Esports Investing: Risks, Rewards, And What You Need To Know

Esports is a booming global industry where skilled video gamers play competitively. Esports is growing exponentially and has already amassed a large global audience. However, as with any investment, there are risks involved. This paragraph will discuss the potential risks of investing in esports, including player risk, execution risk, and game risk.

Player risk refers to the challenge of team-building, especially when dealing with young players who may have strong opinions and expectations of a short career. Execution risk pertains to the possibility of the team structure failing, losing tournaments, and other business risks associated with a media business. Game risk involves the possibility of a game not becoming popular enough to gather an esports audience or losing popularity to another title. Additionally, there are concerns about the thin boundary between esports and gambling, with unregulated third-party websites targeting young people. These risks should be carefully considered by potential investors in the esports industry.

Player risk: Young players with short careers and high expectations can be difficult to manage

Young esports players with short careers and high expectations can be challenging to manage due to several factors, including intense competition, burnout, and the unique dynamics of the esports industry.

Firstly, the esports scene is highly competitive, with a constant influx of new, young players eager to make their mark. This dynamic creates pressure and often leads to early burnout as players must practice extensively to maintain their skills and competitive edge. The long hours of practice can result in physical and mental fatigue, causing players to retire early.

Secondly, the potential for early financial security through prize money, sponsorships, and other compensation can also shorten esports careers. Players may earn enough money in a few years to consider retirement, unlike traditional careers where financial stability usually takes longer to achieve.

Additionally, the physiological changes that occur with aging can impact an esports player's performance. As people enter their late 20s, reaction times and cognitive processing speed tend to slow down slightly, affecting their performance in fast-paced games that require quick reflexes.

Lastly, the rapidly evolving nature of the esports industry, with new games and technologies constantly emerging, can make it challenging for players to stay at the top of their game. This dynamic landscape of gaming platforms and audiences can significantly impact the longevity of an esports player's career.

Managing young esports players with short careers and high expectations involves recognizing and addressing these challenges. It requires providing support for physical and mental well-being, helping players adapt to industry changes, and promoting a healthy work-life balance to prevent burnout and early retirement.

Execution risk: Building a new team or reinvigorating an existing one is challenging and may not pay off

Building a new esports team or reinvigorating an existing one is a challenging task that may not pay off due to the inherent risks involved in the venture. One of the main challenges is attracting and retaining talented players, as the industry is known for its young athletes, typically between the ages of 17 and 25. With players being so young, team owners and managers may encounter issues with player immaturity and ensuring everything is "properly under control". It is crucial to conduct extensive research and scouting to find the right talent, considering not only their gaming skills but also their ability to work well with the team and handle pressure.

Another challenge is the financial aspect of building or reinvigorating an esports team. Owners need to be prepared for significant expenses, including tournament fees, player salaries, travel costs, and the cost of gaming equipment. While there are opportunities to generate revenue through tournament winnings, corporate sponsorships, and revenue sharing in franchised leagues, it can be challenging to turn a profit, especially for new teams. It is recommended to start locally to keep costs down and build a strong foundation before expanding to national or international competitions.

In addition to financial challenges, there are also operational complexities. Owners need to establish a dedicated practice space, develop a detailed training schedule, and create a strong brand identity with a memorable name and logo. Effective marketing and social media presence are crucial for standing out in the crowded esports landscape.

Furthermore, the volatile nature of the esports industry poses risks. The success of a team is often tied to tournament performances, and with a proliferation of teams, underperforming teams may struggle to maintain their place in high-profile competitive leagues, impacting their revenue streams. Additionally, the popularity of specific games can fluctuate, as game developers continuously release new products, which may lead to a decline in interest in existing esports titles.

Overall, building or reinvigorating an esports team requires a significant investment of time, effort, and financial resources. It is a challenging endeavour that may not pay off due to the dynamic nature of the industry, the intense competition, and the potential for high costs. However, with careful planning, a strong team, and effective strategies, there are opportunities for success and growth in the rapidly expanding world of esports.

Esports risks: Esports is a new industry that is unfamiliar to many, and teams will need to invest in educating and attracting fans

As esports continues to grow in popularity, it is also attracting interest from investors. However, as with any new industry, esports is unfamiliar territory for many, and there are potential risks that teams and investors need to be aware of.

One of the biggest challenges for esports teams is the need to educate and attract fans. While the industry has seen tremendous growth, it is still relatively new, and there is a perception that it is a "bubble" or a "shameless money-shaking of investors". Teams will need to focus on building a dedicated fan base and creating a sustainable future for their organisations. This may involve investing in marketing and branding strategies to raise awareness and attract new fans, as well as retaining existing supporters.

Another key risk area for esports is the potential for cyberattacks and online threats. As a digital industry, esports is particularly vulnerable to cybercrime, and player data security is a significant concern. A hacking incident could not only impact the integrity of the games but also the broadcast and the personal information of players and fans. Teams and organisers must prioritise cybersecurity measures and regularly review and improve their cybersecurity posture to mitigate these risks.

In addition to cybersecurity threats, there are also physical risks associated with hosting esports events. As with any large-scale sporting or entertainment event, organisers must consider the potential for bodily injury to spectators, property damage, active assailants, and even terrorism. Strategic risk assessments are crucial to identify and address these potential dangers, and securing the necessary insurance coverage is essential.

Furthermore, esports teams and players must also be mindful of the impact of their behaviour on their brand and reputation. Inappropriate conduct by athletes or stakeholders, especially when amplified through social media, could result in the loss of sponsors or tournament licenses, negatively affecting the brand value. Teams should implement guidelines and provide education to athletes and partners to reduce these risks and protect their reputation.

Lastly, the health and wellbeing of esports athletes are also a growing concern. Esports players may spend long hours practising, and the physical demands of the sport, coupled with an inactive lifestyle, can lead to significant health challenges. Mental health is also a critical consideration, as the pressure of competition can contribute to anxiety and depression. Teams should prioritise the physical and mental well-being of their players and consider providing appropriate health coverages and support services.

In summary, while esports offers exciting investment opportunities, it is important for teams and investors to be aware of the potential risks. By implementing robust risk management strategies, prioritising cybersecurity, addressing health concerns, and focusing on fan engagement and education, esports organisations can work towards mitigating these risks and fostering a sustainable and successful industry.

Game risk: Choosing the right game to compete in is critical, as the wrong choice could result in low viewership and a lack of popularity

The choice of game is critical to the success of an esports team or organisation. With a wide range of games and genres available, from multiplayer online battle arenas (MOBAs) to first-person shooters, each with its own dedicated fanbase, the wrong choice could result in low viewership and a lack of popularity.

When selecting a game to compete in, it is essential to consider its popularity and potential for attracting a large audience. Games like League of Legends, Dota 2, and Counter-Strike: Global Offensive have massive fan bases and established professional leagues, making them a safer choice for investors. These games have become global spectacles, with millions of viewers tuning in online and in-person during major tournaments.

However, it is also important to be aware of the risks associated with putting all your eggs in one basket. Investing in a single game or genre could be risky if player preferences shift or new, more popular games emerge. A diverse portfolio of investments across different games and genres can help mitigate this risk.

Additionally, it is worth noting that the popularity of games can fluctuate over time, with new releases and updates causing massive shifts in the esports landscape. For example, the release of a new game in the Call of Duty franchise or an update to an established game like League of Legends can significantly impact the dynamics and strategies employed by players, creating a learning curve that some may struggle to adapt to.

In summary, choosing the right game to compete in is a critical decision that can make or break an esports team or organisation. A careful analysis of the current trends, a pulse on player preferences, and a diverse investment portfolio are key to success in the dynamic and rapidly evolving world of esports.

Platform risk: While mobile gaming is popular, it is unclear if this will translate to esports viewership

Mobile gaming is incredibly popular, with around 3 billion mobile gamers worldwide as of 2024. This popularity has translated to success in the world of esports, with mobile esports games such as Mobile Legends: Bang Bang, PUBG Mobile, and Free Fire gaining massive viewerships. Mobile esports are becoming increasingly popular due to their accessibility—almost everyone has a phone and an internet connection, allowing for a wider range of players and fans from around the world.

However, it is unclear if this popularity will continue to translate to esports viewership in the future, particularly in regions such as North America and Europe. While mobile esports are thriving in regions like India, Brazil, Indonesia, Thailand, and Vietnam, they have not seen the same level of success in NA and EU. This could be due to a lack of support and promotion from publishers, as well as cultural differences that view mobile gaming as less competitive than PC or console gaming.

As mobile esports continue to grow and evolve, it remains to be seen if they will be able to capture the attention of viewers in these regions. The future of mobile esports viewership in NA and EU may depend on publishers creating mobile versions of popular titles and supporting their competitive growth. With the right support and promotion, mobile esports could see increased popularity in these regions, as more and more games go mobile.

Additionally, the growth of mobile esports platforms cannot be ignored. Platforms like Twitch, YouTube Gaming, and Facebook Gaming have become popular destinations for viewers to experience their favorite interactive content. The success of these platforms demonstrates that there is a demand for mobile esports content, and as the industry continues to innovate and expand, it may attract even more viewers.

While the future of mobile esports viewership is uncertain, the popularity of mobile gaming cannot be understated. With the right support, promotion, and platform accessibility, mobile esports have the potential to capture the interest of viewers worldwide and continue their rapid growth.

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