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Let's Play! 2020

The European esports market

The European esports market experienced further growth in 2019 with most companies increasing their revenues. The market is being keenly watched to see if growth will continue in 2020 despite – or perhaps even because of – the COVID-19 pandemic.

IT was no surprise that 2019 continued the trend of consecutive annual growth for the esports industry. That trend was expected to continue in 2020, but the COVID-19 pandemic disrupted business plans, as it did with so many industries. However, the esports ecosystem has in part escaped the impact brought on by the COVID-19 restrictions. Furthermore, some stakeholders have successfully managed the situation beyond mere damage control, capitalising on the versatility and adaptability of esports’ digital medium. These developments in 2019 and 2020 with a special spotlight on the COVID-19 pandemic is what this study “Let’s Play! 2020 – The European esports market” focuses on.

Regarding the industry’s development, 2019 was a worthy follow-up to a strong 2018, confirming that esports is well on its way to becoming mainstream. The worldwide audience grew by 12 per cent in 2019, reaching 443 million people, with Europe being one of the esports hotspots after Asia and North America.

To get a clear picture of the European esports market, Deloitte ran two extensive surveys focussed on the different segments of the European esports industry, the direct market participants and company representatives from across the industry.

In June 2020, a consumer survey was conducted with 12,000 people in eight European countries to capture the audience’s characteristics, as well as to record the impact of COVID-19 on consumption behaviour. Some 1,500 respondents participated from each of the following countries: Belgium, Czech Republic, Germany, Hungary, Italy, the Netherlands, Spain and Switzerland.

The second survey, based on interviews with company representatives from the European esports ecosystem, was also completed in June 2020. This expert sample represents all those areas of the esports world where companies conduct business: events, leagues and teams, media and online platforms, publishers, as well as strategic partners.

Responses to the expert survey depict a positive picture for organisations in 2019. Stakeholders from all areas of the European esports ecosystem reported positive market developments over the past year. Matching the predictions from the 2019 edition of this study, 77 per cent of the organisations stated that they managed to increase their revenues compared to 2018, accompanied by a boost in user numbers. These findings point to a dynamically developing industry.

While revenues and viewership numbers further increased during 2019, the market for mergers and acquisitions slowed. After a record-setting €3.6 billion in global transaction volume in 2018, the market saw mergers and acquisitions worth approximately €1.7 billion in 2019.

Nevertheless, company representatives from the strategic partners interviewed for this study report that their previous investments/sponsorships developed positively in 2019. Some 55 per cent are fully satisfied with the performance of their existing engagements. Another 18 per cent consider their expectations exceeded, while the remaining 27 per cent are at least partially satisfied. This raises the expectation of continued interest of strategic partners in the esports market.

COVID-19 changes the ecosystem’s dynamics

While the market was set for growth in 2020, the COVID-19 pandemic has affected the dynamics of the esports world in unforeseen ways. The governmental restrictions in connection with the pandemic have led to a major shift in the esports offering and altered consumer behaviour, making long-term forecasts difficult to perform.

During the first six months of an exceptional 2020, the absence of traditional sport and entertainment events meant esports clearly moved into the public focus. In spite of increased user numbers, the economic consequences of the pandemic vary considerably for the different segments of the esports ecosystem. While some organisations were able to continue or even expand their business activities, others were forced to shut down their operations temporarily.

So, while the esports sector may appear to have coped better with the crisis than other industries, the numbers displayed in the 2020 Let’s Play! report show that no simple conclusion can be drawn. It will be interesting to observe whether the esports market will continue to grow despite – or perhaps even because of – the COVID-19 pandemic.

Regulatory demands increasingly being made on the esports industry

Due to the global activity and increasing interdependence within the ecosystem, the regulatory demands on stakeholders in the esports world are growing. ‘Withholding tax’ and ‘protection of intellectual property’ are two relevant key phrases in this context, both of which are addressed within a special focus section in this report.

Because of its strong revenue growth and its ability to generate international cash flows, the esports market is increasingly scrutinised by financial regulators. For example, German tax authorities established a task force at the end of 2018 to examine the esports sector. In the United States and other countries, tax authorities are also becoming increasingly vigilant to ensure the sector’s rising sales figures match the respective tax obligations.

Intellectual property rights provide esports organisations with the essential security needed to implement their creative ideas. Protecting these core assets is one of the most important challenges in an industry that is growing larger and becoming increasingly globalised. The report highlights the role of intellectual property and IPRs (intellectual property rights) for the esports ecosystem and shows how esports would barely be able to exist without them.

The industry is not yet fully structured and there are no limits to thinking

The industry developments in 2019 and to this point in 2020 underline the ecosystem’s dynamic and innovative character. There is still significant experimentation going on within the industry and market participants are learning fast, as two experts substantiate in interviews conducted for this report. It will be fascinating to see how the European esports ecosystem develops in the future, what innovations it will bring and how it will finally emerge from the crisis.

To read all study results and the expert interviews in detail, download the complete report here.

Deloitte Sports Business Group

For more than 20 years, Deloitte’s Sport Business Group has been advising and analysing the national and international sports, fitness and esports industry. Our work draws on Deloitte’s global network and combines expertise in auditing, tax and legal, financial and risk advisory as well as consulting with the industry expertise of the Sports Business Group. This multidisciplinary approach combined with digital competence in all areas enables us to tailor our work specifically to the needs of our clients.

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Acknowledgments

The authors would like to thank Deloitte’s Jeff Loucks , Pete Giorgio , Domenic Vermillion , and Sam Boor for their contributions.

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