Economics of Esports: A Multimillion-Dollar Industry

person sitting on gaming chair while playing video game
Florian Olivo on Unsplash

Sports entertainment has entered a whole new level in recent years. As contemporary video games have exploded in popularity, titles such as League of Legends, Overwatch, and even Pokémon have developed their own competitions, known as Esports leagues.

If you're completing a Master of Business Administration online, the emergence of Esports highlights how new avenues of business can come from all directions. From the LAN parties of the 1990s to modern gigabit internet, let's discover how gaming has evolved to foster the creation of the Esports industry and how this new industry enables a generation of gamers to pursue a career being the best they can be in video games.

The Emergence of Video Gaming — The Digital Revolution

In recent decades, technological advancement has resulted in the invention of smaller and smaller computing devices that are significantly more powerful than their predecessors.

Consider the development of the first supercomputer, ENIAC—in 1946, it was estimated that this room-sized machine was able to run an estimated 400 floating point operations per second (also known as FLOPS).

While 400 may seem like a lot of calculations in a second, functionally, it simply wasn't enough to play a video game. In the decades after the creation of the first computer, companies such as IBM and Apple sought to improve the speed and performance of computing technology to eventually bring smaller, powerful computers to the homes of those who could afford them, followed by a broader, general audience.

This process took many decades, with the first home computers hitting the broader consumer market in the late 1970s and early 1980s. In tandem, computer scientists used their knowledge of supercomputing systems to develop games such as Spacewar!, a game that can now be played on almost all modern hardware.

As the decades passed, computers became exponentially more powerful than their early predecessors, resulting in the ability for more complex experiences that portrayed imaginative, high-quality visions of alternative worlds and environments. The development of the Internet not only fostered a seeping, interconnected world—but also enabled gamers to engage in new experiences, such as playing with their friends and family online in titles in genres as diverse as racing and digital combat.

Video games have truly evolved from the stuff of a computer scientist's imagination to the fabric that connects people from all around the world. Some estimates predict that by 2027, there will be as many as three billion gamers around the world.

From the Arcade to the Stage — The Escalation

As more and more users have found themselves exposed to the world of video games, the opportunity to showcase their own skills and demonstrate that they are at the peak of their field has caught the imagination of millions of gamers worldwide.

Early video game competitions took place, centered around games such as Spacewar. As the world of video games developed and titles such as Space Invaders introduced high scores, gamers took on the challenge in the arcade, seeking glory as the top scorer of many titles.

The introduction of modern, connected titles such as Street Fighter introduced the idea of competitive, tournament-like play. This was enhanced by the introduction of games such as Super Smash Bros, encouraging a genre of video game where you could demonstrate your prowess at outsmarting your opponent while not having to look at a high score table simply.

As time passed, platforms such as YouTube and Justin.tv (which would eventually pivot to the juggernaut now known as Twitch) provided an environment for tournament footage to be streamed to a live audience. This enabled an explosive cycle of growth, allowing for games such as Pokémon to garner worldwide recognition as Esports while also enabling gamers to generate their own income through streaming.

a room filled with lots of computer monitors
ELLA DON on Unsplash

Olympic Recognition — A Rocky Road for Esports

While video gaming has rapidly grown in recent years, it has hit hurdles when being recognized and integrated into mainstream sporting tournaments. To date, there is no national global federation for video game publishers—as a result, the Olympic Organising Committee is reliant on recommendations from each of their member states.

Modern video games hit an additional hurdle—trying to align with the Olympic value of promoting peace causes a litany of the most popular Esports titles to be excluded from Olympic Esports tournaments. This conflicting position between what the people are playing versus the values of the Olympics presents a rocky road ahead—while sports are fundamentally different from video games, it seems unlikely that the IOC will look to adopt popular contemporaries as a part of any Olympic series.

The Future of Esports Is Optimistic

While it may seem disappointing that the Olympics is unable to reconcile the differences between Esports and physical sports, not all is lost. Many publishers host their own tournaments—from competitive shooters such as Fortnite and CounterStrike, fighting games such as Mortal Kombat and Tekken, and multiple online battle arenas such as League of Legends and DotA, creating unique opportunities for gamers to showcase their craft in a welcome environment.

Gamers should be optimistic for the future—as games continue to grow in popularity, it's only a matter of time before modern Esports are as embedded in our lives as world sporting tournaments such as the Olympics.

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