Video gaming and wrestling are not the most likely pairing; however, those hoping for some perspective on how the esports market could develop over the next few years should look to the meteoric rise of World Wrestling Entertainment Inc (NYSE:WWE).
Despite being around for more than 40 years, and listed on the stock market for 20, since 2014 WWEs share price has risen close to 365%, causing its market cap to balloon to US$4.4bn.
The dramatic ascent followed a decision that many considered very risky at the time, transferring content away from the traditional pay-per-view (PPV) cable TV model and towards an online subscription service, the WWE Network.
In an interview with business magazine Inc. in 2018, WWEs co-president Michelle Wilson said the transition to digital had been a “smart choice” as the firms data had shown that “digital consumption and subscription services were the future”.
The move has proven to be a shrewd one, as by 2017 the company had raked in US$801mln in revenues, the highest in its history, and now counts over 1.5mln paid subscribers on its network in addition to a raft of content distribution deals with major networks such as Fox and BT Group PLC (LON:BT.A).
The company also still retains its large “tent pole” events such as Royal Rumble, SummerSlam, Survivor Series, and WrestleMania, with tickets for the latter selling at over US$330 a pop.
What has this got to do with esports?
While WWE had to make the transition from terrestrial TV into digital, the groups success provides something of a read-across for esports.
One of the crucial factors is media rights (i.e. the right of specific broadcasters to show content), which is becoming a key source of revenue as streaming providers battle over exclusive content to replace income lost from traditional TV advertising.
According to research from Goldman Sachs, media rights as a revenue stream accounted for 14% of total esports sector revenues in 2017, however, by 2022 this is expected to grow to 48% of the total.
Esports is also attracting major network interest for its content, much like WWE, with ESPN+, Walt Disney Cos (NYSE:DIS) subscription sports service, inking a streaming deal last year for League of Legends, an online video game with a large esports player and fan base.
Esports events will also serve as a major draw as the global audience expands, and with it, opportunities for sponsorship and merchandising that is already attracting interest from major brands.
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