HomeInsightsM&A and investment opportunities in eSports – just the beginning…

The eSports ecosystem spans a broad range of areas (technical service providers, events, teams and other ancillary services) which offer M&A and investment opportunities for companies to expand, promote brand recognition or simply tap into the growing revenues from online advertising, sponsorship and media rights.

M&A and investment activity has been increasing across these areas. Since the start of 2011, eSports and game streaming start-ups are believed to have raised close to $1bn in funding. There remains a predominant US and Asian focus on early stage financing backed by venture capital. However, the larger M&A deals have been dominated by established tech and media businesses that have recognised the complementary nature of the eSports industry to their existing businesses.

Areas of particular activity have been in streaming/broadcasting services, leagues and teams. Given viewing hours for eSports in 2016 are estimated to total around 6.1bn and the coveted consumer demographics (young males with high engagement rates who are traditionally harder to reach through other mediums), streaming and broadcasting services have been the focus of the largest deals in recent years in terms of acquisitions (Amazon’s $1bn purchase of Twitch along with Activision Blizzard’s purchase of Major League Gaming for $46m) and investments (with Azubu raising $60m in 2015 and DouyuTV, China’s answer to Twitch, raising $226m in its latest funding round in August 2016).

European digital media companies are not being completely left behind – to expand on their traditional sports broadcasting experience in 2015 Modern Times Group took a majority stake in ESL, the league and tournaments organizer, for $86m, with President Jørgen Madsen Lindemann hailing the investment as a key milestone in Modern Times Group’s digital development.

2016 has seen investments in eSports teams, with NBA franchise owners and players featuring frequently in deals seeking to leverage their experience in more established sports markets. Activision Blizzard has also recently launched a new league for its Overwatch title, structured to encourage investors to buy into the team franchises. In Europe West Ham, Manchester City, Wolfsburg and Schalke have all hired eSports players for Fifa tournaments as part of branding opportunities and investments or joint ventures involving sports clubs are likely to be on the horizon.