With a predicted global market revenue of $1.866 million by 2025, eSports continue to rise in popularity. But what are esports? how did they reach this point? And what does the future hold for eSports?
One avenue that eSports would seem a natural fit for is the Metaverse. Esports are played in a virtual landscape, and the Metaverse seeks to virtualise our day-to-day experiences, from online gaming to shopping. The Metaverse relies on active participation and remote social interactions, while esports have arguably come this far due to live streaming and social networks.
Other commonalities include virtual currencies and a blending into pop culture. The technology used in esports, such as headsets, PCs, and computer mice, is being upgraded to Augmented Reality (AR) and Virtual Reality (VR), creating a more immersive experience not dissimilar to the Metaverse. The links are there, but how would collaboration work in practice?
In this article, we’ll give you a brief history of eSports, explain the challenges facing the growth of the industry and look at some predictions for the future, including esports in the Metaverse.
A Brief History of eSports
eSports first appeared in the early 1970s. In 1971, multiple students from different courses came together to compete in a battle of Spacewar, a space shooter game created a decade earlier.
It was a far cry from the huge eSports events of today, with no prize money and little coverage. The prize was a one-year subscription to Rolling Stone magazine.
Still, it paved the way for what was to come.
The first official eSports event was a Space Invaders Championship in 1980. More than 10,000 players competed, drawing attention from mass media for the first time. Companies woke up to the potential, and Twin Galaxies joined forces with the Walter day organisation to hold a worldwide eSports event the same year.
Through the 1980s, companies such as Nintendo increased accessibility to eSports with products such as the Nintendo Entertainment System. By 1991, games such as Super Mario and StreetFighter 2, The World Warrior had blown up in North America.
In 1994, Nintendo held a World Championship called Powerfest 94′, which attracted thousands of spectators to the final in San Diego, California.
It wasn’t until the 2000s that advances in technology and the introduction of social media allowed eSports to flourish. This culminated in streaming platforms such as Twitch forming multi-million dollar deals with eSports teams and star players.
eSports and the Metaverse
Since gaming is seen by many as a gateway to the Metaverse, it makes sense that those in the eSports world are among the first adopters.
eSports players already have alter egos like the avatars in the Metaverse. They already collect and purchase assets through the games using a play-to-earn model. The technology for the Metaverse is cutting-edge VR, AR and AI and could benefit eSports by creating a more immersive experience for players and fans alike.
Indeed, at the 2020 League of Legends World Championship Final, physical attendees and those watching the live broadcast enjoyed an extended reality (XR) experience, courtesy of Riot Games.
The XR stage in Shanghai featured numerous LED screens and used augmented reality to create a 360- degree virtual world. Designed by Lux Machina, the technology comprises an ultra-advanced network environment and hardware system that renders the images at a 32K resolution and 60 frames per second, producing real-time images for the physical and digital audience to marvel at. The event was the first time this kind of multi-camera technology had been used in this way. The mammoth undertaking required more than 40 technicians and artists, making it prohibitive for smaller eSports events.
However, it put theories into practice and has paved the way for future augmented reality events.
Cryptocurrencies
Cryptocurrencies and eSports go hand-in-hand. As the use of cryptocurrencies increases, the accessibility and popularity of exports should increase even further. Cryptocurrencies exist on the blockchain, which is also the monetary mechanism in eSports. The non-fungible tokens (NFTs) used in the Metaverse can be used by eSports players to buy new character skins, and weapons or for betting. In the Metaverse, non-fungible tokens can be used to make virtual or real-life purchases. Virtual skins can also be traded or bet on for real money.
However, progress in this area has been stalled by organisations refusing to accommodate Blockchain. Speaking to Forbes, Founder of eSports Group Alex Fletcher, said:
“Once blockchain or third-party entities allow the games to talk to each other, then video games may begin to connect to the metaverse. Blockchain technology has the potential to empower eSports in the metaverse. However, Valve’s Steam recently blocked all blockchain games from its platform, so I think we have a way to go.”
In 2022, digital wallet company Verasity pioneered ‘Watch & Earn’ technology, where a remote, decentralised audience could earn tokens for watching and redeem them for in-game rewards. Social chat functions also enabled viewers to sync up with friends across time zones. Not only did this satisfy the reward for watching element that was missing for virtual audiences, but it also allowed greater engagement within a virtual environment.
Audiences
The age groups of eSports and the Metaverse also match up, with most players aged 10-35. New eSports fans can be found in the Metaverse and introduced to more eSports through events and competitions held in virtual worlds.
The Virtex Stadium is a virtual arena providing live eSports to members every time they log in. Created by eSports enthusiasts, the Virtex Stadium aims to ‘bring the intense excitement and joy of a live [eSports] event to every fan around the world’. Founded in 2020, the company raised $3.3 million in seed funding in 2022 to continue its vision. The site reports 532M esports fans, with 237K hours of content broadcast and rising. The first virtual venue of its kind, the Virtex Stadium is unlikely to be the
last. Virtual arenas create natural cross-pollination between eSports fans and those in the Metaverse.
Games
eSports games such as Fortnite are already part of the Metaverse, and this kind of cross-pollination looks set to continue. Roblox brings players millions of immersive worlds, showcasing how eSports may work in the Metaverse going forward.
Epic Games, the creators of Fortnite raised $2 billion from Sony Group Corp and the family-owned holding company behind the Lego Group, to help advance a Metaverse partnership with the Lego Group. The investment takes Epic Games’ valuation to around $32 billion. Players have even begun to earn money by selling digital items within these digital worlds.
The issue is that while these games are legitimate Metaverse games, they appeal primarily to a small specific audience – kids and teenagers. Games such as Spawnpoint’s RE: COIL competitive VR eSports shooter game target players age seven and
above. The problem is that this age group does not have a high disposable income and isn’t predisposed to
spend money.
Roblox’s company prospectus states that people over the age of 13 have:
“a higher propensity to spend on content, and our ability to increase penetration in, and user contribution from, this demographic will affect our ability to grow revenue.”
Roblox has started to address this issue by incorporating features to appeal to an older audience. One such feature is 18+ restricted areas within the virtual worlds.
During the pandemic, Roblox recreated its offices in virtual reality with minute attention to detail and held its 2020 Christmas party in this virtual headquarters. Roblox and Fortnite have also tried to broaden their audiences by having popular music artists including Lil Nas X (Roblox) and Travis Scott (Fortnite) perform virtually within the games’ virtual worlds.
Virtual Venues
The announcement from Meta regarding the development of haptic feedback gloves making tactile interaction in the Metaverse more ‘real’ than ever before could pave the way for live events to be played in entirely virtual venues that fans can enter from wherever they are. Likewise, players would not have to travel from all over the world to compete but could meet in the Metaverse from designated spaces in their home countries. This global outlook could also give players in nations that currently struggle to compete against the best get a better foothold in the industry.
In a future where climate change is a concern, the Metaverse could eliminate the need for many international trips. The same applies to all the energy used to power the huge arenas currently used for eSports events. This is where venues such as the Virtex Stadium come into their own and provide a blueprint for other companies and even other industries.
eSports Betting
The ability to broadcast or live-stream eSports events has helped bring it into the mainstream and with increased interest comes increased opportunities. Not least in the form of betting.
Where once you would have to rely on a specific eSports betting site, now the majority of serious sportsbooks will offer a plethora of eSports odds and markets.
Last month, Esports Insider reported the record Quarter 3 2022 financial results of the eSports betting company Rivalry. A revenue of CAD$7.1m (~£4.65m) for Q3 meant a 35% increase from Q2 2022 and a 93% year-on-year increase.
Steven Salz, Co-Founder and CEO of Rivalry, said:
“The significant year-over-year and sequential growth we delivered is a testament to our market leadership in next-generation sports betting and casino. Our customer base demonstrates our ability to engage a highly sought-after audience of Gen Z and Millennials in global markets, and further validates our overarching player acquisition and brand strategy. We are very well positioned for a strong finish to 2022 and continued momentum into next year.”
eSports fans often bet with cryptocurrencies, but we could see this increasing as cryptocurrencies and NFTs merge in the Metaverse.
Redirecting Investment
It is not just betting where we can see eSports move into the mainstream arena. The investment in eSports-specific venues and training camps reflects a growing engagement and monetary investment.
Prize money for world eSports championships has reached a combined $47.79 million for DOTA 2, including a $19 million prize pool for Dota’s 2022 Championship.
When you consider that eSports has a global audience of 500+ million viewers and annual revenue of more than $1.5billion, it makes international companies more likely to invest in eSports.
Sports leagues such as the NBA have begun to incorporate eSports into their offering, while sponsors include IBM, BMW, Levi’s and Marvel Entertainment are just some of the huge brands sponsoring eSports events.
In the future, this investment could be redirected to the Metaverse. Without the need for lavish physical arenas and the cost of flying players from all over the world to compete, the money could be used to develop eSports within the Metaverse.
Events would have an almost limitless ticket capacity, and each audience member would feel the excitement of attending an eSports major without leaving home.
Eventually, the prize money could potentially be awarded as NFTs.
How the Pandemic Changed eSports
The COVID-19 pandemic and subsequent lockdowns had a monumental effect on the online gaming industry.
With international sporting events cancelled or postponed, sports enthusiasts and, in particular, sports bettors turned to virtual sports and eSports.
People had more free time than ever before and a greater need for distraction from the real-world events that were unfolding.
Many turned to online gaming and eSports. Twitch viewership grew by 70%+ to 4.9 billion hours.
Newzoo’s 2021 Global ESports & Live Streaming Market Report showed a 38 million audience growth in 2020. Almost 50% of these new fans were consuming eSports content.
Traditional sporting companies grew wise to the potential in this market, and ran new events such as the Virtual F1 Grand Prix and the Premier League FIFA 20 tournament.
What does the future hold for eSports?
Predictions made in 2017 forecast the worldwide eSports market to reach USD 2,174.8 million by 2023. There are numerous revenue streams, including sponsorship, indirect and direct advertisements, media rights, tickets and merchandise, and publisher fees.
Aside from growing integration within the Metaverse, the demographic and way eSports are played look set to evolve.
Mobile
Mobile use continues to grow around the world, creating unprecedented access to online gaming and eSports. Better network access in high-population countries like India will open up massive new potential audiences for eSports and online gaming in general.
Riot Games has also announced that Wild Rift, the League of Legends game created specifically for mobiles will soon have its own eSports events.
Launching the game as ‘free to play’ allows players to ‘try before they buy’ testing out the virtual universe in the comfort of their own homes via their mobiles. The focus is on player experience, building a global community of fans through shared lore and in-game experiences, plus access to events.
Players choose their champion, which world they wish to explore, and player mode for an immersive player experience. Killing enemies will earn you gold that you can use to purchase in-game items such as weapons and supplies to upgrade your character’s stats. You also earn experience as you play which also boosts your stats, encouraging players to return.
More women in the industry
A report by consumer insights agency Interpret, found that women made up 35% of eSports viewers in 2019, a 6% increase from 2016.
With female eSports players, such as Sasha “Scarlett” Hostyn and Li “Lioon” Xiao Meng rising to fame, plus advocate groups pushing for more gender inclusivity in eSports, this trend is likely to continue with more women playing and watching eSports.
Obstacles to further growth
The return of traditional sports as we move out of the pandemic may result in a natural fall off of some new eSports fans. However, the industry continues to grow, and the Metaverse could prove vital to its sustainability. Here are a few of the challenges facing eSports in the coming years.
Lack of Standardization
The lack of standardisation in eSports creates issues for the growth and sustainability of the industry. This is because it can be difficult to tell which opportunities are worth taking and which are a waste of time and investment.
In addition, many issues with clubs, players and events can arise from a lack of standard rules and regulations.
Niche Mentality
Despite the move into mainstream culture, many still consider eSports to be niche and therefore not an attractive business or investment opportunity. Mass adoption of the Metaverse would change that perspective.
Links to Underage Gambling
As many esports players and fans are teenagers and even school-age children, concerns are frequently raised about the proximity to online gambling in the eSports industry. This is one area where the Metaverse could be a hindrance, as Metaverse players are as young as 10, according to recent reports.
Conclusion
The Metaverse is billed as the next evolution of the Internet, and eSports could be one of the industries to be most positively impacted, providing agreements can be reached with regard to the Blockchain.
As discussed, eSports and the Metaverse have already started to overlap, with the same technology, NFTs and increasingly virtual venues driving both forward. The predominantly young, male audiences of both and young people’s increasing desire for virtual experiences and the gamification of everyday life show that there is an appetite for the Metaverse, particularly among young males.
However, eSports has begun to target young women with more representation and female-friendly marketing. Attracting this newer eSports audience will be essential to growing the Metaverse and links to female eSports stars could help.
eSports and the Metaverse will need to become less niche and more standardised, without losing the appeal of something not yet mainstream, a tricky balance to master. Problems, such as links to underage gambling, need to be dealt with without alienating the core teenage audience. Esports and the Metaverse will also need to be introduced and tailored to a wider, older
audience to make it a financially viable prospect for the majority of investors.
The Metaverse offers a potential route for the evolution of eSports, but the two strands of digital gamification could help each other to grow and thrive.
