What does 2019 hold for mobile gaming and esports?

The Consumer Electronics Show (CES) will take place early January in Las Vegas. We will likely learn more about the next electronic car, drone, and IOT device than sports technologies and esports trends at the show. However, sports technology and esports will be on display and could breakthrough what is a consumer electronics show. To determine where 2019 might bring mobile gaming and esports a quick look back at 2018 can help inform the industry and its investors.

Mobile Gaming - Still growing in 2018

In October 2018, Sensor revealed that Pokemon Go earned USD $84.8 million in September 2018, Pokémon Go is estimated to have global gross revenue of USD $2.01 billion since 2016. The mobile game was downloaded 8.86 million times in September 2018 representing a 100 percent increase year-over-year compared to September 2017.

Also in October, the industry learned that the Fortnite mobile game - Fortnite Battle Royale earned USD $300 million in revenue from the iOS edition of the game after its first 200 days. That might sound like nothing compared the game’s PC and console editions combined $316 million revenue in May 2018 alone, but an iOS version reaching a USD $300 million revenue milestone is 2nd to only Pokemon Go. Pokemon Go’s USD $300 million revenue came in only 113 days. So Pokemon Go was growing by 100% in September 2018 at the same time as Fortnite Battle Royale was reaching for Pokemon Go revenue records.

Pokemon Go and Fortnite mobile game and mobile advertising revenues are buried in the 3rd and 4th tallest bars in the chart below. A combined $200B + industry that by some estimates is 200x bigger than esports and 6 times bigger than sports gambling. Obviously esports and sports gaming stands for big growth with recent legal changes in the United States and some dispute about just what, and how big the esports industry, might be.

How Big is esports right now?

Is esports a $1B business or a $13B business? Is esports only about watching top professionals play competitive games or does it include other types of content? When many think about football, if American, they think NFL - a $14B business globally. At the same time, the U.S. youth sports business is bigger than NFL at $15.5B.

And lets be honest, we all know there are a lot of youth playing or watching a video or mobile game right now and it's not absolutely clear yet where all the money leads. And "unlike the audiences for top TV events, the audiences for online video games are highly fragmented and distributed across numerous game titles and viewing channels". A July 2018 study in China showed the industry at USD $13B. Also in July, a Forbes article quoted NewZoo figures to show the professional esports industry is USD $1B. Where will the esports industry go in 2019 if there may be 13x more revenue, or more, in the parts of the industry obviously not measured by NewZoo?

What is the Score at theScore?

It was also in October that we started to get some data from sports mobile app theScore. The sports and esports score app announced that it was seeing 12.5% growth in iOS users and seemed to be losing Android users. TheScore also stated it was losing monthly app sessions by user, while growing its social media subscribers and reach. An October 2018 press release states that theScore had reached 55 million users per month on its social channels, 3.7 million with its app, and 11 million esports monthly (33 million in Q4) video views.

What does this sports score and news mobile app indicate about the future of mobile? How to acquire and maintain users? The cost of customer acquisition and where is the industry headed? With CAD $27.7m in 2018 revenue, theScore is currently in the 3rd biggest bar in the revenues bar chart - the USD $100B mobile advertising segment. And according to reports and filing pursuing a position in the two smallest bars in the chart - esports and sports gambling. $1.77m in content and $2.49m marketing spending (CAD $4.26m) indicates a Customer Acquisition Cost (CAC) for theScore of $21.30. It cost theScore a little over $21 to earn a user in 2018. With the company losing a little over $2m, some of its Android users, and perhaps bleading users to YouTube and other social media efforts to lower CAC or increase advertising revenue in 2019 are necessary. Or perhaps theScore will benefit from less sports TV viewership, esports increases, or gambling revenue.

Deloitte's 2019 Predictions

In December 2018, Duncan Stewart and his collegues at Delloite published the 2019 Techonology, Media, and Telecommunications Predictions. The report makes predictions and measures yearly results. In this year's version there are 10 predictions and one is about TV sports benefiting from sports gambling and another predicts 35% growth in esports. Both are more predictions about media consumption than about anything else, but its important to know that whatever size esports is today, Deloitte expects it to grow by 35% in 2019 and that sports TV viewership will appeal to more and more men and fewer and fewer women as sports networks cater to gamblers.

Deloitte does not state in the report how much the nearly USD $40B sports gambling (the 2nd smallest bar in the revenues chart) market might grow with legal changes in the U.S., but it does predict that the sports TV viewership will decrease by as much as 7.5% which may have an impact on the largest bar in the revenue chart - sports advertising.

AR to disrupt "games we know"

Also, in December 2018 we learned that the International Olympic Committee has been told by gaming experts that gaming is to be disrupted by virtual and augmented reality.

Thomas Bach, president of the IOC, said that experts that have met with the IOC, say the games we now know will have "disappeared" in five or less years and that “virtual reality and augmented reality will play a much more important role and will more or less have taken over technology-wise.”

Augmented Reality is expected to be a USD $321B business by 2021 and is already bigger than esports and sports gambling combined at $117B.

2019?

So where does that leave mobile gaming and esports in 2019? The creator of Pokemon Go will launch a new AR game based on Warner Bros. Harry Potter franchise. Pure sports gambling on mobile in the U.S. will be constrained still in 2019 given state-by-state legal and regulation updates. The industry may learn the real size of esports is actually much bigger than the industry thinks it is today. Will sports networks and others continue to lose audiences? Yes. Will the industry figure out how to get young people engaged? Not in 2019, according to Deloitte they will focus on sports gamblers and potentially shrink the largest bar in the revenues chart - sports advertising.