HOT TOPIC: Are Esports a good investment?

Today on the grill: João Carvalho, Tandhem Esports Director

João Carvalho is a die hard fan of esports and an expert in the matter. 

He was the Founder of Prémios Esports Portugal (Portuguese Esports Awards) and has been working with the esports industry for 10 years.

We asked him to explain to us what esports are and how they have grown so fast, to tell us about the leading esports games, and to share his insights from a business perspective. 

But before, let’s take a look at the latest facts and numbers about esports and the video game industry:

The video game industry has been generating more revenue than the movie box office and music industries combined over the last decade, reaching $159.3 billions in 2020. 

The esports popularity keeps growing and it is expected to reach over half a million viewers in 2023.

How would you define esports?

Esports is the competitive side of gaming. I always explain it like this: a person juggling a football ball is not playing a football match. He’s using the same tools (football boots, the ball, might even use a net and a goalkeeper), but he is not competing against anyone other than himself. It is the same with esports: when you are playing video games against other people, in a competitive way, you can call it esports.

Why did esports become so popular in the last decade?

I would attribute that to 2 main reasons: the technological advancements of our society, that created the infrastructure needed (high speed internet, accessibility and affordability of video game consoles and gaming PC’s) for people to connect online like they were in an offline environment (no lag, no difference in ping, etc.) – vital for competitive integrity; the eager that human beings have to compete. Since the beginning of time humans are competitive animals in everything they do, so it is just natural that the same applies also to video games.

Tell us about Tandhem Esports project and goals.

Tandhem Esports is an extension of Tandhem itself. Tandhem is a global talent agency, with expertise in athlete management and sports marketing. Tandhem Esports shares the exact same values and principles, but applied to the esports industry.

We aim to help semi-pro and pro esports athletes to achieve their goals, both professionally as well as personally. The majority of the athletes in the esports industry are very young and still very naive. They just want to compete and there is nothing wrong with that. We try to defend them from people who know exactly how to take advantage of that, giving them financial, legal and representation advice.

We see ourselves as partners of the players, more than their agents, in the traditional sense of the word.

Why are global sports institutions such as NBA, MLS, LaLiga, FC Barcelona, Paris Saint Germain or Bayern Munich, creating esports sections/competitions?

They are aware of the phenomenon. They know that not entering now may jeopardize their business in the future.

Traditional sports are seeing their fans and viewership grow older as the time goes by. They need to do something to reverse the trend and one way to do it is to target the kids who give the majority of their attention to esports competitions, other than traditional sports ones.

Football and non-football sports institutions know this and see esports as an amazing opportunity to captivate younger audiences.

Currently, which are the esports teams generating more revenue and the games with more audience?

It is very difficult to tell which teams generate more revenue as the majority of them don’t disclose their annual income in full. One can only grasp and assume, based on the teams they build, the players they hire, the content they produce. Which is not exclusively related to the revenue they organically generate, because some teams survive via continuous outside investments from people still trying to enter the scene.

As of the games with more audience: League of Legends and Counter Strike have been producing top numbers for quite some time and I would consider them top 1 and top 2, respectively, based on the longevity of the numbers they’ve produced. 

However, Fortnite and FIFA have been producing amazing numbers too, in platforms such as Twitch and Youtube, and it is very interesting to see what the future holds.

Are the salaries of professional esports players higher than the salaries of professional soccer players? 

It is important to remember that there is a HUGE gap between the amount of professional teams in traditional sports compared to esports. Top esports players can earn multiple million dollar deals a year, but there are only a few of said players in the world, while in traditional sports it is rare that a player from a top league does not earn those amounts.

This is changing however, because esports players are more keen to create content and to share certain aspects of their daily routine (like training, exercising, habits), something that the younger fans want to see, because they want to emulate their idols.  

Could you imagine the hype if Cristiano or Messi would train with a gopro on their heads? The world would stop to see it.

What are the costs of a professional esports team in a top world competition such as League of Legends World Championship?

It depends on different factors, but right now I would say it would cost more than one million dollars a year. Two years ago, with talent from Europe (the best region in terms of talent besides the Asian market), you could build a great team with half a million a year.

The salaries increased a lot since the players perceived their power and how much they were generating for the teams just in exposure and stream numbers.

What are the income sources to monetize esports?

Currently, sponsors are the biggest source of income for team organizations. 

I would say that TV Rights will play a huge role in the next 5-10 years, because only now the teams are understanding their importance to the Leagues: the Leagues capitalize on the teams’ exposure to close multi million dollar contracts with sponsors – League of Legends European Championship – LEC – is the biggest example of this.

Other than that, esports have the same revenue sources as traditional sports teams: merchandise, player buyouts, prize pools from tournaments, events’ ticketing, etc.

Are esports a good investment, or a bubble that will blow up eventually? Why?

It is one of the best investments one can make still of today. Esports exposure will only go up, as more and more kids change their hobby habits to playing video games on a daily basis, because they now have the access to the technology (mobile phones, tablets, computers, consoles, etc.) that we didn’t have 5-10 years ago.

5G will also play a huge part in the dissemination of mobile competitive gaming, as we will only need our cellphones to be able to compete at the highest possible level, from anywhere in the world.

I believe that because all of this, associated with the streaming tools that exist today,  in 10-20 years esports the number one sports in the world.

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