Hype Around Esports Is Fading as Investors and Sponsors Dry Up
The once-thriving esports industry has fallen on hard times as funding sources dwindle and signs abound that athletic competition via video games doesn't have anywhere near the earning potential investors anticipated. From a report: Sports-business billionaires and gaming executives had hopes that esports could one day could scale into an organization like the National Basketball Association. But after a boom five years ago, several prominent esports teams and organizations, particularly in the US, are contracting, the result of a broad economic downturn, a venture capital industry that's no longer willing to accept growth without profits and a crypto meltdown that has undercut a significant source of backing. Since the summer, Team SoloMid and 100 Thieves -- the two most valuable esports organizations according to Forbes -- have terminated dozens of positions in total. In November, Evil Geniuses, one of the oldest esports groups, disbanded its North America team that competed in the highly popular game Defense of the Ancients 2 and shifted their operations to South America. Game publishers, too, are shrinking their esports operations and that's trickling down to tournament organizers, teams and players. In early November, Riot Games said it will close its official Wild Rift leagues outside of Asia next year, choosing to focus solely on the world's biggest mobile gaming market. And a popular Super Smash Bros. tournament was terminated after not getting a license from Nintendo. Investors who were once eager to get in early on what was expected to be a booming industry are now scrutinizing the business fundamentals and not much liking what they see. In 2018, a record $4.5 billion was invested in the industry, including from private equity firms jumping in for the first time, according to a report by Deloitte. That bounty has faded and venture capital investment in esports is the lowest it's been since 2016 -- excluding 2020, when pandemic restrictions threw into question the viability of live esports tournaments -- according to data provided by PitchBook.
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