While marketers and content creators worry over people cutting cable in favor of Netflix and other streaming-video services, the generation that is growing up right now might not ever even care to get cable in the first place. They’re too busy watching competitive gaming online.
In 2013, people spent 2.4 billion hours watching e-sports video, according to a report from industry research group IHS Technology (via Gamasutra). That’s up from 1.3 billion in 2012, and IHS expects that number to continue growing over the next several years. By 2018, the firm projects consumers will spend 6.6 billion hours watching competitive gaming each year. This is reflection of e-sports surging popularity both in terms of a participatory activity as well as a spectator sport. Games like League of Legends, Dota 2, and Starcraft II have a huge global audience — and the vast majority of those people are young gamers that marketers desperately want to reach but can’t find through traditional advertising avenues.
The top games in terms of viewership in 2013 were League of Legends, Dota 2, and Starcraft II, in that order. League of Legends has around 70 million monthly active players while Dota 2 has around 8 million each month. Both are free-to-play multiplayer online arena battlers, which is an action-strategy genre that requires fast fingers and a mind for tactics. Both games also have popular e-sports leagues surrounding them. Later this year, Dota 2 developer Valve will hold The International, its annual tournament, with the largest prize pool in e-sports history — more than $8.4 million. This will have millions of people tuning in to watch — that in turn will have advertisers looking to hook up with Valve and livestreaming sites like Twitch to put advertisements in front of and in between the action. Games like World of Tanks and Call of Duty, which have huge players bases, don’t draw quite the same level of viewership.
“While advertising in and around games has often proved to be a difficult proposition, advertising in online video is commonplace,” IHS research director Piers Harding-Rolls said in a statement. “This form of advertising gives games companies a much better opportunity of assessing the advertising value chain in a successful and meaningful way and offers these companies a route to profitable return on investment from their e-sports initiatives.”
While Riot and Valve attract a lot of players through their e-sports initiatives, both companies make most of their money by selling in-game items to fervent fans. League of Legends generated around $624 million last year in microtransaction sales, while Dota 2 brought in around $80 million.
“I think e-sports helps build brand, awareness, longevity, loyalty, and can really help extend the lifecycle of a game,” Eilers Research analyst Adam Krejcik. “So certainly publishers and developers are looking at it from that perspective.”
These marketers aren’t just traditional gaming companies, either. While you might see 30-second spots for games and energy drinks, Hollywood’s marketers are turning to Twitch and giant North American e-sports association Major League Gaming to reach those young eyes.
While e-sports generates million in ad revenue now, Harding-Rolls believes that by 2018, the industry will bring in $300 million each year from advertising.
While e-sports is growing, most publishers don’t look at the market as a significant way to generate revenue. Call of Duty maker Activision supports its competitive scene with an annual $1 million tournament, but it’s unlikely that the company even breaks even from that event. That money is probably coming out of Activision’s marketing budget.