• Vesna Drofenik

Lucrative match: The impact of esports on local communities

Updated: May 4, 2020

Esports has been a hot topic, perhaps it’s even become a buzzword in recent years. And it’s no surprise – every year, more global brands commit to the industry, making for exciting headlines and attracting more investors looking to jump into the growing market. The impact of the growing esports industry has also been felt locally as elite teams and competitive events find their space in the real world.

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According to Newzoo, the esports industry surpassed the threshold of $1 billion in total revenue for the first time in 2019, and revenues are projected to continue to grow with a compounded annual growth rate of 9% in the period 2018-2022. As non-endemic brands like Kia Motorsand MasterCard jump in with multi-year sponsorship contracts, they also send strong signals promising sustained growth to potential investors.

While the total sum of all esports investments in 2019 ($1.95 billion) showed a decrease from the total sum of investments raised in 2018 (a record $4.52 billion), this was no indication that the industry was slowing down. A healthy wave of large-ticket investment rounds peppered the year, which was crowned by the successful NASDAQ initial public offering of Chinese live-streaming service DouYu at a valuation of $4 billion in July.

Big brand sponsorship deals, investment rounds, and joint ventures are great, but their impact on stakeholders outside of the elite circle may not be felt directly – or immediately. Impact does spread out to a wider circle of businesses, players, and fans eventually, however, in a juxtaposition of effects that are unique to esports.

The championship comes to town

Although online viewership is likely to stay a key metric when it comes to esports, several franchises have demonstrated a strong potential and demand for live, physical events as well. In a phenomenon remarkedly similar to traditional sports events, fans have flocked to cities hosting both regional as well as world championships in beloved esports leagues to support their favourite teams and players. Host cities have reported a positive direct economic impact from increased tourism, including an increase of revenues in the hospitality and cultural industries.

A notable example is the championship league run by Riot Games, the developer and publisher behind what’s arguably the world’s most successful esports title, League of Legends. The League of Legends World Championship (or Worlds for short) occurs once a year, with competitors qualifying from regional championship leagues covering either single countries (China’s LPL or South Korea’s LCK, for example) or regions (the LEC covering Europe or the LCS covering North America). The World Championship series is hosted by a different region each year: 2019’s Worlds took place in Europe (Madrid, Berlin, Paris), while the upcoming 2020 and 2021 Worlds are slated to take place in China (Shanghai) and North America, respectively.

Riot Games revamped the structure of the highest-tier championship in 2019, renaming what was previously known as the EU LCS to today’s LEC in order to develop the European championship into a stronger entertainment franchise and to better distinguish it from its North American counterpart. It also kicked off a host city program inspired by traditional sports structures, where cities are able to apply to Riot as candidates to host championship finals as far as two years in advance.

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Both regional leagues are consistently keeping their audiences engaged throughout each Split – so much so that even the finals for each half season, called the Spring and Summer Split, have shown to attract large numbers of fans who make the trip to whichever city is hosting a given final event. In mid-2019, Riot Games reported that the first LEC Spring Split Finals, held in Rotterdam, Netherlands on 13-14 April 2019, had contributed over €2 million to the local economy. Over 87% of the attendees had come from outside the city and had spent an average of €53 per day during their stay in Rotterdam. Following the conclusion of the Summer Split, Riot released a recap of the LCS season stating that the Summer Split Finals held in Detroit, Michigan, US, had contributed $5.44 million to the local economy. For the 2020 season finals, the LEC is heading to Budapest, Hungary, and Malmö, Sweden while the LCS Spring Split Finals will be hosted in the city of Frisco, just north of Dallas, Texas, US.

However, it’s not just the big players making waves – smaller esports have also reported significant economic impact resulting from their offline activities. Greater Raleigh, a nine-county metropolitan area around the cities of Raleigh and Durham, North Carolina, US, reportedly saw $1.45 million in direct economic impact from the Rainbow Six Siege Raleigh Major event held in August 2019. The Major attracted over 2600 attendees over three days, with more than 70% of visitors coming from other US states or even countries. What’s also important for the Raleigh area, also known as the Research Triangle and home to numerous tech companies and video game development studios, is that more than 1000 inquiries for local video game industry jobs were reported over the course of the weekend. Which brings me to my next point …

Employment & Government Incentives

With esports and related industries comes a strong potential for high-value job creation as well, many local or even state governments around the world have grasped. The trend seems to be strongest in Asia, where several successful initiatives and government-backed projects have kicked off over the past few years. Perhaps most notable was the move by Malaysian Minister for Youth and Sports, Syed Saddiq, who helped allocate $2.4 million of the country’s annual budget to esports. The industry welcomed this news, with several tech entrepreneur including Razer CEO, Min-Liang Tan, to match the committed funds.

Much of the government activity in the Eastern region has been on a municipal level, however – the Tokyo Metropolitan Government allocated ¥50 million (about €450,000) in its fiscal year 2019 budget for a two-day esports event hosted by the city. As for China, a country which has generally been covered in gaming-related news for its stringent regulation policies, several municipalities have been building so-called “esports towns.” Hangzhou city notably opened its 17,000 sq. meter esports complex in November 2018 and intends to spend up to a total of ¥15.45 billion RMB (€2.05 billion) on the project, which will include an esports academy, hotel, theme park, business center, and even a hospital, by 2022. The city is slated to host the 2020 Asian Games, which will feature esports as a medal event for the first time. The city of Xi’anhas also invited esports-related companies to open offices in the area, promising to reward them with a maximum of ¥100 million RMB (€13.24 million) if they decide to do so. Hainan, the country’s southernmost island province, has also announced an esports development fund worth a sum of ¥1 billion RMB (€134 million) dedicated to supporting esports talent development, tournaments, streaming, international visa applications, and a zero tariff and low tax rate policy for applicable companies.

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Though Western governments and municipalities have not shown such bold ambition as their Eastern counterparts just yet, great examples of government incentives targeted at the esports industry have started popping up here as well. Perhaps most notable is the Esports Stadium Arlington in Arlington, Texas, which officially opened to the public in November 2018. The city spent $10 million to construct the stadium and has signed a 10-year lease to NGAGE Esports, which is responsible for booking and managing events hosted by the venue and securing sponsorships, for example one with NVIDIA GeForce. ESA has since hosted a number of high-level events, including the Counter-Strike: Global Offensive ECS Season 8 Finals in late 2019.

Other municipalities have focused on attracting esports talent by offering grants and tax refunds. Misfits Gaming Group, one of the leading esports organizations in North America, has decided to consolidate its presence in the market by opening a new HQ in Boca Raton, Florida, US in 2021, worth $1.3 million. The organization has revealed that local and state authorities will provide over $200,000 in grants and tax refunds to support the relocation, supported by Misfits Gaming’s plans to create at least 30 new jobs.

Several government-supported esports projects are planned or under way in Europe, too. In the UK, the Weavr Consortium, led by ESL UK, was awarded a two-year grand of £4 million in government funding by the UKRI in 2019. The consortium seeks to create 45 tech-focused jobs in order to develop a new platform aimed at transforming the sports experience for remote audiences. On the mainland, the Danish Growth Fund led the latest €10 million investment round raised by RFRSH Entertainment, owners of the Astralis esports team and operators of the Counter-Strike: Global Offensive BLAST Pro Series.

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