This archive report was first published on 5 May 2020.
As the world grapples with the COVID-19 pandemic, the esports industry is facing unprecedented challenges. With most sports events canceled, esports has become a beacon of hope for fans and players alike. However, the reality is far from rosy.
According to Kristalina Georgieva, the International Monetary Fund's managing director, the current global recession could be worse than the 2007-2009 one. The esports industry, which was initially thought to be immune to the pandemic, is now facing a perfect storm of challenges.
Competition organizers, venues, and esports organizations rely heavily on merchandise, ticketing, sponsorships, and media rights for revenue. With spectator events banned until September, these revenue streams are drying up. Moreover, many companies that sponsor esports teams have rebalanced their budgets, cutting down on marketing, sponsorships, and partnerships.
However, not all subindustries are affected equally. The esports betting industry, for instance, is thriving. Established websites like dota2-bets.com are seeing a surge in traffic as more people stay home and bet online.
Esports Startups in Peril ¶
Esports startups, which are already vulnerable due to their youth and high competition, are facing an existential crisis. With revenue streams drying up and investors pulling back, many startups are struggling to stay afloat.
Startups in the esports ecosystem come in all shapes and sizes, from software development companies to hardware manufacturers, data providers, media outlets, event organizers, and esports teams. Most startups are not profitable straight away, relying on investors for funding and bootstrapping to offset costs.
The current COVID-19 situation is exacerbating the major points of startup failures, including too much competition, saturated markets, bad business ideas, outdated technologies, and barriers to entry. Management problems, such as poor research and planning, changes in spending, and wrong motivation, are also more visible during the pandemic.
Rising from the Ashes ¶
While some esports startups will undoubtedly fail during the COVID-19 situation, there are opportunities for others to rise from the ashes. The pandemic has accelerated the growth of esports, gaming, and game live streaming services, creating a new landscape for startups to thrive.
For those who can demonstrate their sustainability, the pandemic may prove to be a blessing in disguise. With investors pulling back, those who can show resilience and adaptability may just get the funding they need to change their lives forever.
