COVID-19: Global esports revenue will take a hit despite higher viewership

The games market insight and analytics company, Newzoo, has revealed that the global esports market will generate USD$1.06 billion in revenue.

This estimate, however, is down from their previous estimate of $1.10 billion, primarily due to the COVID-19 pandemic causing conventional esport competitions to be postponed or cancelled, as well as the migration of some of these competitions onto an online format.

Newzoo says that despite the reduction in their revenue estimate, demand for esports has not decreased due to COVID-19 (the audience is not smaller than pre-virus levels).

Instead, it says its revision is based on a temporary cease in esports activity (or a transition to digital-only events).

The company says that after 2020, the immediately impacted revenue streams will remain unchanged from our previous forecast.

Merchandise revenue, as well as tickets to physical events, will see a major decrease as people stay home, with the combined revenue for the two also being revised down, from $121.7 million to $106.5 million.

Newzoo says it also downwardly revised media rights and sponsorship forecasts for this year—from $185.4 million to $176.2 million and $636.9 million to $614.9 million, respectively.

As media rights and sponsorship are mostly broadcast-driven, the capacity for leagues to transition to online-only drove the downward revision in merchandise and tickets, while cancelled events make up the bulk of the downward revision to media rights and sponsorship.

It's not all doom and gloom for the esports industry though.

The implementation of nationwide lockdowns across the world has led to higher viewership, with new entrants into the market expected.

Newzoo's forecast for team streaming revenues has subsequently increased from $18.2 million to $19.9 million in 2020, and $31.6 million to $34.4 million in 2023.

The company says steady flow of new competitions, titles, and publishers led to more demand, driving up publisher fees—even in more mature markets.

If it continues in this trajectory, esports will remain an attractive business or marketing opportunity for publishers, and that this growth will be sustainable for the coming years in both developed and developing markets.

Newzoo says it did not include the impact of a potential global recession resulting from the decreased economic activity caused by COVID-19.

The negative impact on consumer-brand spending in the space could hurt both the growth of sponsorship and media rights revenues.

Should the COVID-19 outbreak ripple further into the second half of this year or even next year, it is likely further revisions would need to be taken in terms of esports revenue projections, says Newzoo.