The authors would like to thank Nazish Mirza, Articling Student, for her assistance in preparing this legal update.
The COVID-19 pandemic has caused considerable disruption affecting both populations and industries. The financial impact has been severe, with some major companies filing for bankruptcy. However, one industry that is experiencing increased user engagement and traction during these unprecedented times is esports.
Due to the pandemic, sport tournaments have been severely affected, with the NBA, NHL, MLS and MLB seasons being postponed, and the NCAA’s March Madness getting cancelled. As individuals find themselves yearning to watch sports, and missing out on long-awaited final games, many are turning to esports as an alternative. The virtual gaming platform allows individuals to engage in social interaction while also safely practicing social distancing.
A recent article published by the World Economic Forum highlighted that while on average, weekly views of gaming live streams have increased by 70% year over year in 2020 compared to 2019, such weekly views increased by more than 100% over the last few weeks of the pandemic. The industry has recently received an added boost due to celebrity endorsements and specialized tournaments intended to compensate for the cancellation of sports. Racing sports associations such as Formula 1 and NASCAR, for example, hosted online sim racing competitions, where fans get to watch some of their favourite drivers compete with each other, as well as with professional gamers, YouTubers and Twitch streamers, online. Since the start of the pandemic, professional sports teams and players have also started participating in such online tournaments of the sports in the NBA, MLS, and international soccer, in the hopes of providing an alternative to their fans during the pandemic.
That being said, as highlighted by Sports Business, the industry is not entirely immune to the pandemic. While the industry witnessed an increase in viewership and exposure (Twitch viewership, for example, leapt from 1.35 million people in January to almost 2.5 million in April), there is still financial loss. Increases in viewership and engagement, while beneficial to the e-sports industry, primarily reflect growth in the video game industry, as opposed to the esports industry specifically. Cancellations of most live esports events, which form a significant part of the industry’s revenue and which provide significant exposure to sponsors, may lead to significant losses. Large events, such as the Fortnite World Cup 2020, have been cancelled, while other major events have been postponed or moved online. Similarly, while some tournament organizers have had to rely on digital means (such as social media) to increase exposure to their sponsoring partners, given that tournaments are now played online instead of in arenas, physical exposure is usually still more effective, and some organizers and teams are struggling with securing new sponsorship deals.
As such, not everyone in the industry is equally affected. While streaming platforms are benefitting at this time, esports leagues and competition organizers are managing, but not necessarily thriving.
Overall, the industry is in better shape than others, in that increased viewership and engagement allows certain players to benefit and is sustainable on a short-term basis. However, since esports is not entirely digital, the loosening of social distancing rules is an important component to the industry’s success. We will continue to monitor how the industry continues to adapt during, and after, the pandemic.