It is no longer news that esports, and gaming more generally, is big business. It has been widely reported that despite its relative nascence, the global gaming industry is already at more than the movie and music industry combined.
However, following the post-pandemic surge in interest and investment, there remains a degree of uncertainty as to how the industry can, and should, take the next step on its journey. Whilst interest remains high and is growing (a reported global audience of 540 million), the sector continues to sit at somewhat of a crossroads as stakeholders compete for power, and market share. Industry voices are growing louder with their—often competing—views as to how best to achieve continued professionalisation and consolidated growth.
The challenge in harnessing the potential of esports lies in a number of factors which are unique to the industry, when compared with traditional sports. Those are as follows:
- Diverse and unique group of stakeholders. Whilst there are some recognisable stakeholders from traditional sports (broadcasters, sponsors, players and teams), there are other stakeholders who enjoy far greater power in the esports sector than that of traditional sports. Specifically, the publishers (who, at the outset, will hold the IP rights to their titles) and streaming platforms (which may facilitate both broadcasting of esports tournaments and streams of professional gamers playing their favourite titles to millions of followers) play a key role. There are a broad range of tournament operating models at play at present (some publisher led, some led by third parties), with no broad consensus on what works best. This fragmented, complex ecosystem also gives rise to a raft of ever shifting IP considerations not only between publishers, and tournament organisers but also with players, tournament organisers, sponsors, and merchandisers.
- Cross-border nature. Whilst international sports is not a new phenomenon, esports are, by their very nature, inherently borderless. Players have typically plied their trade playing regionally (with many titles segmenting online play in this manner) and the concept of national representation and national competitions is far weaker than in traditional sports. This means that the need for, and structure of, national regulators and federations is less relevant. Different countries continue to take differing approaches to esports regulation and federations and again, no established and agreed model has yet emerged.
- Diverse sports. Whereas sports are, typically, managed, supervised, and regulated on a per-sport basis, it is less obvious that this is the correct way to approach esports. “Esports” captures a limitless number of different games. Achieving tournament and regulatory models which serve the interests of all stakeholders is inherently tricky.
As a result of these factors, there is no playbook as to how to further scale esports. Many believe that to take the next step, some degree of centralisation and leadership at an international level is the key to bringing key stakeholders together to achieve further alignment. Whilst international esports tournaments are not a new phenomenon, the announcement of the multi-sport, multi-year, Saudi-hosted esports World Cup at the end of the last year is certainly turning heads given the level of commitment to the sector being demonstrated by the Kingdom from the highest levels of government. The recent announcement of Sony as a founding partner of the esports World Cup gives significant credibility to the event, as does the Kingdom of Saudi Arabia’s timely US$120 million investment in the sector. Against this backdrop, there is a strong sense that esports is an area where the KSA is primed to succeed.
International impact aside, the significance of these moves for the local market should not be overlooked. Data suggests that some 67% of KSA’s (uniquely young) population are already gamers, meaning that the focus on the sector makes absolute sense. Further, investment in infrastructure (see, by way of example, the cutting edge gaming facility announced in Qiddiya) and the diversification of domestic industry is central to the KSA’s Vision 2030. The Saudi government is focused on improving society for its people and growing gross domestic product through cutting-edge industries which should serve to future-proof the Kingdom as the world inevitably moves away from what was previously its core commodity, natural resources.
Regardless of the extent to which cross-stakeholder alignment can be achieved to take esports to the next level, there is a high probability that, at the very least, esports will flourish in the Kingdom and that the esports World Cup will become a central feature on the international esports calendar.
By Jamie Ryder, partner in the entertainment and media industry group at Reed Smith.
