Esports: Too Good to be True?

Insight written by Tejun Celestin, originally published on April 1, 2021.

A classic sentence delivered by most parents as their children begin playing video games is “Video games will rot your brain.” However, even with this narrative ever-present throughout many people’s childhoods, the statistics of video game users have proven that this has not been effective in deterring video game usage. In 2020, 224mm people in the United States played video games. That is roughly 75% of people that live in the U.S. and was an increase of 32mm users from 2018. One branch of the video game industry, esports, has especially grown in popularity, despite concern from parents. In the last 10 years, esports scaled in market presence within the sports industry, to the development of the ever-present and especially large industry worth an estimated $2.1b. Esports’ rapidly growing network of fans has been pioneered by popular streamers like Tyler “Ninja’’ Blevins as well as mainstream celebrities like Drake, Offset, and Kevin Durant.

In 2017, esports had a fanbase of 335mm people which grew 35.5% to 454mm in 2019. Insider Intelligence estimated that viewership will grow to roughly 646mm by 2023 which is a 92.8% increase in a 6 year period. Bullish valuations on the future of the industry led to $4.5b invested into esports in 2018; a dramatic increase from 2017 where $490mm was invested. In 2018, there were 11 disclosed investments of private equity firms funding esports business. That’s 4 more investments than there were from 2014 to 2017.

Discussions on the future of esports have been pessimistic after COVID-19 caused a majority of in-person events to be canceled or held virtually. In 2020 organizations had to forfeit media rights and sponsorships as well as miss out on selling merchandise at in-person events. In order to generate revenue in other ways, many organizations began operating more like FaZa Clan and created content surrounding their starts rather than solely relying on revenue from competitive play. NRG’s valuation is one esports organization that’s valuation increased this. They began receiving sponsors for live streams and videos in order to bring in revenue. Most organizations were not as fortunate as NRG and despite adjustments made during the pandemic, esports revenues fell by $150mm in 2020 rather than increasing by 16% to $1.1b as predicted.

Esports is a relatively new industry that investors are still trying to figure out. Though the bullish valuations that many investors and industry leaders had for esports heading into 2020 did not come to fruition it does not mean esports is currently overvalued or dying but instead are causing headway within industry innovation and adaptation to find the best paths to meet the expectations of their investors.

I believe organizations will be able to adapt and meet the expectations investors had in 2018 and 2019. Not all of the current esports organizations will make it through this transition period but I believe industry leaders such as FaZe and 100 Thieves will lead esports in the right direction as the industry continues to grow in the next few years.


Tejun Celestin is a junior from Deerfield, NH who is pursuing a degree in Business Administration with options in Finance and Information Systems & Business Analytics. Last summer Tejun was a manufacturing cost analyst intern at Alstom and this summer he will be joining Goldman Sachs Controllers Division as a summer analyst. On campus, Tejun chairs the Diversity, Equity & Inclusion Commission, is the chief financial officer of the Interfraternity Council, and is a member of Sigma Alpha Epsilon. He joined The Fund in order to learn more about private equity and to meet and work with other ambitious individuals.

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