Asia e-sports: Pumping up in a timeout

AVCJ has tracked four sizeable VC investments in Asian videogame start-ups in the past two months – in the ballpark of $100 million or more – and three of them are in the industry’s hardest-hit category: e-sports.

The deals in question include a $100 million Series A round for Japanese mobile games developer Playco, a $90 million Series C for India’s Mobile Premier League (MPL), a $225 million growth round for India’s Dream Sports, and a $100 million Series B for China’s VSPN, a knowing nod to US sports broadcaster ESPN. 

The cloistered lifestyles and uptake of online lifestyles in the COVID-19 era are known to have been a boon to the videogame industry, but logic would dictate that the enthusiasm should stop at e-sports. This is a market that is reliant on stadium-based events with live audiences. About 60% of industry revenue is generated from brand sponsorships around these physical events; it’s more about team-branded merchandise than ads during the streaming of a match.

To some extent, a pandemic honeymoon for e-sports investment can be attributed to the sheer upside of the category versus the rest of the gaming space. E-sports accounts for only 1% of the overall $200 billion sports market, and the lines between the two worlds are blurring fast. COVID-19 has only accelerated the rate of virtual events experimentation by traditional sports organizations including the NBA, NFL, F1, and NASCAR.

A closer look at the latest flurry of deals reveals, however, that the biggest bets are still skirting around the pure e-sports concept. MPL, for example, brands itself as the largest e-sports and mobile gaming business in Asia, but its core interests appear more rooted in the latter. MPL offers a platform for competitive gamers to face off against one another, but it’s amateur competition. The games themselves mimic traditional sports; the business model does not.

Dream Sports takes a different approach to the sports-videogame nexus but also keeps some distance from the risks related to events-based revenue dependence during a pandemic. The concept here is fantasy sports, whereby users create their own teams comprising real-life players participating in actual matches, scoring points based on on-field performance. There is still a dependence on live matches, but with traditional and fantasy sports, it’s not a huge problem if the stadiums are empty.

VSPN is a more squarely targeted e-sports ploy. The company, whose investment earlier this week was led by Tencent Holdings, organizes tournaments, creates related video content, and operates a string of offline venues tied to its TV-based business. This is a big-staff, asset-heavy model by videogame standards, with more than 1,000 employees and ambitions to build an e-sports research institute and culture park.

With China returning to a post-COVID-19 normal, the staging of physical e-sports should not be inhibited. However, VSPN is also targeting cross-border expansion and that remains shrouded in uncertainty. If the question is how to time an entry into a temporarily suppressed but destined-to-boom industry, investors may do well to consider the likely speed of e-sports post-pandemic rebound.

While other prospective categories in this sector – such as virtual reality games – will continue to contend with technical and consumer uptake risks, e-sports has already proven its viability. As such it may be logical to infer that if e-sports can maintain even modest momentum in the current climate, a post-pandemic inflection point becomes all the more plausible.

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• Topics
• Technology
• Expansion
• Early-stage
• Greater China
• South Asia
• China
• India
• TMT
• covid-19
• coronavirus