS 2023
CONTACT

Thomas Alomes
SVP, Head of Market Insights
thomas@stws.co
linkedin.com/in/thomas-alomes
www.stws.co

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