In an era when cable TV users are cutting the cord in droves, live sporting events have traditionally been the one bright spot in the TV lineup, with NFL games consistently beating out the ratings for all other programming. As recently as 2015, Sunday Night Football was bringing in 22 million viewers and ESPN was a revenue behemoth, easily one of Disney’s most profitable properties. Advertisers love live sports because it makes it harder for viewers to skip or fast forward through ads, and sports networks are able to negotiate higher cable fees because they provide must-have programming.
But times are changing. The acceleration of cord cutting is now eating into sports networks’ bottom lines while also becoming a drag on ratings. In just the last three years, average ratings for Sunday Night Football have declined by four million viewers. Meanwhile, ESPN has lost over $1 billion in revenue from falling subscription numbers, forcing it to lay off 550 staffers over the last few years. Meanwhile, we’re seeing a rise in skinny bundle cable packages, which often eschew expensive sports programming.
But there’s one category of sports that’s seen tremendous growth in both viewership and revenue over the last few years: eSports. And there’s one platform that’s been particularly adept at capturing this exploding market: Amazon’s live streaming platform Twitch.
Amazon bought the company for almost $1 billion in 2014, and by then it was already the leader in live streaming games, with some of its top users generating tens of thousands of viewers and making decent livings, mainly through monetary contributions from their fans.
Most of its users are amateur gamers who don’t generate enough money on Twitch to quit their day jobs, but the platform’s inroads with the gaming community made it the perfect vehicle for broadcasting professional eSports, an industry that’s been well-established in South Korea but is only recently gaining massive popularity in the West.
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In just the last year or so it’s locked down the streaming rights to several eSports events. In January Twitch signed a $90 million deal to stream a league that plays a first person shooter game called Overwatch. This league is particularly interesting to watch because of how it tries to mimic professional sports leagues, allocating teams by geographic location so you can root for your “home team,” and it’s instilled a minimum salary for all its players.
How big is the potential for this market? According to eSports intelligence firm Newzoo, eSports generated $465 million last year, which may seem like a paltry sum compared to traditional sports, but consider that it’s tripled in size since 2012. That same source projects it will be a $1.5 billion market by 2020.
The viewership is certainly there. The global audience is estimated to be 385 million. The Intel Extreme Masters World Championship, the most-watched eSports event, was watched by 46 million people, almost half the audience size of the Super Bowl. The first Overwatch game streamed by Twitch pulled in 360,000 viewers. Twitch has 15 million daily users and averages 962,000 viewers at a time, which one analyst pointed as being similar to the average live viewership of CNN, MSNBC, and ESPN.
And Twitch’s potential doesn’t end with eSports. I think it has the potential to go after traditional sports streaming rights as well, especially since it’s backed by Amazon’s deep pockets. YouTube, Amazon, Facebook, and Twitter have already gotten into bidding wars for NFL online streaming rights. Last year, Amazon bid $50 million for the rights to stream NFL games behind its Prime paywall and generated an estimated 300,000 viewers per game. They’re continuing to bid for these rights, and I can see a scenario where they carry a version of the game with advertising on Twitch. One of the criteria the NFL uses to evaluate a potential streaming partner is whether the platform offers interactivity in order to lure younger viewers. It just so happens that Twitch has very active chat rooms within their streams and it’s looking to expand their functionality.
Of course, traditional sports aren’t the only things the tech giants are bidding on. They’re also competing for eSports streaming rights. Facebook Live recently won the rights to stream competitions run by Germany’s ESL One. In 2016 Facebook signed a deal to stream a major Call of Duty tournament. Both Facebook and YouTube have made major investments in building up their video game content, with the former recently rolling out new tools to help gamers monetize their fanbase.
But then again, ESPN has managed to maintain its title as the worldwide leader in sports even though it hasn’t locked down the rights to all games. Facebook and YouTube have lots of other priorities, and Facebook has abandoned other live streaming efforts in the past. Only Twitch is pretty much singularly focused on live video and gaming, and its large gaming community gives it advantages that make up, in part, for it being smaller than some of these larger platforms. When ESPN launched in the late 1970s, it had virtually no rights to major sports games, but early viewers fell in love with its dedication and obsession with sports. Twitch, with the right grit and determination, might just well be the underdog that will eventually dominate the world of sports.
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