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Despite the occasional outlier, such as Activision’s $160 million deal with YouTube, media deals for esports broadcast and streaming rights have lagged behind both audience scale, viewer value and the kind of big-money deals that have become common in mainstream sports. In fact, traditional sports media rights deals have never been higher. I expect this will change in 2022. Why?
Streaming companies are now in the live sports business. From Amazon and Twitch to HBO Max and Showtime, sports is moving behind streaming paywalls. This is driven by not only cord-cutting acceleration but also by streamers seeing the user retention and anti-churn value that live sports can bring to their platforms. I believe their data shows the revenue upside, and they have the money and public valuations to write the checks.
Additionally, as ratings overall — and the ratings for the demographic of 18- to 34-year-olds specifically — decline, linear outlets often don’t have the same economic power to pay what it now takes to retain sports rights in renewal negotiations.
Live sports, in general, is having a valuation bubble moment. In 2021, the NFL negotiated over $100 billion in media rights deals. Even Bowlero, the operator of bowling facilities, saw a huge valuation spike at $2.6 billion in a 2021 SPAC deal. From my perspective, there is no outcome where esports doesn’t benefit from this frothy market — if for no other reason than it seems “cheap” today to lock up a top-tier esports property in comparison.
Here are the top sports and gaming trends I believe we’ll likely see develop in 2022:
1. Increased Celebrity Investment and Involvement in Esports
The esports industry has the potential to garner even more attention from celebrities, athletes and high net worth individuals. On the heels of Roc Nation Sports, owned by Jay-Z, Eonxi, whose investors include NBA star Spencer Dinwiddie, and even Netflix breaking into the industry, I expect this trend to continue as gaming pushes even further into mainstream media consumption. Sponsorship revenue could be the biggest moneymaker in esports in the coming year, potentially accounting for more than 30% of total revenue, meaning the benefits of being involved in the esports market are becoming substantial and more like traditional sports.
2. Live Events Return to High GDP Nations
While the pandemic challenged the live sports and esports ecosystems for more than a year, vaccinations, proven Covid-19 protocols and fans’ desires to get back to in-person events could bring fans, ticket revenue, venue revenue and sponsorship dollars back in 2022. This trend may not extend into the second and third world. However, the bulk of sport’s revenue has largely come from first-world markets where ticket prices, merch, food and beverage, and media rights values can be maximized.
3. Increased Non-Endemic and Luxury Brand Integration
To cater to this common passion among 18- to 34-year-olds — a generation by and large not deeply engaged in traditional media — old-line luxury, travel, fintech and other brands are racing into sports and esports to build engagement and brand preference.
Crypto.com signed a $175 million deal with the UFC quickly after signing a $100 million deal with Formula 1. FTX bought naming rights to the home of the Miami Heat for $135 million. On the gaming side, Vans and Gucci have set up stores in gaming metaverses and Louis Vuitton created the trophy case for the League of Legends Esports Championship and did a capsule collection as well with the publisher, Riot Games.
This comes after several years of record labels and artists using gaming worlds for virtual concert appearances and promotions. Expect all of this to accelerate quickly in 2022.
4. A Shift to Mobile-First Engagement
Sports has been traditionally centered on the “big screen” experience. High-end gaming consoles serve as not only a platform to play games on, but also to watch Netflix and more. Even many vertical gaming platforms have been PC-based with a larger monitor.
Today, with the advances in processing power and battery life of mobile devices, accelerated by cord-cutting and the rise of mobile-first culture, the mobile device is taking center stage in sports and gaming. Nifty Games recently released NFL Clash as a mobile game globally. Overall, many mobile esports games saw an increase in viewership in 2021, with a renewed focus on strengthening engagement in the West.
5. Data Could Fuel New Forms of Revenue
Just as data drove the explosive growth in digital advertising, data could unlock massive new revenue streams in sports and esports. From third-party betting and fantasy platforms like FanDuel and Draft Kings to first-party data such as the PFL’s “SmartCage” technology in MMA, data could help fans evaluate player performance as well as earn revenue from their fandom, increasing engagement and participation.
Today’s younger fan understands metadata and loves data interaction on their digital devices. If sports and gaming move to an ARPU and lifetime value model, data will be the driver of stickiness. Organizations that leverage data will simply do better at keeping and engaging fans. The smartest gaming and sports brands will share the new monetization pool with their biggest fans.
6. Educational Opportunities in Gaming Drive Mainstream Legitimacy
Parents used to tell their children to go to college for a fallback career when told that their child wanted to pursue a professional gaming career as a player or as a game designer or developer. Today, those same kids can point to dozens of degree programs, new labs and publisher partnerships at some of the finest schools in the U.S. In parallel, console makers, publishers, venture capitalists and others are investing in the educational ecosystems around gaming and esports.
Along with these trends, overall, there will be larger prizes for professional players and more opportunities for them to succeed in securing sponsorship and media deals outside their endemic worlds.