While esports has a long way to go before it reaches the prominence of the NFL or NBA, it is very possible that some day you will see an Overwatch player as celebrated as any traditional sports stars. That's the long-term goal of Activision Blizzard (ATVI) CEO Bobby Kotick as the game maker gets set to start the first season of the professional Overwatch League next year. Assuming esports continues its rapid ascent, that goal could very well become reality.
The 385 million fans who watch esports are helping to generate roughly $700 million in revenue this year, and that dollar figure is estimated to grow 30% per year through 2020. The rising popularity of esports could even turn competitive gaming into an official Olympic event. This is just one of three signs I will discuss below that illustrate the growing phenomenon of competitive gaming and its long-term potential.
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Asia has the biggest esports audience
With three of the world's most recognized and biggest game companies -- Activision Blizzard, Electronic Arts (EA 1.30%), and Take-Two Interactive (TTWO -0.03%) -- all headquartered in the U.S., you might think the U.S. is the center of esports. But while North America is the biggest esports market in terms of revenue, the biggest esports audience -- and arguably the most engaged audience -- is in Asia.
Newzoo expects Asia to account for 51% of esports enthusiasts in 2017. This is obviously due in part to the huge population, but it also reflects cultural differences. Gaming is so popular in Asia that there are gaming cafes with high-end gaming PCs where anyone can stop by and spend hours playing games.
It's perhaps because of this that South Korea has gained a reputation for having some of the best esports players in the world. The South Korean team dominated the 2016 Overwatch World Cup, and could repeat that performance at Activision's Blizzcon 2017 in November.
Esports is a good career
Perhaps one of the best ways to monitor the magnitude of esports is watching the salary that esports team owners are paying the most talented professional gamers to join their teams.
Despite its fast growth, esports has a long way to go before the top gamers are earning multimillion-dollar contracts like NFL and NBA players. For example, one of the most talented Overwatch players in the world, 17-year-old Jay "sinatraa" Won, recently reportedly signed a $150,000-per-year contract for a spot on an Overwatch League team. It's not quite the $100 million the Cleveland Cavaliers are paying LeBron James, but it's a lot of money.
The minimum salary for Overwatch League players is $50,000. Players are also given health insurance and a retirement savings plan, and each player also gets 50% of their team performance bonuses, which for season 1 will total $3.5 million, with $1 million awarded to the team champion of season 1.
Esports might show up at the Olympics
One of the surest signs yet of how esports is quickly gaining popularity is the talk about esports becoming an official Olympic sport. Esports was first included as part of the Asian Indoor Games in 2007, but the recent surge in esports popularity is causing competitive gaming to get even more recognition.
The Olympic Council of Asia announced earlier this year that esports would debut as an official medal sport at the 2022 Asian Games in China. Esports was an event at the recently concluded 5th Asian Indoor and Martial Arts Games, where Activision Blizzard's Starcraft II and Hearthstone were among the featured games.
What's more, the International Olympic Committee is considering esports as part of the Olympic program in Paris for the 2024 games. That would be a very big deal. One of the reasons cited by the committee for this possibility is the younger audience esports attracts, an audience that advertisers need to reach. This is also why traditional sports team owners from the NFL and NBA have been getting more involved in esports lately.
Investor takeaway
There's a healthy ecosystem building up around esports, which is helping the market grow as fast as it is. The growing popularity of game streaming sites like Amazon.com's (AMZN -2.56%) Twitch.tv, which attracts about 15 million daily active users, and which partners with esports organizations to stream live tournaments, is helping esports reach a massive audience, one expected to grow beyond 500 million in the next five years.
Game companies see the writing on the wall and are starting to invest heavily in esports, which means the best way to benefit from the growth of esports is to own the companies that make the games.
