The video game industry has been growing for years, but the arrival of COVID-19 and the virtualization of our lives over the past 18 months or so has accelerated and expanded that growth. That advancement has also propelled competitive, organized gaming, aided by the pause in live sports last year, with industry forecasts projecting that esports will be more than a $1 billion industry by the end of this year. For brands, that growth should be a beacon.
The maturing of the esports industry introduces a new dimension to the broader sports sponsorship industry. And while esports revenue comes from an array of avenues, sponsorships and media rights account for the vast majority, with streams, publisher fees, merchandise and tickets accounting for much smaller portions. Sponsorship revenue grew at a compound annual growth rate (CAGR) of nearly 32% between 2014 and 2019, and panelists participating in a recent Nielsen event said they expect revenue from sponsorships alone to hit $1 billion in the very near future.
With the future of widespread live events still uncertain, the viewing of esports activities, both live and prerecorded, has skyrocketed among U.S. esports fans. According to Nielsen’s syndicated 2021 Esports Fan Insights Report, 87% of fans have viewed a live stream esports event over the past year, up 17 percentage points from 2019, and 83% say they’ve watched a pre-recorded event (up from 47% in 2019). Even without access to live events, the increase in viewed events (live and pre-recorded, including on cable and satellite TV) present a significant opportunity for brands looking to enter the space.
Across Nielsen clients, companies allocate an average of 15% of their brand marketing budgets to sponsorship opportunities, and many (if not all) are facing increasing pressure to justify their spending decisions and investments, particularly when they begin exploring opportunities and industries that they’re less familiar with. Esports is less (or un) familiar to many brands, and as live and virtual merge, opportunities for fan connections, personalized experiences, reimagined sponsorship assets and revenue models will continue to evolve.
Future evolution aside, proving return on investment (ROI) is the new normal for marketers—in esports and everywhere. To address this in esports, Nielsen and Riot Games, which runs the League of Legends Championship (LCS) series, have agreed on an average minute audience metric—something that can be broken down by demographic so it can be compared with other sports.
“With those metrics, we can say that the LCS is the third most popular professional sports league in North America,” said Matthew Archambault, head of esports partnerships and development, North America and Oceania, at Riot Games during the recent Nielsen event. “We have the NBA and the NFL and then you have LCS. We are right there. When you look at size and scope, there is a ton of value and scalability.”
That value and scale is attracting an array of brands that haven’t been historically associated with video gaming, such as financial services companies and personal care brands. Matt Boyd, VP of esports and games at Nielsen, cites increasing interest from financial technology, financial services and crypto brands. And with the groundswell of social movements last year and momentum to bring more women into the industry, brands like Tampax are now looking at esports.
“I think there already is a culture of acceptance built into the esports world,” says Boyd. “There is a bit of counter culture perspective there that shatters a lot of the stereotypes that are out there, and I think we’re going to continue to see many organizations dedicate themselves wholeheartedly to changing the landscape and I think that’s an opportunity for brands and rightsholders to participate and move things along.”
Expectedly, the most recognized sponsors in esports are those most closely associated with the industry, with PlayStation surpassing Red Bull to be the most recognized, as noted in this year’s Nielsen Esports Fan Insights Report. That said, however, overall sponsorship awareness dipped among most major brands as the number of brands involved in esports increases.
Mastercard is another brand that some might not associate with esports, yet it decided to get involved a few years ago. According to Michael Goldstein, head of sponsorships, North America, at Mastercard, the involvement helps the brand reach an audience that is different from its traditional clientele. While he says the brand’s involvement offers significant visibility, integration in LCS, for example, allows players to keep their card on file for in-game e-commerce use. Integrations aside, however, Goldstein says ROI is paramount.
“If you can’t measure it, you probably shouldn’t do it,” he says. “It’s on brands, like Mastercard, to, frankly, challenge the industry. It’s great that it’s different. It’s great that it’s a new audience. But when it comes to renewal, you need to give me some hard data so that I can go back to others at Mastercard with evidence about how the investment worked hard for our brand and here’s how. I need to be able to show something that makes sense for why we’re involved.”
From an awareness perspective, involvement in esports already provides brands with exposure to new and diverse audience sizes that are already comparable to some of the biggest traditional sports events on the planet. But with sponsorship values still below $1 billion, esports has some ground to gain to be as financially lucrative as traditional sports. But Boyd says esports is on its way.
“I think the audiences are there,” he says. “Today, I think it’s about telling the story of esports and who the audience is—and then relaying that back to brands and start using data to support the rationale for investment. How will the audience benefit the brand? That’s the story to tell.”