The business of eSports in numbers

It takes about 50 years for a "game" to become a "sport," according to Andrew Paradise's calculations. He's an entrepreneur who recently joined the wave of investors getting in on the eSports game: His app, Skillz, allows mobile-gaming fans to win real money while playing some of their favorite titles. That's right, mobile eSports. From smartphones to dedicated eSports arenas, Paradise knows why professional gaming is a booming market and he explains it all in a straightforward, money-focused manner. If you've ever looked at eSports and wondered, "Why?" Paradise might have your answer.



"Just like video games, basketball and football weren't initially considered sports and certainly weren't mainstream for the early years of their existence," Paradise says. "We are now hitting the 50-year milestone in eSports history as people who grew up playing Ponghave children playing League of Legends and Call of Duty. In many respects, eSports have already gone mainstream."

Hear that, eSports haters? According to Paradise, dismissing eSports only demonstrates how out of touch someone is with an emerging new reality -- kind of like a musician deciding to abandon streaming services or tech companies opposing net neutrality.

A number of recent, high-profile acquisitions support the idea that eSports are an accepted, legitimate sport, at least on the investment side of things: On July 1st, Swedish entertainment company MTG acquired the Electronic Sports League, the largest eSports organization in the world, spending $86.4 million for a majority stake in the company. In September 2014, Amazon bought video game-streaming site Twitch for just under $1 billion. Even CaptainSparklez, a popular YouTube personality, has entered the mobile eSports market in a partnership with Activision co-founder Howard Marks.A screenshot from Valve's eSports documentary, Free to Play




It's easy to see why investors are excited about the future of eSports. The industry is valued at $612 million in revenue worldwide, with 134 million total viewers, according to SuperData Research. Paradise says analysts expect these numbers to grow by roughly 30 percent over the next five years. Investors today look at the direct revenue generated by professional gaming, including competitions, sponsorships, online ads, paid viewership, merchandise, licensing, tickets, game sales and fantasy sports, to name a few pipelines, Paradise says. One eSports championship tournament, the Dota 2 International, has a prize pool of nearly $18 million this year, largely funded via fan contributions.

Investors have to consider the fans "as an important metric for the future of the industry and for potential revenue," he adds.


League of Legends is one of the top eSports at the moment, alongside Dota 2, StarCraft II,Counter-Strike and StarCraft: Brood War, Paradise says.One of today's most popular eSports games demonstrates the industry's ability to rack up a lot of cash quickly: In October of last year, SuperData calculated that League of Legends was poised to generate $1 billion in revenue in 2014 alone, and that's just via in-game transactions. It's worth noting that League of Legends is a free game. The $1 billion comes from voluntary player investment in new characters, fresh outfits, aesthetically customized items and boosts, and it doesn't include revenue from major, sold-out tournaments, streams or merchandise.

"Measured by the number of participants or by minutes played, video games are already a bigger industry than all offline sports," he says. "Additionally, video games are much younger in their evolutionary history than offline sports and are growing at a much faster rate."





A new, booming industry means big bucks for investors. Paradise says that his company, Skillz, facilitates eSports competitions across games from more than 1,100 studios. "While many of the games we power are not household names, the combined prizes paid in these games represent 30 percent of all eSports prizes paid so far this year," he says.

Paradise sees eSports as a rapidly evolving, lucrative industry that will soon compete directly with -- and perhaps surpass -- traditional sports.

"Looking at physical spectators, Game [8] of Major League Baseball's first World Series drew 7,455 spectators in 1903 -- 64 years after the game was invented," Paradise says. "By comparison, last year's League of Legends Championship -- which came just 42 years after the release of Pong [in 1972] -- drew over 40,000 spectators. ESports are well on their way not just to legitimacy, but to true sports supremacy."