Newzoo is a global market research and predictive analytics firm which focuses first and foremost on gaming. Headquartered in Amsterdam, it releases regular reports and predictions on esports amongst many other topics.
SBC caught up with CEO and Co-Founder Peter Warman ahead of his talk on esports at ICE Totally Gaming. Warman will be a speaker at the ‘Fireside Chat: An ABC(D) of E-sports’ on Wednesday February 3rd.
SBC: 2015 was a big year for esports and reports such as yours, Deloitte’s and Superdata’s made significantly different predictions for its expected growth. To what do you attribute these differences?
Peter: 2016 will be pivotal for esports. The initial buzz will settle down and the way forward on several key factors, such as regulations, content rights and involvement of traditional media, will become more clear.
The collapse of MLG was a reminder that this market still has a long road to maturity and we need to be realistic about the opportunities it provides. In that respect, it is in nobody’s interest that current market estimates differ so strongly.
Luckily, when zooming in on the highest market estimates of more than $700m (£488.9m), the difference is explainable by an in-depth look. This estimate only differs in the revenues generated in Asia (Korea in particular), and by taking betting revenues into account. At Newzoo, we believe betting on esports should not be mixed into direct esports revenues as the money does not flow into the esports economy. Similarly, sports betting is not reported in sports market reports.
We think it’s a pity that other reports did not explain the significant differences in revenue estimates and left it to the market to figure it out. This forced us to run an active campaign explaining the differences. Deloitte does not plan to become a big player in esports research. It just reports on a trend and uses desk research and publically available information to come to conclusions. Their aim is to get attention and ultimately sell their financial consulting services. In the footnotes you will see they averaged Superdata and our take and chose a figure slightly lower than the average.
Ultimately, the question is what market intelligence the companies in esports use for their strategic and marketing decisions. Our granular audience and revenue projections, reports and esports consumer insights on 27 countries are used by the majority of esports-related companies since we launched this in 2014. We do not want to appear defensive but in this case we feel we have to have an active approach in explaining the differences in terms of research company strategy and market estimates.
SBC: You’re speaking on esports at ICE this year. What’ll be the focus there? Are there other companies involved in esports with stands at ICE you’ll be visiting, or any talks you’re looking forward to at the Excel?
Peter: There is an enormous interest from the igaming community in esports for many plausible reasons.
The most important one being the audience that skews younger than the traditional target group of casino, betting and gambling companies. Other reasons include the growth figures and proof that esports enthusiasts are big digital spenders. Ultimately it is a completely new market for a business that has not seen a lot of innovation or new markets in recent years.
We see esports betting as a separate ecosphere as the money does not flow into the esports economy. Also esports betting alone can be, and probably already is, bigger than esports revenues. Take NFL as example: $12bn in revenues and an estimated $95bn in betting and wagering.
We have also found that betting companies are not very willing to pay for market intelligence, so we are moving away slightly from this space.
SBC: One discussion point is that of gambling and esports. There still appears to be some reluctance of some major operators to commit to offering esports markets, why do you think this is?
Peter: They might want to wait until the market is more mature and regulations are in place.
There is a relatively large risk for match-fixing-type scandals considering the age of the players in combination with relatively low pay. And, as with many traditional industries, they might underestimate the size and spending power of the young generation of gamers.
SBC: The Deloitte report made a fair assessment that the huge number of gaming fans globally doesn’t translate into a ready and waiting esports audience. What are the challenges in converting them?
Peter: There are two billion gamers in the world across all screens: computer, TV, smartphones and tablets. At this moment around 250 million or one in eight gamers is engaged with esports. That share will rise steadily going forward with an anticipated total global esports audience of 350 million in 2019.
Still, realistically we cannot expect everyone who plays mainly casual games on mobile to be interested in esports or competitive gaming. The game enthusiasts that are into competitive gaming could amount to 50% of the total global gamer audience but not much more, capping the total esports audience growth at around a billion consumers. Looking at game video content into account, already half of all gamers engage with both video and game content around their favourite franchises.
SBC: Newzoo detailed the five factors defining the future of esports in September 2015. The primary point, that of diversity of games seems particularly vital as esports moves towards the mainstream. Could you give a brief overview of these for SBC readers, and explain which of the factors you class as the most important?
Peter: The five factors are very different and cannot be prioritized. Additionally, they are inter-related. Already, gamers themselves organize online competitions around an endless number of games, including mobile titles.
The number of games supported with significant esports investment by the publishers remains relatively limited. However, with announcements by giants Activision, Microsoft and EA to invest into esports, the types of games and number of titles involved in esports will quickly broaden. This will ensure appeal to a broader and larger audience. As this field and the betting around it grows rapidly, regulations will have to be put into place to minimize risks such as match-fixing and doping. A third big factor will be if traditional media forces and the digital-only esports ecosystem will align, tapping into the enormous ad / sponsor budgets spent in the traditional media space.