NEW YORK--(BUSINESS WIRE)--Professional esports is expected to see continued revenue growth and investment, driven by a range of factors that have pushed the industry further into the mainstream, according to a new survey conducted by law firm Foley & Lardner LLP and The Esports Observer. But industry participants are also eyeing an array of concerns as they focus on protecting and legitimizing their brands at this critical juncture in the esports industry’s development.
The 2018 Esports Survey was completed by 124 professionals, primarily from esports and traditional professional sports teams and leagues, as well as technology and media companies.
What’s Driving Growth?
Respondents identified several factors that have had a significant impact on the growth of esports over the past year, including increased interest in streaming deals from major tech companies and TV networks (69%), the growing involvement of traditional professional sports teams, leagues and figures (68%) and the broadening of sponsorships beyond brands endemic to gaming (59%).
The traditional professional sports industry, eyeing ways to diversify revenue streams, is the group respondents most expect to increase their investment in esports over the next year (57%), followed by private equity and venture capital firms (39%) and media groups (38%). Meanwhile, respondents ranked advertising and sponsorships as the area they expect to drive the most revenue growth in esports over the next year, followed by media rights.
“Respondents’ belief that advertising and sponsorships will drive growth is a positive development for esports as these revenue streams benefit participants across the industry, independent of the developers and publishers that largely dominate the broader gaming industry,” said Michael Wall, of counsel and a member of Foley’s Sports Industry Team. “This growth can be expected to accelerate as traditional sponsors become increasingly comfortable with evolving metrics for evaluating return on sponsorship investment.”
Tobias Seck, business analyst at The Esports Observer, added that “the near-term growth anticipated from sponsorship deals might be explained by their relatively lower degree of complexity and duration compared to media rights deals, which – especially considering the impact of mobile streaming – are likely to contribute significantly to the industry’s long-term growth.”
Despite the significant promise of esports, survey respondents are also cognizant of the risks facing the industry. Match fixing topped the list of threats to the legitimacy and growth of esports, with 78% of respondents calling it a serious or moderate risk. A substantial percentage said the same of the recent repeal of U.S. net neutrality regulations (71%), the lack of safeguards and protections for underage players (60%) and illegal gambling (57%).
“When you consider the amount of money in esports gambling, combined with the ability of one player to make or break a team’s prospects for success, match fixing is really the elephant in the room,” said Mary K. Braza, co-chair of Foley’s Sports Industry Team. “Looking ahead, match fixing has the potential to negatively impact the popularity of esports if fans get the impression that cheating is widespread or that results are illegitimate.”
A strong majority (69%) said their organizations are focused on staying up to date on legal issues concerning esports and complying with current laws and regulations. Respondents also identified a number of legal issues that they believe pose a substantial risk to the esports industry, including cybersecurity and malware attacks targeting gamers’ and fans’ data (65%), intellectual property rights and licensing issues (50%), cyberbullying within games (43%) and contracts that do not provide adequate protections for players (43%).
“Survey respondents are keenly focused on legal compliance. This is not surprising as the commercial growth of esports requires greater sophistication across the landscape of potentially applicable laws,” said Jon Israel, vice chair of Foley’s Sports Industry Team. “At the same time, the unique aspects of the esports industry makes the panoply of legal considerations novel and complex, particularly in the absence of laws or regulations specific to esports.”
Esports Institutions – and What Else Might be Ahead
Amid this risk and uncertainty, a substantial percentage of respondents feel there is a need for stronger esports institutions. They expressed the greatest support for players associations that represent the interests of professional esports players (77%), likely to bring greater credibility to esports and to protect players from exploitation. Another 57% agreed with the need for an organized lobbying group to spur development of esports and influence government regulations. Roughly two-thirds of respondents expect that each would be established within three years.
The creation of an overarching esports governing body was more controversial, with 47% indicating a need for such a body and 34% dissenting. Supporters indicated that such a governing body could boost legitimacy and mainstream appeal, while opponents argued that it would be impractical or even counterproductive, given the disparate and evolving nature of esports.
“The survey responses indicate some recognition of a need – and overall desire – for the esports industry to band together,” said Kevin Schulz, co-chair of Foley’s Sports Industry Team. “There’s also notable uncertainty about how that would look and acknowledgment of the practical issues with applying a uniform standard in a constantly changing and dynamic industry comprised of different games and developers.”
Respondents also identified other developments that will support the burgeoning esports industry. Over the next year, the overwhelming majority (88%) foresee the construction of more specialized esports facilities and 47% expect virtual reality esports to grow substantially.
For more information and to download the complete 2018 Esports Survey report, please click here.
About Foley & Lardner LLP
Foley & Lardner LLP looks beyond the law to focus on the constantly evolving demands facing our clients and their industries. With over 1,100 lawyers in 24 offices across the United States, Mexico, Europe, and Asia, Foley approaches client service by first understanding our clients’ priorities, objectives, and challenges. We work hard to understand our clients’ issues and forge long-term relationships with them to help achieve successful outcomes and solve their legal issues through practical business advice and cutting-edge legal insight. Our clients view us as trusted business advisors because we understand that great legal service is only valuable if it is relevant, practical and beneficial to their businesses. Learn more at Foley.com.
About Foley’s Sports Industry Team
Foley’s multidisciplinary Sports Industry Team provides comprehensive, integrated legal counsel on a full range of commercial and regulatory issues facing organizations in the sports industry, including professional and college sports organizations, amateur and charitable sports organizations, sports technology companies, fantasy sports and sporting goods manufacturers. With a long history and depth of experience in the sports world, Foley helps clients navigate all aspects of the dynamic and growing esports industry. Foley’s sports attorneys bring a diverse range of legal disciplines and practical industry experience to counsel clients on a wide range of issues, including investments, acquisitions and financing; sports facility development; antitrust and litigation matters; negotiation of media rights deals; intellectual property issues; and labor and employment matters. Chambers USA, U.S. News-Best Lawyers and The Legal 500 United States have recognized Foley’s Sports Industry Team as one of the top sports practices in the country for more than a decade.
About The Esports Observer
The Esports Observer is the world’s leading source for esports business news and insights. TEO offers an integrated platform that enables companies to make the right decisions when venturing into the esports industry. We offer real-time business intelligence and reports, in addition to planning and hosting industry events and conferences. Our ultimate goal is to increase transparency and foster growth in esports.