Will Gaming and Esports Startups Survive the Coronavirus Crisis?
The video game and esports industry was booming before the coronavirus crisis took hold. In 2019 the video game market likely achieved a value of $150 billion. Esports was worth just under $1 billion. Then came Covid-19, self-isolation and physical distancing and sports and esports events were cancelled globally. But, with esports and gaming’s digital origins, players and fans are returning to their gaming routes, staying home and playing and spectating online. These gaming stalwarts are now joined by many “noobs,” new players and a new audience looking for entertainment that is available and enabled for physical distancing.
What this will mean for gaming and esports startups is either an opportunity or a challenge, depending on the type of business.
Sadly, esports startups that focus their offering on physical events, tournaments, ticketing and the like will be suffering alongside many many businesses in other niches, especially those that rely on visitors and physical sales. That said, esports can only boom once we are through this coronavirus crisis. Added online interest will create significant impetus once events and tournaments are once again safe and allowed. If startups can be resilient, adapt or merely survive, later they may thrive.
Esports teams, actually a healthy number of esports startups, can compete online. They were, however, beginning to prosper from an increasing number of big brand sponsorships. These brands were taking advantage of the coverage of physical tournaments and their growing audience. How this sponsorship activity will fare back solely online remains yet to be seen.
2020 could be make or break
For gaming and esports startups which have or can quickly create an online offering, 2020 may be the year that makes them. Providing, of course, they have enough funding or can obtain it, investors will be shy in 2020. Esports Observer crunched the numbers and discovered, based on venture capital activity in prior recessions that startup funding could decline by over 20% and by as much as $86 billion.
However, people are home, furloughed, kids are distance learning, physical sports are cancelled, vacations are delayed so there is more time to spend gaming and streaming for just about everyone who wants to.
Despite an impending global recession that could rival the great depression of the 1930’s and is likely to at least have the same impact as the recession of 2007-2009, online gaming and esports startups could flourish.
Unable to televise leagues like the NFL, NHL, MLB and even the UK’s Premiership media giants are even airing live esports and gaming online events, accelerating the mainstream introduction of this burgeoning new industry.
The NBA’s Kevin Durant and other sports celebrities are competing in esports tournaments broadcast by ESPN and a Fox Sports airing of the virtual NASCAR Pro Series Invitational achieved 1.33 million viewers in March, becoming the most viewed esports event in US TV history.
Read also: DraftKings launches DFS on eNASCAR contests
Esports and gaming startups which find they have a growing market during the coronavirus crisis may be faced with funding challenges due to uncertainty and impeding recession. They will also face the usual threats and challenges of any startup, that of competition, barriers to entry, structure, organization, leadership and motivational issues and well as simple idea failure. Still, as per Esports Observer, over half of Fortune 500 companies were actually created during a recession. And, over 50 of the technology unicorns we see today, valued at over $145 billion, were founded during the great recession of 2007-2009.
Green shoots of success are showing
There is some evidence that gaming and esports startups are thriving in 2020. A recent Your Story publication named Indian gaming startups including Gamerji, Rein Games, Adda52Rummy, and Poker Dangal as surging amidst self-isolation.
Gambling operators that offer gaming and esports options have seen significant booms. Unikrn has seen what it describes as “unprecedented” demand and Luckbox a 50% rise in revenue in February and March. These aren’t startup companies per se, but their success indicates the opportunity that exists.
DraftKings, a five year old UK startup company has recently publicly listed, it is adapting its betting offerings by giving users the option to play DFS on online esports tournaments like CS:GO events as well as simulated Madden NFL matches. Moreover, DraftKings has been included in the list of the best online gambling stocks to currently invest in, according to Esportsbets.
Blockchain gaming projects, many of which are still in their infancy and in the development stages are still progressing at pace and seeing demand. New virtual game metaverses like The Sandbox and Decentraland are experiencing significant interest illustrated by sales of their blockchain-based digital assets. Virtual worlds today are far safer for those avoiding Covid-19 than the streets of our real world, and this will make such projects attractive entertainment for users.
It is absolutely true that some gaming and esports startups will struggle to survive the coming months if their business models rely on physical events or need capital financing. Others will survive hopefully to emerge into a post-Covid-19 or post-recession boom. A few, and hopefully more than that, will succeed in 2020 as online entertainment and competitive online sports become a major medium for people to occupy themselves safely at home.