How David Beckham and Dele Alli have helped fuel an esports boom

For millions of sports fans around the world, locked out stadiums and banned from live games, there's one activity that has helped satisfy their craving for adrenaline.

Esports has become an global sensation during lockdown. Viewership on game streaming site Twitch reached an all-time high in November with 2.5 million concurrent watchers – more than double the 1.2 million from the same period last year.

But it's not just arm-chair enthusiasts. This year, football stars like Tottenham’s Dele Alli and ex-Manchester United star David Beckham have become involved in the sector.

“There are a lot of similarities from being a professional athlete and esports,” says Alli, who has just joined UK-based Excel Esports as an ambassador. “I would say the main thing is the mentality; you want to win everything.”

The England international, who streams regularly on Twitch, says his deal with Excel represents a sizeable change from simply playing games with friends.

He is the latest in a line of footballers who have become more embroiled with the competitive gaming industry. His teammate Gareth Bale owns a team called Elleven Esports, while Dutch legend Ruud Gullit has established a side known as Team Gullit.

Closer to home, Beckham is a key investor in London-based Guild Esports, which completed a £41m initial public offering in October.

Britain’s Fnatic, listed as one of the world’s most-valuable esports teams at $175m (£129m), is also raising a further $10m as interest in the sector continues to swell.

For Goldman Sachs, the only way is up for the industry as it moves from the “Wild West to the mainstream”. The investment bank tips esports to top 300 million viewers and near $3bn in global revenue within the next two years.

To date, esports has relied heavily on filling out stadiums to generate revenue. Tens of thousands of fans have turned out for competitions based on team-based shooter Overwatch, battle royale title League of Legends, and footballing simulation FIFA.

While viewership numbers are up considerably this year, the sector is expected to take in less revenue due to cancelled events. Revenue is now expected to hit around $950m, which is considerably less than the $1.1bn that was originally touted for 2020, according to figures from gaming data firm Newzoo. The estimate would result in a $300,000 hit for the industry in a year where it was meant to grow by 15pc.

Despite the vast audience, some questions remain around how to monetise it properly. While many will point to media deals not too dissimilar to the ones struck in football, others question why anyone would pay for it when it's largely available for free on Twitch.

“These esports teams are being sold on a scarcity value; they’re not being sold on a multiple of earnings,” says Doug Harmer, partner at sports advisory group Oakwell Sports.

Harmer, who has advised on the sale of football teams in the past, says there are “parallels” with what’s going on with esports teams currently. He compares sports teams buying their esport equivalent to telecoms firms “bidding for spectrum” on 4G and 5G markets.

“They’re bidding, I think, because some of them feel they have to,” he says.

“If these leagues – the Overwatch, League of Legends, and all these franchise leagues – are successful, then not to have a seat at the table could be very, very costly.”

Betting on the long-term success of a relatively  young industry can be a risky bet. Given that the pandemic has driven unprecedented hype in the sector too an element of “fear of missing out” or FOMO has emerged.

“Any industry growing at a really fast pace will evoke very aggressive investments that are made with the goal of capitalising on that growth and taking significant market share,” says Carlos Rodriguez, founder of Berlin-based G2 Esports.

Rodriguez says the increased demand to deploy capital in “simply not enough good companies available to invest in” can create a “bubble-like effect”.

Evidence of media deals have already become apparent with both BT and Sky Sports adding esports coverage during the pandemic to fill up their schedules.

While some may suggest the pandemic has led to an over-inflation of the value of the sector, others argue that it has shown it can adapt.

“Esports has shown resilience to Covid-19, and its adaptability and relative success within entertainment show it can adapt to overcome serious existential challenges,” says Sam Matthews, founder of UK-based Fnatic.

Matthews believes the sector is still in its “early growth phase” and that there is still a long way to go. He also argues that esports has “bigger growth potential” than traditional sports teams.

The Fnatic chief executive puts this down to the sector being game agnostic, meaning it can take on a new title as it comes out, and having no fixed geography, meaning it can go into any region.

“On the revenues side media rights, brand partnerships are only beginning to scale, and we will see further rise with the franchising of more leagues as well as broader interest by non-endemic brands,” he says.

The world’s top leagues will all be filled with professional players and much like regular sports, teams are developing academies to nurture the best available talent.

Beckham’s Guild uses an “academy-powered” model, where it deploys best practice from elite sport to help train players.

The company’s executive chairman, Carleton Curtis, said that Beckham’s involvement was a “natural progression” from his own experience founding Inter Miami in the MLS.

The ties between sport and esports go further. Throughout the summer Formula 1 held a host of virtual races that were broadcast on Sky and included McLaren driver Lando Norris, Williams’ George Russell, Ferrari’s Charles Leclerc and Red Bull’s Alex Albon, among others.

Esports has even caught the eye of other industries. In Texas, real estate investor Lee Zieben attempted to agree a $40m deal to buy the Houston Outlaws, before ultimately losing out to US broadcaster Beasley Media Group.

It remains to be seen whether the sector will live up to its hype over the coming years, but it has certainly begun to establish itself at its current level.

“I don’t think anyone thinks esports is going away,” says Oakwell’s Harmer. “The ability to drive revenues on these growing audiences really is the pivotal part of esports. That will determine how sustainable it can be from an investment perspective.”

For sport stars like Bale, Beckham and Alli, the sector is likely to stay extremely attractive. Gaming has continued to grow at an aggressive pace in recent years and become ever more entwined with pop culture.

The advent of new consoles in the Playstation 5 and the Xbox Series X will only push the growth of the sector further.