If you thought esports were a fad, you can put those thoughts to rest. Activision Blizzard's (NASDAQ:ATVI) Overwatch League has sold out the Barclays Center for the Overwatch League Grand Finals later this month, and Disney's (NYSE:DIS) ESPN will broadcast the event live to millions of homes across the country. For at least a few days this summer, esports will be on par with major sports leagues.
According to research from Newzoo, esports will in fact be a $905.6 million business in 2018 and attract 380 million viewers. This is no longer a niche business -- this is the future of video games, and investors need to start paying attention.
People are dying to see esports
Over 20,000 people have shelled out at least $60 apiece to see the two-day Overwatch League Final event at the Barclays Center on July 27 and 28. On Stubhub, a ticket resale portal, demand for tickets is high enough that a single ticket would set you back at least $195. These are ticket prices that are more often associated with major musical acts or major sporting events, not video games.
What's amazing is that esports are moving into stadiums built for popular sports like the NHL or NBA. The leagues may not be front and center in the minds of most consumers, but they're insanely popular, and even the biggest media companies want a piece of the action.
Big media wants in
Esports has become a big business over the last year. Twitch, a video game streaming service owned by Amazon, was the first to see the value of the Overwatch League, offering $90 million for digital rights to the first two seasons. Big media companies were a little later to the game, but on July 11 Disney and ESPN announced that the Overwatch League playoffs and finals would be carried on channels from Disney XD to ABC. This was a big validation for esports, which have always operated on fringe media platforms.
Like traditional sports, esports is premium content, and media companies and advertisers are both willing to pay for the ability to tap into these markets. Disney saw was dollar signs being thrown around in esports and wanted a part of the action.
ESPN has reported that HP and Intel paid $17 million and $10 million, respectively, for sponsorship deals with Overwatch League. Sour Patch Kids, T-Mobile, and Toyota have also signed undisclosed sponsorship deals. If these companies are willing to spend money on advertising with leagues, they'll certainly be willing to pay a premium for advertising during esports events on TV. That's what Disney sees as the upside of the deal with Overwatch League.
Esports is just getting started
The future of esports is just getting started in 2018. Overwatch League has demonstrated how big the business can be, and now Activision Blizzard will be the first company to see how big it can make esports grow. Management has said it wants to expand the league beyond the current 12 teams and potentially into international markets, which could bring in $60 million per team in expansion fees, although a final plan has yet to be announced.
Venues will also be built to house esports events. In Los Angeles, Activision Blizzard built an esports stadium for Overwatch League this year, and we'll see more purpose-built spaces in the coming years, particularly if expansion goes overseas.
I also think we're just scratching the surface of the esports advertising business. Esports fans are the valuable under-30 crowd, and all we'll see advertising to them go mainstream now that Overwatch League has built critical mass. Esports is here to stay, and given the size of the business this early there's no telling how big it will get -- which is great news for the industry's leader, Activision Blizzard.