Journey to the centre of eSports

June 18, 2021

Aside from a bit of Counterstrike here and there, neither of us are experts in the world of eSports and, as investors, that what we’re in the business of becoming at short notice…and so my journey began.

I’m going long here – and I’ll be covering:

What eSports is

Why it’s popular

How businesses are approaching the sector

How players and fans view the evolution of eSports

Where to place your bets

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eSports?! What’s that? Electronic Sports?!

Yes, it’s electronic sports, of a sort. Video games have been around for decades and it’s no surprise that people have been creating teams, congregating in arcades, competing and wagering on outcomes all throughout their history. Don’t believe me? Treat yourself to a viewing of King of Kong which documents the history of the King Kong world record score and those determined to break it. It’s an great film and commentary on human nature.

eSports as it’s referred to today concerns the world of online-multiplayer first person and team based games where someone/a team wins and someone/a team loses. The most popular of these games can be seen in the graph below. Quite the power law in action here.

Taken from Mahesh Vellanki’s which referenced data from NewZoo, and some of Matthew Wong’s work

The team-based, multiplayer battle arena games League of Legends and DOTA 2 are by far the most popular games out there. Their popularity is reflected in the prize money at stake though there’s far more money to be made by playing DOTA 2 (~$45m in prize money per annum) than any other game (League of Legends comes in at ~$11m).

Taken from

As you can see, there’s a lot at stake here. Though before you think that you’ve missed your calling and are about to throw in the towel to become a pro-gamer…eSports is a (very) young (typically) man’s game. The top earning players are typically aged 15–25 and if you’re reading this, you probably aren’t. Beyond those advanced years you simply don’t have the requisite reaction speed to compete at the highest level. You’re fried by that point. Putting that into context, the best Formula 1 drivers can win into their late 30s. Furthermore, eSports players are concentrated in certain geographies. The US, China, South Korea, Northern Europe and the Nordics account for the vast majority of player numbers and earnings.

Ok, but still, why is it so popular?

Well, it’s easy to overstate eSports’ popularity. It’s still pretty niche, in terms of player numbers and main-street awareness.


Audience growth, while impressive, isn’t gang-busting. With a projected global audience (complete with heavy geographic skew as mentioned above) of 345 million this isn’t by any means a critical mass. Soccer, cricket, hockey and tennis all have fan numbers in the billions, by way of comparison. The slightly ‘underground’ feel to eSports is something that this industry is going to have to overcome if those who are placing big bets are to realise a return. This is corroborated up by a recent survey by PWC where, unprompted and unaided, only 15% of people knew what eSports was.

Revenue growth, however, is ludicrously strong which is probably the reason why you might have heard about it if you’re not a gamer.


It’s exactly this revenue growth — and the potential to exceed even these projections — which has the investment community, game makers, publishers, GAFA, media, and many more fighting for a piece of the upside.

Descriptive statistics are one thing, but I wanted to find outwhy eSports is growing so fast. Why do people play the games? Why do people pay to watch games? What are the components of this revenue growth?

An important thing to understand about eSports is that the game never ends. Unlike in Pac-Man or Assassin’s Creed, eSports games are continual. You die, you respawn. The real value in the experience is created by the community of players (and watchers) rather than a 1-way consumption of product.

The possibility for endless gameplay, super-high octane action and the well established video meta-trend has been the foundation for the growth of a fanatic, deeply interconnected group of both professional and amateur players and followers. While online competitions provide a strong engine for growth and an obvious focus for business, there are also more constant venues for eSports players and fans to get their fix.

Twitch is the self-styled social-network for gamers (purchased by Amazon for $980m in September 2014). On the platform, players can play and cast their gameplay and webcams for watchers enjoyment. Watchers can interact with each other and the streamer, make donations, sign up for channel subscriptions and purchase mods. The amount of content being streamed regularly places Twitch as the 4th biggest bandwidth user in the USA behind Netflix, Google and Apple. Recorded media is well established too with Google’s YouTube being the main destination. PewDiePie is probably the most well known proponent here with more than 12 billion views of his various vlogs. eSports’ neat fit with both recorded video and live-media is a key strength — not least because it maps neatly onto a consumer base of which 69% are 18–34 but also because it has yielded platform potential for businesses and entrepreneurs.

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Big business and eSports

Having done some of the desk-based market research, watched a copious amount of Twitch and ruined my follower/following ratio on Instagram by following lots of eSports and casting celebrities it was time to get on the phones and pound the streets.

One thing which I found is that almost all of the folk that I spoke to within big organisations like Activision and Facebook were acqui-hires. While Activision Blizzard’s $5.9bn acquisition of King didn’t see them specifically acquire eSports players or ingratiate themselves with the eSports community, it certainly shows the value which big-business places on gamers across all platforms. In Activision Blizzard’s case, they paid ~$180 for every new quarterly-active-user that they acquired. The folks that I talked to there were incredibly excited about their new team based shooter Overwatch and you’d imagine that they’d be hoping for some cross-sales into their newly acquired users.


It’s hugely encouraging that larger organisations have such an acquisitive attitude to sourcing knowledge and entrepreneurial spirit in the hope of catching on to the coattails of eSports revenue growth. With this in mind, they’ve not been neglecting the small guys nor are they being internally slack. At the end of last year they set up a dedicated internal eSports division and acquired Major League Gaming (a leading tournament organiser). This was described to me as “the circling of the wagons”. American vernacular which I had to google but makes perfect sense. I’ve used it plenty since.

One thing which did occur to me over the course of my meetings is that there is a massive heterogeneity of opinion among executives, investors, insiders and entrepreneurs. For every person who was excited about VR, I found others who thought that it was so far away that it’s almost an irrelevance (where I stand). Similarly, backing for business models varied greatly. Media/AdRev seemed to be logical for some whereas owning the stack seemed preferable to others. Events and ticket sales (a relatively professional and enthusiast market) were the way forward for a few entrepreneurs whereas monetising ‘live’ and recreational viewers and gamers held the keys for plenty. A classic case of everyone talking about it, yet few people doing it successfully, yet. That’s probably a symptom of the nascency of the market and ‘the answer is probably a weighted mixture of all of these things.

In Part 3 I’ll go into my own predictions of where you might put some dollars to work but there were a couple of things that everyone seemed to agree upon. First, the industry is unanimous in their praise for the impressiveness of audience growth (especially in comparison to other sports). It was mentioned far more than the revenue trend. So, having been warm-not-hot on it (in general and in Part 1), I quickly learned to keep that to myself and reconsider my stance. Second, a clear picture of categories of powerbrokers in this young industry emerged: online and offline tournament venues, game-makers, video platforms for streaming and accessories/mods / coaching providers. This roughly maps onto Blake Robbins’ excellent eSports landscape diagram.

What do players and fans think?

I wanted to spend some time talking about the social side of eSports: who the Twitch viewers are, who the recreational players of DOTA 2 are, what excites them and what are their hopes and dreams for the industry? There’s plenty of content out there which follows the fantastic, the rich and the celebrity on offer for eSports players and the best casters — this VICE mini-series is great viewing, but I wanted to find out a little more about the every day fan and gamer: the majority.

This is possibly the most important part of the equation — understanding the customer. It’s these guys and girls who are the net promoters, who are the grassroots and the groundswell, the keys to the audience and the revenue growth. So, aside from subscribing to some Twitch channels, I spent a while in the Reddit eSports and individual game sub-Reddit wormhole and chatted to gamers in their downtime at, Meltdown, our local eSports pub.

Far from this being adolescents, moulding away in dark rooms playing through the night — a common stereotype of which there are doubtless plenty — I found a diverse crowd of age, race and gender. The fanbase, as is, is remarkably transcendent. While the age distribution is positively skewed (34% of fans and gamers are aged 18–24), it isn’t to the exclusion of older folk. The same audience research found that there were similar (actually slightly more) female fans and participants than male ones. This tallied with my anecdotal audience research at Meltdown and online. It all seems to make sense. When I was 10, I lived for Street Fighter II Turbo on the SNES. Talking to these guys and watching them play made me feel like a kid again.

Aside from questions about what they buy (to be covered next week) their support for eSports to be considered sport is unwavering and, to my mind, totally fair. Gamers spend thousands of hours practicing, professionals are subjected to intense scrutiny and those who reach the top are not only naturally gifted but have honed their talent with a dedication to improvement that is superior to lesser players. There is a wonderful, global feel and camaraderie to eSports. It arguably has its roots in Asia but has propagated through the West and it is genuinely ‘native’ within social media, live media and video. It’s borderless, deeply interconnected and as a result and every fan feels truly part of the sport. This social graph a platform for non-linear growth.

Given that the majority of people are still very unfamiliar with eSports, I also wanted to know what gamers’ and fans’ friends and family thought of their passion/hobby/fandom. Something that came up time and again was the portrayal of women in eSports and gaming, in general. The guys who I came across had girlfriends who were concerned about it. Girl fans and gamers were quick to bring it up. It’s not surprising, you can see below some of the discernibly female champions of League of Legends.


I do understand that this is fantasy and that men are also unrealistically depicted albeit in a different, often impossible, way but it’s hard to classify this as anything else but objectification and promotion of unrealistic ideals. Admittedly, as a 30 year old, white, male, VC I’m not in a good place to get on my soapbox. Furthermore the potential problems posed would seem to be significantly less than other forms of adolescent entertainment but there’s clearly some work to do here. Given that eSports and gaming audience will likely continue to be positively skewed in age there’s definitely more that can be done to encourage healthy attitudes toward women. You can watch a great primer on this issue here.

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Finally, to the VC stuff. While eSports isn’t a big market at the moment, it’s experiencing massive year-on-year revenue (~40%) and audience growth (~11%): propelled by it being truly native to tech, social media, live media, video and VR. So the question isn’t “is it going to be big”, rather: “how is it going to be big”.


Understandably, the majority of money is being made right now is through classic media revenue models. Having talked to gamers and looked through a good deal of pitch decks: many of today’s offerings concentrate on the hardcore enthusiasts. Down at the eSports pub, the only thing that everyone seems to buy are the compendiums: the guides for the biggest tournaments for the biggest games (DOTA 2, League of Legends). This struck me as a group of enthusiastic consumers, under-penetrated by products.

People are earning a good crust in casting either on Twitch or commentating on professional games (ReDeYe is a good example). As eSports is professionalised further, I’d expect these independent operators to retain some appeal, but see the large part of their market be ceded to big broadcasters. This is already underway with ESPN making significant moves.

There’s no doubt that streaming, ad-rev and pro-focused offerings will continue to be an important component of industry revenues but there’s amassive amount yet to be done in monetising the vast majority — viewers and gamers — with a variety of products and services.

As an investor, I think that the secret lies within this increasing professionalisation of eSports. It’s a reasonable hypothesis that revenue streams from ‘sports’ as the general public knows them today are going to be transposed onto eSports. What does this mean? It means that people are going to plough lots of their hard earned cash into getting better at eSports.

This is also already underway. Dojo Madness is a great example. Give them access to your data (a seamless experience), and they will tell you exactlyhow to improve. Compare this value proposition to these clunky augmentation devices for tennis players and skiers. More generally: think of all the money that consumers put into coaching and improvement in recreational sports. I don’t think that eSports will be any different but what is exciting here is that because it’s “e”Sports those coaches can be software. Anecdotally, to give an idea of the appetite that players have for improvement, I came across quite a few gamers who complained about the current offering of energy drinks making them jittery, as opposed to helping their reaction times. There’s huge latent demand here, waiting to be tapped.

Similarly, empowering social competition, through clubs and venues represents a lucrative opportunity. Whereas other sports mostly offer this offline, with eSports this will be mostly online with the added attractiveness of defensibility through data and network effects. No doubt there will also be some slightly more vanilla opportunities yielded by the growth of the sector: mods, merch and hardware/peripherals.

Beyond this revenue model transposition, there will be some opportunities which are unique to the category of sport itself. As covered in Part 2, part of the secret sauce of eSports is the live experience. The medium allows an ease of following and an interactivity that results in an addictive experience with a network effect all of its own. There’s a great opportunity out there for those aiming to improve the mobile experience where, for a good deal of time, technical innovation has suffered at the hands of customer acquisition. On a day where I’ve just read that Snapchat has surpassed Twitter in daily users, there is clearly room for entrepreneurs to create custom UI and UX for what is the most exacting online audience.

A specific note on betting and gambling: the business case here is clear but I think that it’s a matter of timing. There are some interesting models in the market already: in-game DOTA 2 betting, Betfair for Counterstrike, alongside some more standard offerings. These all strike me as quite niche for the time being. There’ll be a time for betting, but I’d wager that the audience needs to widen and the general understanding of eSports needs to deepen before this gets to be a really interesting area.

If you’re serious about putting some money to work in eSports it’s a good time to start. Riding the wave of rapid growth is an enticing prospect. But it’s tough to get in and to get access. This remains an indie-industry, with a few key power-brokers. So get started, get to grips with the industry, ask for intros, ask lots of questions and, if you’re stuck, you can even ask me.

Until the epilogue in a couple of years…thank you for reading.

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On my journey I came across some brilliant people. I’d like to give special thanks to a few for letting me ask the silly questions: Sundance, Ian, Julia, Lawrence, Jens and Jiri.

This post originally appeared in three parts (one, two, three) on my blog

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June 18, 2021