Why Esports is Not a Bubble


In the past few years, esports has grown from a niche hobby into a multi-million-dollar industry. The industry is constantly seeing growth, and many people are wondering if there's going to be an esports bubble. This article will explain how it would take a miracle for esports to become a bubble, and why this industry is here to stay.


A bubble is an economic cycle that is characterized by the rapid escalation of market value, particularly in the price of assets. A bubble occurs when investors have a high demand for an asset but fail to find enough new buyers on the open market, causing the prices on this asset to rise exponentially until they become unsustainable and lead into a major crash.


Esports has had several high valued companies and projects, but throughout its growth as an industry, it's been relatively sustainable. The following factors contribute to the lack of a bubble in esports:


Esports is growing from a low starting point


In 2016 alone, global revenue for esports equaled about $325 million. Compared to other established industries, $325 million might not sound like much at all. But compared to the revenue of esports in 2012, which was only around $194 million, it's 400% more. And even if you look back to 2010 when revenue for esports was only around $64 million, that's still 80% growth. As you can see, although esports has seen growth through the years, it's still starting from a low point.


Esports is still growing rapidly


Even though global revenue has grown 80+% in the last 5 years, that doesn't mean that growth will stay at that rate forever. There are hundreds of millions of gamers around the world, and most of them are casual gamers. Once esports becomes recognized as a major industry, that's when we can expect to see exponential growth in revenue. We've already seen the rapid growth in the number of esports tournaments and leagues over the last few years. According to esportsearnings.com, there were around 300 esports tournaments in 2014. In 2015, the number jumped to 962, and in 2016 we saw over 2000 esports

tournaments globally.


The nature of esports makes it less likely for a bubble to form


Because esports is about video games and the tools that are used to play them competitively, it's extremely difficult for a company to gain a monopoly on the industry. The value of esports comes from people coming together to watch gamers play video games, which means that it's highly unlikely for a single company to be able to monopolize the market. Also, since there isn't a physical product being sold, companies don't have an incentive to produce fake demand or inflate their prices. It would be much easier for a company to create an esports bubble if it sold physical products because they could inflate the prices and limit how many people can purchase those products, but companies that sell physical products related to esports aren't as common.


The nature of video games makes them less likely to reach a point of unsustainability


The value of esports comes from the nature of video games. When companies want to produce more fake demand for their products, they usually do so by producing fake versions of their products that they sell to consumers, which then creates an artificial demand that is unsustainable once this cycle has run its course. Esports can't really be taken advantage of in this way because the value of esports comes from the players and/or teams playing a video game, not from physical products. As long as there are gamers who want to play a certain type of video game, it will be possible for esports tournaments to exist because other gamers will want to watch those games played competitively. Every major company that has risen to prominence in esports is involved with video games, including (but not limited to) Riot Games (League of Legends), Blizzard Entertainment (Star Craft II and Overwatch), Valve Corporation (Dota 2 and Counter-Strike: Global Offensive), Activision-Blizzard (Heroes of the Storm) and Hi-Rez Studios (Smite and Paladins).


The companies are producing esports events instead of consumer products


The fact that major companies are hosting esports tournaments, providing video game development assistance or streaming their games on platforms like Twitch is a big difference from what would happen if the same companies created physical products. It's much easier for a company to limit how many people can obtain a physical product than it is for them to limit the number of people who will be able to watch an esports tournament, which means that there are fewer ways for companies to monopolize or inflate the esports industry.


The value of the esports industry depends on everyone's willingness to keep

playing video games competitively


There are many gamers around the world, but not all of them are willing to play video games competitively. If fewer people wanted to watch others game competitively, it would be harder for esports companies and tournaments to grow because there would be less demand for their livestreams or matches. The value of esports comes from these gamers who play video games competitively, and since there's no way for consumers to fake demand, the only way for companies to monopolize or inflate the market is if gamers stop playing certain types of video games.



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