20 Jul 2021

Gaming is Eating the World 

Yash Patel

General Partner

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By Yash Patel, General Partner Telstra Ventures 

 

I love sports. I’m a huge Golden State Warriors fan, but I am obsessed with sports technology.

My thesis has always been that pro sports teams and leagues explore and adopt technologies to improve their game. They do this exceptionally well, and they do it fast. Whether it’s stadium productivity, cybersecurity, or all-important fan engagement, they look for new and innovative ways to continue engaging fans and monetizing through new digital mediums.

The sports industry tends to sit right at the cutting edge of technology adoption. There’s a definite pattern within the sports industry’s technology adoption and how it enters the mainstream across multiple sectors.

As we know, technology is critical to delivering a great user experience, particularly in the visual sense.

It’s also why the sports industry started to explore gaming and eSports. Part of that was recognizing that their core user base was pretty single-dimensional – older, heavily skewed toward the male. They were desperately lacking diversity and needed to attract more millennials and a female-oriented audience. Gaming and eSports are driving an opportunity to expand audiences and provide new ways to engage audiences.

 

Art versus science

Up until recently, investment in gaming and eSports was considered more art than science. How could you tell if a game or idea you were investing in would be a hit with consumers? The gaming world was seen as ‘niche’ and ‘only for hardcore gamers,’ so the industry wasn’t getting a lot of attention from venture capital firms – but that has changed.

Enter Snapchat.

Four years ago, I led the investment for Telstra Ventures in Snapchat. Snapchat changed the way people interact and connect online. Through gamification through ‘filtered selfies’ and a strong focus on ‘sharing fleeting moments,’ Snapchat quickly became a popular way for Millennials to connect – and for the Telstra Ventures team, interactive media investment opportunities became a focus.

 

Gaming – a billion-dollar industry

Today, mobile gaming and eSports are a billion-dollar industry, and it’s growing – fast. Estimates suggest that the global eSports market revenue will hit USD1.6 billion by 2023. Sponsorships and advertising will drive a spike in revenue, followed by media rights, publisher fees, merchandise and tickets, digital, and streaming. Asia and North America represent the two largest eSports markets, with China alone accounting for almost one-fifth of the market.

 

Old guard versus the new

In the last three years, the gaming industry has overtaken the interactive media landscape. It’s challenging other sectors, too – in a big way. Look at the media industry, which is ripe for disruption.

Live sport has arguably been the lifeline for the cable television industry. It always attracts eyeballs in the thousands. Now media rates are on the rise, and the next generation – the millennials and younger – aren’t watching cable television – they’re on Amazon Twitch or playing League of Legends and Fortnite.

The disruption of traditional media brings a new digital advertising ecosystem and infrastructure and monetization opportunities— with gaming publishers and those that produce eSports games and events.

Think about the National Football League (NFL) in the U.S. CBS or ESPN, or the kind of media company that will spend USD20 billion over five years, typically dominates the game’s media sponsorships. Now, we’re seeing Amazon, Facebook, and new internet companies bidding for these rights. They’re challenging the old guard, and that’s what is happening with gaming and Esports. It isn’t cannibalizing traditional sports but impacting how the media landscape works.

 

Gaming is the new social media.

This shift away from traditional media is taking place within social media too. Instead of spending time on Facebook, Snapchat, or Twitter, which people still do but are skewed toward older demographics, consumers connect via the online games they’re playing.

Gaming has become a place where you not only go to play games casually; you go to watch people play games, almost like a sport, and to listen to music and experience concerts. One of the most exciting aspects of gaming is seeing in Fortnite; for example, artists set up virtual shows. We’re seeing people sign into the game, not even to play, but to listen to their favorite rapper Travis Scott. He puts out a show with cool new filters and avatars to dramatically enhance the user experience.

This approach is gaining serious momentum. Now e-commerce is entering gaming in a tangible way. People are trading and buying virtual gear or virtual skins across games like Call of Duty, Fortnite, and more – there’s another billion-dollar-plus economy there.

 

The digital marketplace for gaming. 

The new ‘virtual merch’ economy in gaming is enormous. What is the next-gen digital marketplace experience? Who will be the first to deliver a marketplace for virtual goods in the gaming economy? We’re looking for the next Amazon or eBay for virtual merchandise.

Gaming is eating the world, bringing with it significant opportunities for startups – and we’re looking for them.