Newzoo: Esports revenue forecast drops despite huge interest and viewership


Esports demand is going strong in terms of its audience, but even with that, revenues are likely to decline this year as companies can no longer stage big physical events.

Back in April, market researcher Newzoo was pretty timid about knocking down its esports forecast for 2020. But the company revised its forecast a second time today, saying that 2020 revenues would be down 8% from its forecast from February. I wouldn’t be surprised if the consequences of the pandemic force the company to revise the figures again.

The downgrading is happening as physical events get delayed or dry up altogether. Esports companies and game publishers are taking their events online, but COVID-19 has prevented them from doing any physical events, which were previously a big chunk of the industry’s revenue. Newzoo said the situation is fluid and it may revise its forecast again as needed.

Why the numbers are changing

These sinking forecasts aren’t due to a lack of demand for esports, Newzoo said. That is, the audience is not going to be smaller. And it doesn’t have anything to do with a decline in esports content offered by organizers. Rather, the downward revision is based on the delays and cancellations of international esports activity and a transition away from physical events. COVID-19 cancellations and postponements have trickled in the third and fourth quarters of 2020.

VB Transform 2020 Online – July 14-17. Join leading AI executives: Last chance to register!

Also worth pointing out: Newzoo suggests that for esports to thrive digitally, it must focus more on regional events, where it is easier to guarantee good connectivity and fairness in internet-based competitions, rather than attempt to do large, globally dispersed international competitions.

READ  Watch Sony unveil its Vision-S concept car and reveal the new PS5 logo

While digital revenue is a big part of esports revenue, it’s harder to generate excitement for online events compared to physical events, where lots of people are shouting in a stadium full of people. It’s also challenging to convince sponsors — who are the largest source of revenue for esports — to keep spending on events where that level of excitement and engagement is no longer possible in a physical space. But the numbers aren’t total disasters, as while physical event revenue is dropping, more event revenue is shifting online. How much of that is shifting online is a big question, but Newzoo hasn’t answered that just yet.

With lockdown measures continuing, Newzoo now predicts that global esports revenue will hit $973.9 million in 2020, and $1.194 billion in 2021, which is also lower than expected (though Newzoo did not provide previous 2021 numbers). In April, Newzoo said that that 2020 revenue would be $1.059 billion in 2020. Back in February, the market researcher expected revenue to $1.100 billion.

Above: Revenue keeps growing in esports, but at a slower rate now.

Image Credit: Newzoo

How events will be different

Newzoo said a larger number of international events have switched to alternative formats. Online events are replacing offline events, leading organizers to replace international tournaments with regional ones.

One reason for the change is that the competitive integrity of international digital tournaments can no longer be guaranteed without in-person events. The internet connections of players (with transcontinental ping times) vary, and so it’s hard to do a worldwide tournament that is entirely fair. And cross-continental travel is a non-starter.

READ  The First Minecraft Dungeons DLC, Jungle Awakens, Is Out Now

Newzoo also knocked down the 2021 forecast because of a weak sales pipeline for rights holders. Uncertainty in the market means many companies are cutting marketing budgets to preserve capital, which will affect revenues at the beginning of 2021.

Newzoo estimates that merchandise and tickets will generate revenues of $76.2 million in 2020, compared to $121.7 million in February and $106.5 million in April. The latest number seems a bit optimistic still. Media rights is expected to be $163.3 million now, compared to the previous April estimate of $176.2 million in April and $185.4 million in February.

The delay and cancellation of large international tournaments has also impacted media rights and sponsorship. The new sponsorship forecast is $584.1 million, compared to $$614.9 million in April and $636.9 million in February.



READ SOURCE

LEAVE A REPLY

Please enter your comment!
Please enter your name here