Esports Industry Veteran Says Best Investment Is With Game Publishers Like Blizzard
Earlier this year, esports analytics provider Newzoo predicted that the global esports economy will top $1 billion for the first time in 2019. Sponsorship was highlighted as the category that should lead the way in terms of being the largest revenue stream (at $456.7 million), but media rights growth (projected to be 41.8% year-over-year) was believed to become the fastest growing esports revenue stream.
Overall, Newzoo said that total esports revenues should rise 26.7% year-over-year. That type of growth, if substantiated, is bound to create substantial interest among seasoned investors as well as more novice investors looking for the next great opportunity to expand their wealth.
If one gets past the question of whether to invest in esports, and determines that it remains an industry with a high ceiling that is worthy of investment, the key question becomes, where should new capital be flowing towards?
I recently spoke with Luis Medina, who serves as SVP of Partnerships at Rooster Teeth Productions, a WarnerMedia Company, for his perspective on esports investment opportunities. Medina was at YouTube video supplier Maker Studios before it was acquired by Disney in March 2014, and spent another couple of years at Disney, where he enhanced his expertise in taking startups to digital studios and preparing them for media acquisitions.
Medina believes that the wisest investments may be with esports game publishers.
Some of the biggest esports publishers currently include Blizzard, Riot, Valve, Activisions and Electronic Arts. While the upside with investing in these types of companies may be marginalized based on the amount of revenues already received, which is baked into their valuations, Medina says there is much less risk than with taking an approach of pumping money into an esports team.
The other area that Medina is interested in surrounds distribution of esports content. Larger names in this space include Twitch and YouTube.
“Publishers have a lot of power to decide how the ecosystem looks. Some are very hands on and others hands off,” says Medina. “It’s an interesting time when you look at the ecosystem. There’s really two areas of upside: owning and publishing the game (like Blizzard) and distribution (like Twitch, YouTube) that can provide a global audience. The middle of that chain is a league, team or linear distribution like TV. Not really clear what the opportunity is there.”
Medina is not so fond of investing in an esports team, because he has a hard time feeling confident about a structure that is not and typically cannot be aligned tightly with a publisher. The publisher directs its plans for a game, not the team. Thus, putting money into a team that has an expertise connected to a particular game can turn out to be a risky proposition.
“Starcraft II was the biggest most watched esport in the world six years ago,” says Medina. “It’s not even on the radar of top five games being consumed for esports today. This is different from traditional sports where a sports stays relevant, while players change.”
Medina is cognizant that publishers such as Blizzard have a lot of control of where things will go in the esports industry. That is the type of organization he would want to invest money in — a leader, not a follower.
“What makes esports not traditional sports is that no one really has a copyright and full ownership of the game of basketball, for instance,” says Medina. “So the thing that makes it unique is the publishers.”
If you are interested in more insight from Medina, then you can join Medina and me at the Esports BAR Miami event taking place from October 2-4. We will further discuss what investors are looking for in the world of esports.