'Significantly more' market consolidation expected in esports

gamesindustry.biz:

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Signs of an esports downturn emerged over a year ago.

Throughout the boom years of the 2010s, investors had pumped millions into team organisations and other entities, dazzled by the bright lights of competitive gaming, the stadiums filled with roaring fans, the professional players with significant followings and the bombastic headlines boasting of million-dollar prize pools.

Older games like League of Legends and Counter-Strike continued to impress, while newcomers like Fortnite, Overwatch and Rocket League only added to the hype at the time.

Brands, businesses and backers bought into that excitement, as the projected growth of the billion-dollar industry proceeded to increase. The top pro players commanded higher salaries, with some earning over $1 million per year, not including their takings from prize money and individual sponsorships.

Not even the pandemic could stop esports' rampant rise, with tournaments going ahead online or in studios with newer safety measures in place. With players stuck indoors, games and hardware sales rose, and some companies expanded, buoyed by the growth.

But after the pandemic lifted, as physical events returned and investors looked forward, it became clear that a return on their investment had failed to materialise. With costly player salaries, an overreliance on sponsorships, and a fanbase reluctant to spend more on an activity that is essentially free to watch and follow, esports teams were woefully unprofitable. Alongside this, publishers had over-hired.

"While there has been consolidation in the esports sector, organisations with strong fundamentals are set to emerge stronger and leaner"

At the same time, inflation, a cost of living crisis and economic uncertainty lowered expectations.

The esports boom years were over. The gold rush had ended. And what followed was not an easy pill to swallow.

Cutbacks, closures and consolidation hit the industry, and continue