UNIVERSITAS INDONESIA

The Emergence of eSports

DION ACHMAD
1806160466

FAKULTAS EKONOMI
PROGRAM PASCA SARJANA
DEPOK
JANUARI 2019

Electronic copy available at: https://ssrn.com/abstract=3620601

 Section I
Introduction

Playing video games has become one of the most popular recreational activities, not just
among children and adolescents, but also among adults too (Entertainment Software Association
2017). More recently, video game playing has become professionalized and for a small minority
of players has become a career option in the world of competitive gaming (Faust et al. 2013;
Griffiths 2017). This new professional type of video gaming activity has been termed esports
(electronic sports). Esport is a new area in the gaming culture and is starting to become one of
the most essential and popular part of video game communities, especially among adolescents
and emerging adults (Bányai, Griffiths, Király, & Demetrovics, 2018).
Esports has always provided an engaging viewing experience to an audience no longer
tied to traditional media. This has propelled the massive growth in esports viewership and
audience numbers. Now that many leagues and tournaments have established a sizable audience,
companies are shifting their focus towards monetizing this audience directly. This transition
started in 2018, but this year, the industry will take its early learnings and expand upon them. As
a result, 2019 will be esports’ first billion-dollar year, and its vigor has attracted brands and
companies across every industry (Newzoo, 2019). The world of esports is fast becoming a
mainstream form of competition and entertainment (Holden, Rodenberg, & Kaburakis, 2016).
eSport is a relatively new phenomenon, but core management concerns are not. eSport
faces many of the same challenges present throughout the sport industry and that sport
management is already equipped to address and research. eSport represents a sport entertainment
product with substantial growth potential, requiring management expertise related to events,
merchandise, sponsorship, endorsements, marketing, technology, human resources, social media,
governance, legal issues, celebrity culture, and athlete well-being. A useful managerial
perspective to highlight the need for practitioners and academics to devote attention to eSport
would be to examine how consumers and existing organizations are using eSport (Funk, Pizzo, &
Baker, 2018).
In addition, sport management has a need to distinguish itself from it peers in associated
disciplines such as leisure management, recreation management, and hospitality and tourism

Electronic copy available at: https://ssrn.com/abstract=3620601

management. The current discussion of whether esports should be included in sport management
discourse is only the latest step in a long discussion of what defines the field, exemplified by
contributions of Weese (1995) and more recently, Newman (2014). On the one hand, scholars
clamor for an open view of what sport management is, and view sport management as an
interdisciplinary field (Chalip, 2006). On the other hand, some scholars argue that sport
management can only survive if the sport management domain is clearly marked and defined
relative to other fields, such as management, recreation management, and leisure science (Dustin
& Schwab, 2008). As e-sports is rapidly growing within the sports industry, these two divergent
views on the definition of sport meet, placing e-sports at the center of the debate of what defines
the sport in sport management (Heere, 2018).
Non-endemic brands sponsored esports organizations in droves last year, which will
continue in 2019. From automotive and fashion to food and even the military, it seems that every
industry wants a piece of the esports pie. And for good reason: time and time again, Esports
Enthusiasts have proven how fully engaged they are with their favorite pastime and they are
willing to spend big to show it. Between merchandise and all-access passes, the industry is
finding ways to give them the freedom to do so.
As it looks to grow, esports is using sports as its main inspiration to monetize fans. At the
same time, the sports industry is taking cues from esports, hoping to appeal to a younger
audience. Esports is striving to drive up revenues from sponsors and media rights. Meanwhile,
teams and individual players are doubling down on establishing themselves as brands,
developing large and loyal fanbases of their own. Esports has the luxury of space to easily
experiment with its monetization options and think of radical new formats. Many of these
innovations will trickle into traditional sports in the coming years. In fact, it is already
happening. The sports industry is currently adapting direct consumer monetization strategies that
spanned from esports and gaming, aiming to shift revenues away from linear media rights into
direct digital spending (Newzoo, 2019).

Electronic copy available at: https://ssrn.com/abstract=3620601

 Section II
Boundaries & Methodology

eSport has grown from a fringe activity to a popular sport entertainment product.
Organized eSport events started in 1980, with Atari’s Space Invaders Championship, the first
major video game competition, drawing over 10,000 competitors (Li, 2016). eSport events have
grown in size with The League of Legends World Final 2016 conducted in front of a sold-out
crowd of 20,000 at the Staples Center in Los Angeles with 43 million more viewers watching
online (Kennedy & Rozelle, 2016). The prize pools of eSport events are also growing with The
International 2016 (DOTA2) offering the largest prize pool in eSport history, splitting
$20,770,460 USD amongst 16 teams (Valve, 2016). Despite eSport’s emergent popularity,
whether it meets the criteria of sport should be addressed, and conceptualizations of sport are
reviewed next (Funk et al., 2018).
There are various interpretations of what the esports industry encompasses. In addition to
differing opinions about the market’s boundaries, there are disagreements about the term esports
itself. We define esports as follows: professional-level competitive gaming in an organized
format (tournament or league) with a specific goal/prize, such as winning a championship title or
prize money (Newzoo, 2019). others define esports as “a form of sports where the primary
aspects of the sport are facilitated by electronic systems; the input of players and teams as well as
the output of the esports system are mediated by human-computer interfaces” (Hamari, Sjöblom,
& Hassan, 2019). Therefore, our esports market sizing includes revenues and viewership from
professional competitive gaming content only. We do not include amateur competitions and live
streaming around non-organized competitive gaming. eSport presents the Sport Management
academy with a series of problems and questions that, while not certainly of a sporting nature,
have direct relevance for the management of sport in the future (Cunningham et al., 2018).
The research aims to provide the best possible assessment of the size of the overall
esports market and its future potential. By synthesizing many data points, we provide estimates
on a regional and individual country/market level, also look special sizing at Indonesia Country
market. We focus on three key metrics for every market: Esports Enthusiasts, Occasional
Viewers, and revenues. We define a market as a country, region, or other geographic territory.

Electronic copy available at: https://ssrn.com/abstract=3620601

 The data on Esports Enthusiasts and Occasional Viewers is largely based on secondary
data from Newzoo as we can get it from Newzoo website. In 2019, Newzoo carry out research in
more than 30 countries/markets, covering more than 60,000 consumers. Starting in 2009 with six
countries/markets, this is now the largest games-related consumer research program in the world.
The revenue forecasts are based on our predictive esports market model, which
incorporates data from multiple sources: macroeconomic and census data, primary consumer
research, data provided by our official industry data partners, public event data in terms of
viewership and attendees, media reports, and third-party research. Newzoo also receive valuable
input from clients, including leaders in the esports industry.
Market size estimates and growth forecasts for individual countries/markets and in
aggregate for the total industry are validated against our analysis of various contextual metrics.
For instance, our market model calculates the average revenue generated per Esports Enthusiast,
which is then compared with historic numbers, other regions, GDP per capita, and traditional
sports spending. Overall, forecasts are always the outcome of an iterative process, reviewing
the implications of our assumptions on a very granular level.
We define industry revenues as the amount the industry generates through the sale of
sponsorship, media rights, advertising, publisher fees, and tickets and merchandising. Revenue
numbers exclude prize pools and player salaries, which consider to be cost items at an industry
level, as well as fan contributions to prize pools, which consider in-game revenues.

Electronic copy available at: https://ssrn.com/abstract=3620601

 Section III
Analysist

Electronic copy available at: https://ssrn.com/abstract=3620601

 The overall game-video-content audience, like esports, will continue to grow at a rapid
pace, increasing from 750 million people in 2018 to more than a billion by 2022. The potential
for further development of sports income and profits, in particular from cybersport, is significant
(Lokhman, Karashchuk, & Kornilova, 2019). The results of (Martonc, 2015) study suggest that
e-Sports is not only about the computer games and playing itself, but it can also serve as a means
of satisfying various needs, e.g. the need to belong by forming friendly relationships through the
membership in game teams and participation.
This pool of potential new esports fans is massive. When it comes to live game video content,
esports currently makes up 12% of viewership hours on Twitch and YouTube, compared to non-
esports game content’s 88% (Newzoo, 2019). New monetization options are also a big
opportunity. The audience for game video content includes a segment of Devoted Viewers.
These weekly viewers actively follow and make donations to their favorite streamers. As
mentioned, these streamers are now beginning to participate in esports, bringing many Devoted
Viewers who are willing to spend big on content with them.

Electronic copy available at: https://ssrn.com/abstract=3620601

 The esports audience will grow to 453.8 million globally in 2019. Esports Enthusiasts
will account for 201.2 million of this number, up 28.2 million year on year, and will increase
with a CAGR (2017-2022) of +15.7% to 297.1 million in 2022. Meanwhile, the number of
global Occasional Viewers will hit 252.6 million in 2019, up from 2018’s 221.6 million. This
number will grow with a CAGR of +12.6% to 347.5 million in 2022.
In 2019, 1.8 billion people will be aware of esports worldwide, an increase from
2018’s 1.6 billion. China will continue to be the country/market that will contribute most to this
number, with 500.2 million esports-aware people. Mainstream entertainment is a major growth
driver of esports awareness across the globe, as esports is getting more exposure on Netflix,
linear video platforms, and other media.
Audience and awareness numbers are increasing in emerging markets in Latin
America, the Middle East and Africa, Southeast Asia, and the Rest of Asia. This is mostly due to
urbanization and advances in IT infrastructure. Globally, the increasing popularity of mobile
gaming is an important contributing factor, as well as the continued appeal of the battle royale
and MOBA genres. Of course, the influx of younger generations will further drive audience
growth.

Electronic copy available at: https://ssrn.com/abstract=3620601

 The year 2019 will be a landmark for the global esports market, which will for the first
time exceed the billion-dollar revenue mark. In fact, total esports revenues will reach $1.1 billion
in 2019, an increase of more than 230 million compared to 2018. North America will again
account for the most revenues, generating 37.3% of the global total.
The highest-grossing esports revenue stream worldwide is sponsorship, which will
generate $456.7 million in 2019, up from $340.2 million in 2018. The world’s fastest-growing
esports revenue stream by far is media rights with a CAGR (2017-2022) of +39.6%, compared to
sponsorship’s +28.4%. In 2019, revenues from merchandise and tickets will exceed those from
game publisher fees, which will become the industry’s smallest revenue stream and decline with
a CAGR (2017-2022) of -5.5%.

This year marks a major milestone for the global esports market, which will for the first
time exceed the billion-dollar revenue mark. In fact, revenues will hit $1.1 billion in 2019, a
year-on-year growth of +26.7%. Around 82% of the total market ($897.2 million), will come
from endemic and non-endemic brand investments (media rights, advertising, and sponsorship).

Electronic copy available at: https://ssrn.com/abstract=3620601

 The highest-grossing individual esports revenue stream worldwide is sponsorship,
accounting for $456.7 million in 2019—up +34.3% from 2018. The fastest-growing esports
revenue stream by far is media rights, which will generate $251.3 million in 2019, a year-on-year
growth of +41.8%. Consumer spending on merchandise and tickets will total $103.7 million,
while game publishers will invest a further $95.2 million through partnership deals with white-
label organizers.

Electronic copy available at: https://ssrn.com/abstract=3620601

 While in Indonesian Market, it is a strong market as Indonesia is number 16 in the world
at 2017 (Newzoo, 2017). Which means Indonesia consider as big country do eSport industry.
Having 43.7 million gamers with $879.7 million revenue at 2017, creating massive opportunity
in present and future industry. Zooming in on PC/laptop gamers, 26% are men aged between 21-
35. Men make up 56% of the PC/laptop gamer population. Let’s play and walkthrough videos
are a very popular choice among those who watch gaming video content, with two-thirds of them
watching these videos. An impressive 45% of gamers play on all three platforms – console,
PC/laptop, and mobile. Positive brand attitude for Pepsi is noticeably higher among paying PC
gamers than the entire PC gaming population.

January 2019 ranking reports

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 As reported for January 2019 national rankings, Indonesia might be down to tank 17, yet
the revenue proven to increase to $1,084 million, 23% increase from Dec 2017 to Jan 2019, such
a significant number growth number.
With smartphone-enabled
digital payment services
becoming increasingly popular
around the world, the traditional
landscape of the consumer
payments market is changing
more rapidly than ever. This
infographic from Newzoo and
CyberSource offers insights into
how gamers and Millennials are
driving this change in many
countries around the world, and
what merchants can do to
engage and retain these valuable
and actively mobile audiences.

Electronic copy available at: https://ssrn.com/abstract=3620601

 Section IV
Reccomendation
Esports has grown into a meaningful vertical (Hamari et al., 2019). And given evidence
there is a massive opportunity for any corporation to squeeze that potential. Indonesian
government also supporting eSports association. through Kemenpora (Kementerian Pemuda dan
Olahraga) which houses of FORMI (Federasi Olahraga Rekreasi Masyarakat Indonesia) forming
IeSPA (Indonesia e-Sports Association) at 1 April 2013. To help and continuing eSports growth
in Indonesia. IeSPA also member of IeSF (International e-Sports Federation) which actively
participate on many eSports event & delegating representative at every discussion & meeting at
every International eSports Matches. Asian games 2018 believe as one of the indicators where
eSports is already accepted as profession, profitable business, & have promising future in
Indonesia after being skeptically seen as unusual and taboo of how playing games can be
profession also being a profitable business for the stakeholder.
Corporation able to gain revenue through Sponsorship, Media rights, Advertising,
Merchandise & tickets, and Game publisher fee. Although most revenue came from Sponsorship
(34.3%), corporation can choose based on expertise that corporation has, it doesn’t have to be on
eSport industry kind of corporation, it can be anything, such as BCA (private Indonesian bank)
sponsoring the Piala Presiden 2019 Cup, or Ticket.com (ecommerce Indonesian company)
supporting on ticketing side. Many ways to get into eSports industry, and the industry continue
to growth, at least till 2022 as forecasted, it is a good time for any corporation to joining in.
There is limitation on this research. The research is conducted using secondary data from
global company (Newzoo). It is seeing mostly from high level area rather than touching more
specific detail that can be for further research.

Electronic copy available at: https://ssrn.com/abstract=3620601

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