Video gaming has always been a spectator sport. Pre-millennials will remember hovering over arcade cabinets watching friends make the leaderboard. That dynamic developed into a cottage industry as tournaments emerged.
Fast-forward a couple of decades and people are still watching each other play video games, but they're now doing so on dedicated channels like Twitch.tv . Amazon bought that company for $1.1 billion in 2014. E-sports is no longer an obscure hobby for nerds.
Market analyst Newzoo estimates a 34 percent revenue growth for this market in the near future, from $493 million in 2016 to $660 million in 2017.
The e-sports business may have financial potential, but it is disorganized, warns Jurre Pannekeet. The 27-year-old Newzoo market analyst has firsthand experience. He dabbles in tournament play himself in his favorite game, "League of Legends."
"It's not anything close to mature yet," he said of the space. "We've only just passed the initial phase of a lot of growth and structuring."
An Evolving Business
The two or three top-level games have leagues operated by games publishers, such as the League of Legends Championship Series (LCS) run by Riot Games. These are well-funded, relatively established leagues. However, the lion's share of the activity occurs at the amateur and casual levels, where players are hungry to form their own teams and play in tournaments. This is a fragmented ecosystem.
For it to function well, this community must operate cohesively. Players must be able to find each other and form teams.
"Finding the people around you that have the same mindset and want the same intensity and frequency isn't as easy as you'd think," said Pannekeet.
Then, someone must organize tournaments and ensure that winners are paid. Pannekeet talks of past disputes where players were left chasing organizers for winnings. In 2016, for example, Invictus Gaming claimed that it had not been paid for participation in an event. In another case this year, an e-sports tournament organizer blamed a sponsor for failing to pay up.
Some traditional websites are tackling these challenges on a piecemeal basis, said Pannekeet. For example, Teamfind helps gamers to find each other, and FACEIT enables people to organize tournaments at the amateur and casual levels.
But Pannekeet argues that these sites only address part of a broader organizational challenge for e-sports. He sees an opportunity for blockchain technology to solve them all at the less-supervised amateur and casual levels, especially in areas such as payments, where organizers could stoke accounts with winnings in advance.
"Having that technology with automated contracts where you can have all those payments and other things automated could really help this industry," Pannekeet said. "With all those things being done automatically, I can see a very big role for blockchain [technology] in that regard in e-sports."
The Next Level
Ethereum-based blockchain startup DreamTeam hopes to manage the entire e-sports value chain using a decentralized model. It plans to match players and provide tools for team coaching. It will manage sponsorship and media rights, along with salaries and even processes such as player transfers.
The firm, which has partnered with blockchain-based virtual gaming goods company DMarket, hopes to handle these transactions using its own DreamTeam token. It completed the first phase of its token sale this month and plans for phase two in early 2018.
Unlike conventional sports, where data about players and games must be manually collated, all the data about players and team performance could be automatically encoded in a blockchain. This creates an interesting opportunity for DreamTeam, which hopes to sell analytics data generated by all these blockchain transactions.
The value of that data should not be underestimated in an industry that Newzoo predicts will reach $1.5 billion in 2020.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
