The Emerging Consumer Drives Gaming and eSports Growth
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The Emerging Consumer Drives Gaming and eSports Growth

It takes years of training, gathers thousands at stadiums, and pays increasingly large winner prizes. Video gaming is the second most popular sport after football globally. eSports meanwhile is taking the world by storm, with China at the forefront of more than 300 million fans worldwide that watch video gaming competitions. The Credit Suisse Research Institute, Emerging Consumer Survey 2018, explores the popular phenomenon in further detail.

League of Legends, WarCraft, Counter-Strike… Doesn't ring a bell? Well, it's time to catch up as these are some of the most popular video games played globally. To put video gaming into context: In 2016 some 2.6 billion people worldwide played video games. That is twice as many as those who played tennis or volleyball, making gaming the second most popular sport after football. In our view, this market is far from saturated and is set to offer strong structural growth in the medium term. Globally, consumer spending on video games has already reached 100 billion dollars, with just over a quarter of this driven by Chinese consumers.

The rising popularity of video games has resulted in the development of eSports, global tournaments where professional video game players and teams compete against each other. In 2017, the number of eSport fans increased by 19% to 335 million, more than the entire US population. By 2021, this number is estimated to climb to 557 million according to gaming market researcher Newzoo. The internet is the key channel through which these, largely younger, consumers follow the tournaments and competitions. Increasingly though, traditional media such as TV is catching on too. However, don't underestimate how keen fans are to watch these competitions live. The 2017 final of the "League of Legends" competition was held in the "Bird's Nest" Olympic stadium in Beijing and attended by some 40,000 fans.

Young, Online, and Wealthier

The recently published Emerging Consumer Survey showed that video gaming is dominated by younger consumers. More than 65% of Chinese consumers aged 18-29 years play video games, whereas in Brazil and India gaming participation is approximately 45% for the same age brackets. The younger bias also holds true for the profiling of eSport fans although not as strongly as that for video gaming. This younger demographic of gamers and eSport fans makes them highly attractive for advertisers and consumer brands. The reason for this is that younger consumers in emerging markets tend to earn higher salaries and have higher income growth than older consumers.

People playing a sport (2016, bn)

People Playing a Sport (2016, bn)

Source: Sporteology, Unity, Credit Suisse Research

Another feature that supports the growth outlook for gaming and therefore the relevance as an investment theme relates to the gender mix. The Emerging Consumer Survey highlights that at present there is a male bias towards gaming and eSports. In China, the largest gaming market, close to 50% of men watch gaming competitions compared to less than 30% of women. Similarly in Turkey for example, over 40% of men indicated that they regularly watch eSports compared to only 5% of women. However, other data also suggests that the gender mix in gaming is much less apparent in mobile games than in desktop or console-based gaming. This expands the potential gaming community significantly, considering that mobile gaming is showing much stronger growth than gaming through other devices.

Profile of Gamers and eSports Fans in China – Youth Rules

Profile of Gamers and eSports Fans in China – Youth Rules

Source: Nielsen, NewZoo, Credit Suisse Research

The ability to engage in video gaming and eSports across emerging markets is greatly enhanced by the widespread adoption of internet access not least through smartphones. Smartphone penetration among mobile using consumers is above 70% for all countries surveyed with levels above 95% in the case of China. The findings of the survey also suggest that the smartphone is indeed the preferred device for gamers.

Industry with Great Growth Potential

While eSports is still in a nascent phase, it is rapidly growing: eSports has accumulated a mass following of 335 million people, with the majority of fans beginning to follow gaming competitions in the past three years. Market research firm Newzoo expects eSports to be worth 1.7 billion dollars in global revenues by 2021, up from last year's 655 million dollars. We believe that video gaming is a market that will also continue to generate above-average revenue growth as more advertising and media spending is directed towards it.