The venture opportunity in Esports

The League of Legends Worlds 2023 tournament is currently underway in Korea. As evidenced by early viewership, with opening matches topping 1.5m CCU, LoL esports is as big as ever. That said, the business health surrounding many esports companies continues to remain shaky.

It’s insightful to take a look at the China esports market given it is far and away one of the most developed ecosystems from the audience and business perspectives. LoL has become one of the most popular sports across the country, and drives insane fan and player engagement throughout the year for 100s of millions of Chinese players.

One big takeaway looking at the China market is that esports is an incredibly powerful tool to build and engage a community of young consumers, and it’s interesting to note that all 4 teams representing China at Worlds 2023 have a clear focus on this strategy – JDG, LNG, Weibo, and Bilibili. Their parent companies have a strategic focus on esports which complements their core businesses:

• JD.COM as a leading ecommerce platform
• Li-Ning (China) Sports Goods Co. Ltd as a leading sportswear and sports equipment company
• Weibo Corporation as a leadingsocial media platform
• bilibili Group as a leading video-focused community platform

Note how these teams don’t try to build a standalone business centered around sponsorships and advertising and merch, or other lines of revenue pursued by traditional sports teams. It’s also clear that the per fan monetization through viewership via media rights, which is the primary source of revenue in traditional sports, can never be attained in esports as long as the primary broadcasts are accessed for free through platforms like Twitch and Youtube. Solely pursuing these revenue streams continues to remain unsustainable.

In China, esports is all about connecting with and engaging young consumers, and building stronger brand reach and relevance with this audience. As teams perform well domestically and internationally, they are able to create strong brand resonance with fans who idolize their players and support the teams, who in-turn engage with other products and services created by their parent companies.

At Patron we believe that esports can continue to grow and develop into one of the best ways to engage youth around the world. Using esports as anengine to cultivate a passionate and highly engaged community can be one of the best ways to achieve broad distribution, but that alone isn’t a viable venture scale business. There has to be a clear way to engage and directly monetize that audience through other replayable experiences.

One example within our portfolio is spacecaps in Brazil, as they aim to create the definitive community platform for gamers in the region. LOUD serves as a community building engine through their VALORANT and LoL teams and their network of streamers and athletes, but their broader aim is to organize and drive community activity online.