Newzoo downgrades esports 2020 revenue forecast for third time to $950.3 million

Market researcher Newzoo has downgraded its 2020 esports forecast for the third time this year, now saying revenues will likely hit $950.3 million.

The revision is only slightly down from the previous forecast of $973.9 million, which Newzoo predicted back in July. In April, it revised its earlier estimate to $1.059 billion, and back in February — before the pandemic — the forecast was $1.1 billion for 2020 revenues.

The fact that the forecasts haven’t changed much each time points to the reason Newzoo has had to revise the estimates so frequently — namely, the unpredictability of the market as a result of the pandemic. Admittedly, the frequent small changes feel a little farcical. On the other hand, it seems prudent for the company to evaluate the fast-changing market every quarter, as esports revenues can be affected dramatically by whether fans will be able to meet in physical venues again or not.

In past years, physical venue revenues, from such streams as event ticket sales and merchandise, were a big part of esports revenues. And while digital events produced huge viewer numbers, the revenues associated with digital events tended to be smaller.

Now COVID-19 has turned everything upside down, as physical events have been canceled and digital events are expanding to become more frequent, as well as larger in scope. ESPN and Eleague on TBS, for example, have been broadcasting more esports events on TV.

At the recent Esports BAR online event, Newzoo head of esports Remer Rietkerk warned in a talk that the company was evaluating its forecasts again. In a statement, Newzoo said it is always reviewing its esports revenue forecasts and wants to keep everyone aware of changes as they happen.

Above: Newzoo’s latest esports forecast.

Image Credit: Newzoo

“It is worth noting that the esports audience is not smaller (meaning there’s no decrease in demand) and the number of organizers is not fewer (so there’s no decrease in supply),” Newzoo said. “Instead, our adjusted revenue number is mostly a result of this year’s postponed and canceled esports events.”

Newzoo now expects almost no in-person attendance at esports events for the rest of the year as COVID-19 continues to hinder large in-person gatherings.

The drop in live audience numbers has naturally decreased the forecast for ticket sales, but there is also a splash-over effect on merchandise sales. After all, many fans purchase merch as impulse buys at physical tournaments, driven by event excitement and fanfare.

Owing to the pandemic, merchandise and ticket sales have been revised downward from $76.2 million to $52.5 million. Newzoo said it based its revisions on past and near-future postponements, shifts to online, and canceled events.

The company said Riot Games typically sees a 20% to 30% viewership decline between its spring and summer events. But this year, viewership for its League of Legends tournaments in Europe and North America saw viewership increases of 16.7% and 30%, respectively. Still, restrictions on international play are holding back some digital growth.

Newzoo said the pandemic’s negative impact on consumer-brand spending in the space could hurt the growth of both sponsorship and media-rights revenues in the future. The company cautioned that if COVID-19 continues into 2021, the company will be forced to make relevant revisions again.