The question as to whether investors should be looking to esports for their next big investment opportunity shouldn’t be ‘why’, but rather ‘why not’ write Sally Jukes, partner, and Carl Bosma, director at BDO South Africa.
No longer the simple video gaming and entertainment we once knew and loved, e-sports is currently the fastest growing sport globally with a recent tournament hosted in Singapore recording 5,41-million peak viewers. To put this in perspective, the 2021 Tokyo Olympics opening ceremony recorded 17 million viewers, meaning that e-sports viewership made up almost one third of that single event. By 2024, there are expected to be around 577-million e-sports viewers worldwide showing us that the potential growth of this sector is boundless.
As e-sports popularity rises, global investors, brands, media outlets and consumers are suddenly paying much more attention to this disruptive industry that is currently worth $1 billion – with projections that this number will almost double by the end of 2022.
But what does this mean for South Africa? Rapid adoption of smart devices and an increasingly savvy youth market has experts predicting that e-sports audience size will increase across Africa from approximately 30 million in 2020 to 53-million in 2023 – with South Africa being the stage post for this expansion. While these numbers pale in comparison to the rest of the world, they are still extremely promising.
South Africa currently has the largest eSports community on the continent with sponsorship from international companies and international funding for local tournaments. We also have the skill to rival international challengers as more and more schools begin to offer e-sports as a subject.
But, it is may be what we don’t have that could be making investors wary. Slow broadband, the high cost of consoles and games, connectivity between a player’s computer or mobile device and the game server, and of course the elephant in the room, loadshedding, are all real challenges hindering local growth of the industry.
Some of these challenges are also putting the industry into a catch-22 situation. Take for example the necessity of massive, dedicated gaming servers to host the games. Global game publishers are loathe to commit to building on-shore servers until they see a larger player base, but the player base cannot increase when high data costs and connectivity issues are still such tangible pain points.
The Facebook-backed 2Africa undersea cable project, set for completion between 2023 and 2024, could be the ping that South African players are looking for to substantially lower their lag times and data costs. The 37 000-kilometer long undersea cable around Africa to provide it with better internet access will revolutionise the playing field.
Elon Musk’s SpaceX satellite internet services should be available, subject to regulatory approval, in South Africa in 2022 and will also change the face of internet access and the cost thereof for millions of people as it brings high-speed broadband internet to rural areas left out of the fibre rollout.
Both of these initiatives hold the promise of bringing a newly connected segment of the population into the arena.
Another challenge currently being addressed in our country is that of our energy provider. More and more South Africans are looking towards renewable energy sources to stabilise national power grids and reduce loadshedding – good news for gamers.
All of this opens up the opportunity to invest in the dynamic eSports ecosystem and capitalise on this emerging market. It is a global industry with a high potential for growth, and the numbers are there to prove it. Everything e-sports related is projected to grow, from the sale of gaming consoles to the stock values of e-sports companies.
In fact, in early 2020 Nodwin Gaming, an Indian licensor and creator of eSports properties providing media rights for live events and programming, announced its expansion into South Africa. Merlin Wiedeking, CEO at Nodwin Gaming International, expects even further interest, stating that “Africa’s such a large continent with so many people and so many opportunities.”
Since e-sports is still considered to be in its infancy here, investors have the luxury of being able to dip their toes into the market and test the waters. Forward thinking investors, both local and international, must see that we have barely begun to scratch the surface of what is possible for the future of this industry.
From buying stocks of gaming console and software companies, media houses, ticket-selling firms, streaming sites to investing in team sponsorships and IT infrastructure, e-sports could soon become the MVP in a savvy investment game.