We feel that an industry with such large-scale growth of active and engaged fans as e-sports is always a good place to invest.”
The United States may have its National Basketball Association and National Football League but Asia has e-sports, which is attracting billions of dollars in investment, even though lucrative returns have yet to materialize.
E-sports, shorthand for electronic sports, is comprised of organized tournaments in which participants singly or as a team compete against each other at video games.
The largest contests are like any other major sporting event, with spectators buying tickets to watch in person or paying to see it broadcast on television or over the internet. Both the sponsorship deals from major companies and the prize money for winners can be worth millions of dollars.
On Aug 11, Allied eSports, a joint venture of the largest e-sports, sports and entertainment companies in China, announced a strategic investment partnership with Esports Arena from the US. The partnership will include investment toward new Esports Arena locations.
It’s just the latest example of a flood of investments.
In July, Chinese outdoor advertising firm Focus Media led an $81 million venture capital round of investment in a three-month-old e-sports startup, Sport of the Heroes.
But while attracting investors, they are failing to generate any kind of significant return. For the time being, venture capital firms are just looking to break even.
“If you’ve even made $1 million (as a venture capitalistist in e-sports), I would say you’re doing exceptionally well,” says Alex Lim, secretary-general of the International e-sports Federation, a governing body for e-Sports founded in South Korea in 2008.
Last year, according to a stock exchange filing, Yinchuan International Game Investment, operator of the World Cyber Arena series, one of the larger global tournaments, lost 65.4 million yuan ($10 million).
Hero Entertainment, a competitive video game developer, lost 7.58 million yuan in the first half of this year, according to a company filing.
“You can’t expect returns right away from an early stage. You have to be patient. They are trying to establish a strong brand with strong loyalty from the e-sports community. Only after maybe three to five years, they will start making more money,” says Lim.
The global e-sports market generated $325 million in revenue last year and it is expected to hit $463 million this year, according to Newzoo, a market intelligence firm specializing in the digital games market.
In 2014, venture capital pumped $2.43 billion into 217 game companies. The following year, investments in 216 game companies halved to $1.02 billion. Paul Chan,
Kong Esports chief marketing officer at Hong