PwC: Opportunities emerging with the rise of eSports in China

eSports—also known as competitive video gaming events—in China is set to grow at a CAGR of 26.4% from US$56 million in 2016 to US $182 million by 2021, PwC estimated recently.

China’s eSports market is now the second largest in Asia—only South generates more value in the region, which itself is expected to reach US $195 million by 2021, albeit with a lower CAGR of 13.9% over the next four years.  The US remains the largest national market by value, anticipated to be worth US $299 million by 2021, aided by a buoyant 22.6% CAGR.

“The evolution of eSports is incredibly exciting and it’s unfolding at a staggering scale here in China. As a recent example, last week, the World Championship finals for League of Legends (LoL) - among the most popular video games in China - filled the national stadium in Beijing. And yet ticket sales are just the tip of the iceberg, with millions more watching the finals at home via live streaming, indicating the vast size and range of opportunities that await in this dynamic area,” said Wilson Chow, PwC Global, China-Hong Kong TMT Leader.

According to the PwC Global Entertainment and Media Outlook 2017 - 2021 (E&M Outlook), the upward trend of eSports in China correlates with the nation’s booming video game market, which generated revenues of US$ 15.4 billion in 2016, and is on track to rival the US – currently the largest market - by 2021, by which time a value of US$ 26.2 billion is predicted to have been reached.

Video game developers utilize eSports to promote successful games, extend their life cycles and stimulate more spending on in-game economies. Concurrently, the rise of eSports is leading to a variety of other profitable income streams that include event admission fees, sponsorship and merchandise, but also span advertising, alliances with sports and apparel firms, and new opportunities with other players in the media and entertainment sphere.  

“The special appeal of eSports stems from the fact that typically, spectators are young, tech-savvy and eager to spend money accessing their favored entertainment on digital platforms. We are talking about a group of consumers who are passionate, generally loyal, and very engaged; characteristics which suggest an arena ripe with opportunities, but that so far remain largely untapped,” Chow added.

In terms of value generation of key revenue streams in China, PwC forecasts that by 2021, advertising via streaming will be worth US $84 million, sponsorship will account for US $54 million, consumer contributions will amount to US$31 million and ticket sales should reach US$12 million, all seeing a CAGR in the double digits.

Influential drivers shaping eSports include technological factors such as advancing capabilities through access to faster broadband and more interactive interfaces such as VR and AR, in tandem with behavioral and attitudinal shifts of a growing pool of young users. These elements are leading to a broader acceptance of, and interest in, games by a young generation that favours digital engagement and prioritizes flexible interaction.

Further, as the shift continues, there is a concomitant rise in opportunities for overlap of games and popular culture expressed through social media. Consequently, the market is now characterized by an alignment of cultural icons with video games contributing to the escalating popularity and diversity of the genre.

“Given the size and speed of growth in China’s eSports market, a number of significant implications are arising. Tax planning for new business models will become increasingly important, along with full utilization of tax incentives. As the market continues to mature, these factors will become increasingly significant for successful companies to be aware of, and take steps to adapt to, as they look to secure a healthy bottom line,” said Cecilia Yau, PwC Hong Kong Entertainment & Media Leader.  

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