Playing video games has transitioned into a global spectator sport quite quickly over the last few years. Currently, the games are quite comparable to more conventional sports in arrangement and recent monetary success. eSports competitions have sold out major arenas across the globe, top eSports players make hundreds of thousands annually and many commercial sponsors are consistently joining the industry on a regular basis.
eSports market size
Experts approximate eSports profits could come close to a billion dollars in 2018. Titles such as ‘League of Legends,’ a free-to-play tactical game created by Riot Games based in Los Angeles, USA are very popular. This game alone commands its own collection of full-time players, teams, coaches, trainers, announcers, and commercial sponsors. The youngest professional players within eSports players are around 16-years-old. With parents, perfectly willing to allow their children forgo formal education for such a lucrative hobby usually attached with casual recreation.
Prolific competitors not only receive salaries when signed on to teams, they also earn thousands in endorsement deals, merchandise sales and tournament purses, not to talk of the possible bounty available to them in corporate sponsors and advertising revenue from online streaming. Popular esports contests have gone on to fill Olympic-sized stadiums in Asia, North America and beyond.
With the revenue possibilities increasing on a yearly basis, big name studios such as EA and Blizzard are working hard to make their flagship titles such as FIFA and Overwatch respectively. In fact, since its release, Overwatch has become recognized as an eSport, where in addition to sponsoring tournaments, Blizzard has announced plans to help support professional league play starting in 2017.
Investment in eSports games and UK government incentives
For game developers, technology companies or the avid investor looking for a trending, eSports looks like an interesting investment. With eSports, still in a relatively early stage of growth, an early mover’s benefit might just pay a strong dividend in the long term. Even though most eSport competitions take place online with contestants dispersed all over the world, the timing seems quite right for UK game developers, both start-ups and established businesses, to create new ground-breaking gaming titles, which could easily accumulate a huge community of competitive players. There are quite some ways left to go for the already renowned UK games market to take a significant role in eSports, but all the signs are very positive for developers, gamers, and investors. The extra financial incentive from Video Games Tax Relief (VGTR) and R&D Tax Credits could really make a difference, too.
Video Games Tax Relief is worth up to 20% of the core production costs of a game. The Video Games Development Company receive tax relief based on the lower of either the EEA expenditure or 80% of the core expenditure. Loss-making games can surrender the loss for a payable tax credit at a rate of 25%. Having a good understanding of the BFI Cultural Test guidance and HMRC Video Games Tax Relief manuals will ensure that you claim your full entitlement. It will also allow you to make more informed decision on what games to produce and what country the production costs originate from.
The R&D Tax Credits incentive is designed to encourage innovation and increase spending on R&D activities for companies operating in the UK. It’s one of the government’s top incentives for encouraging investment in research and development and allows up to 33.35% of a company’s R&D spend to be recovered as a cash repayment. Cutting edge technology deployed in eSports games are a prime candidate for R&D tax credit funding.
Conventional sport meets eSports
Conventional sport has also recently started making a foray into eSports. In 2016, West Ham United unveiled its first certified eSports player who will represent the club at all official eSports competitions with club colours. In 2015 German Bundesliga club VfL Wolfsburg became the first football team to officially create a professional gaming division enlisting players to represent them in tournaments across the country. This began a significant trend of businesses built around traditional sport investing resources into the rapidly expanding industry of eSports.
However, before being swept up in the lucrative and profitable prospects of eSports, it is notable that in terms of revenue, the industry still strays behind when being compared with conventional sports. In 2017, it is stated that European football will produce over US$32 billion in revenue, while the National Football League in the United States is expected to generate US$11 billion; eSports makes a mere portion of those numbers. Several challenges also lay ahead with this young and growing sport with the structure surrounding the investing in and organization of teams being logistically challenging. Unlike traditional sports newer game titles are being constantly updated and changed, frequently affecting the strategies and styles of the current titles. Continuously structuring effective teams, sustaining a stable market share, and safeguarding longer and more profitable marketable contracts are consequently very difficult.
eSports predicted growth
Despite gaming competitions existing for several years before the advent esports, its current popularity is mainly thanks to the upsurge in online streaming platforms such as Amazon’s Twitch and YouTube. This is of course has increased its presence as a medium of entertainment with an audience base spanning millions of people across the globe. Newly issued data specify that the worldwide eSports marketplace is expected to grow from US$325 million in 2015 to US$463 million in 2016, a yearly growth rate of 42%, enthralling spectators of around 120 million eSports fans and another 100 million infrequent viewers; with the market predicted to produce US$1.1 billion by 2019, It has become a quite conceivable idea that one day eSports will begin to earn as much revenue as its more conventional counterparts such as Football, Basketball and Racing.