Esports / 11.30.2020

Be Bullish on Esports Investment in 2021

By Scott Norcross & Paige Rabatin

Like many industries, esports investment hasn’t been able to escape the wrath of COVID-19 in 2020. However, the industry is poised to rally back in 2021 from the 2020 lows. Despite the economic downturn, this year highlighted the widespread appeal of esports and offered release and human interaction to people confined to their homes. When hardly any industry was spared from the economic impacts of COVID-19 and its accompanying lockdowns, esports found a way to pivot and capitalize on the public’s need for entertainment.

Despite being categorized as a young industry, and one dwarfed by the $159 billion video gaming industry within which it sits – esports is expected to generate revenues of $950.3 million globally in 2020. While this may be less than the industry’s pre-pandemic forecast, it represents only a 1% decline from 2019, underscoring the strength of esports even in the face of widespread economic turmoil.

Continued social distancing requirements, growth of streaming platforms and continued partnerships with large established brands are top reasons for continued growth in esports, even though a pandemic. Esports has cemented its place as a resilient market.

Over the first two quarters of 2020, disclosed esports investment totaled $1.12 billion according to the Esports Observer. Conversely, in the same period between July and November 2020, $5.01 billion was raised. This increase was seemingly driven by added focus on the esports community.

With such headline-grabbing numbers, the third annual esports survey conducted by Foley & Lardner LLP and The Esports Observer asked 255 professionals their opinion on how investments in the esports industry would flow moving into 2021. The responses were solid expectations of an increase in esports investment and deal activity in Q1 2021.

These expectations don’t come without some hesitancy due to currently declining advertising budgets and the instability of investing in a relatively young industry. Also, the inability to hold large indoor esports events continues to hinder pre-COVID-19 growth patterns. As for esports investment itself, recent surveys suggest there may be some reluctance from investors who sustained large economic impacts from COVID-19 to inject capital into a potentially uncertain industry. Specifically, private equity and venture capital may be a little slower to rush back to their 2019 investment levels, but by the end of 2021 they should return to their strong investment position. Despite this hesitance from others, traditional professional sports teams, leagues, athletes, and celebrities are looking to increase their position in esports over the course of 2021.

This time may actually prove to be an opportunity for the redevelopment and adaptation of commercial properties for esports-related locations. As commercial properties become increasingly vacant, investors and property-owners alike have shown a peaked interest in esports-related properties such as gaming lounges and competitive arenas.

One last segment of esports expected to be a source of investment is gambling platforms within esports. The Nevada Gaming Control Board granted approval for sportsbooks to take legal wagers on matches for ESL Pro League, Call of Duty League, and several other major esports properties, which have thus far been successful. Billions were wagered prior to this legalization, but the new legal status is expected to stimulate the market even more.

In a year wrought with havoc from COVID-19, esports is weathering the storm and in 2021 esports is posed for even stronger growth. If you have questions regarding esports in 2021 or would like to discuss further, please reach out to Scott Norcross at san@kjk.com or 216.736.7264, or contact Paige Rabatin at pmr@kjk.com or 216.736.7270.

 

KJK publications are intended for general information purposes only and should not be construed as legal advice on any specific facts or circumstances. All articles published by KJK state the personal views of the authors. This publication may not be quoted or referred without our prior written consent. To request reprint permission for any of our publications, please use the “Contact Us” form located on this website. The mailing of our publications is not intended to create, and receipt of them does not constitute, an attorney-client relationship. The views set forth therein are the personal views of the author and do not necessarily reflect those of KJK.