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Home > Coronavirus > Upcoming Xbox, PlayStation consoles may accelerate the growing esports industry

Upcoming Xbox, PlayStation consoles may accelerate the growing esports industry

Jul. 7, 2020 by Victor Kao

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Anticipation is building around new gaming console releases expected from Sony and Microsoft, at a time when the esports industry is already growing amid the coronavirus pandemic.

Sony announced full details and specifications of the redesigned PlayStation 5 console on June 11, and is anticipated to release the system in November. Not to be outdone, Microsoft is also expected to announce its launch of the new Xbox Series X (also known as Project Scarlett), which will likely release at the same time to compete against the new PlayStation. Both consoles will feature the latest graphics processing chips (AMD Zen-2 Ryzen processors and Navi graphics processing units), allowing games to load much faster and more efficiently.

Neither company has announced prices for the new consoles yet, but the releases could add to the perfect storm that esports and competitive gaming are experiencing in the COVID-19 environment, especially because there is still uncertainty as to when live sports will return.

How big is esports?

The esports industry is currently valued at $1.1 billion, and is expected to grow another 50% over the next three years, according to gaming market insights and analytics company Newzoo. The global audience for esports is expected to grow from 495 million viewers in 2020 to 646 million in 2023, Newzoo data shows. Some might expect the pandemic – and the recession it has caused – to hamper this growth trajectory, but that may not be the case. Video gaming and esports have had a big boost from the pandemic, making esports more mainstream in the United States at a time when there’s a shortage of live sports to watch.

The esports ecosystem

On several streaming platforms where people can watch gaming live, the global number of hours watched increased in the first quarter of 2020 compared to the previous quarter, according to data from S&P Global Market Intelligence. Twitch, YouTube Gaming Live and Facebook Gaming all saw bumps in hours watched, the data shows.

With a larger viewership, and live sports still on hold, the sports betting market has shifted quickly into esports and competitive gaming. According to a May 15 CNBC interview of DraftKings CEO Jason Robins, esports was just a fraction of the company’s revenue prior to the COVID-19 pandemic. However, during Q1 revenue jumped up 30% compared to prior year, with strong results and acceleration in iGaming and esports. Many NBA2K Twitch streams now involve players making bets with multiple side bet action. It’s likely only a matter of time until esports gambling attracts more attention from regulators.

How do gaming consoles fare during recessions?

If history is any indication, both of these new consoles stand to perform well in the current recession. During Nintendo’s launch of its Wii console during the Great Recession, the company wisely priced the Wii at $249 whereas the PlayStation 3 started at $499. The price disparity shows that gaming can in fact persist during a recession if the value proposition is strong. As shown in the chart below, total video game console shipments increased significantly in 2008 during the Great Recession and hit historic levels in 2009 due to aggressive pricing despite new console releases from Wii and PlayStation 3 in 2006.

Sony plans to deliver two variants of its upcoming console – a standard version equipped with a Blu-ray Disc player and a lower-priced digital version without. This strategy of offering models at different price points is similar to Apple’s approach of selling variants of each model of the iPhone or iPad. With broader price ranges, the company can capture a wider audience. Microsoft is expected to do the same with the Xbox Series X. The Great Recession showed that consumers are willing to spend during a significant recession so long as the consoles are priced appropriately.

So what’s to come?

Gaming companies are building entire ecosystems of games, game engine platforms, consoles, app stores, and now esports arenas, leagues and the broadcasting rights that accompany them. As streaming and viewership continue to grow, more broadcasters and advertisers are expected to enter the gaming and esports space and learn how to capture and monetize the growing audience.

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Filed Under: Coronavirus, Tech, Media and Telecom Tagged With: esports, gaming, technology, video gaming

About Victor Kao

@victorkao4

Victor provides a unique blend of accounting, operations, and IT subject matter expertise, and leads a wide spectrum of projects including internal audit, Sarbanes-Oxley compliance, systems organization controls readiness and attestation, business process improvement, and information technology assessment services. Prior to joining RSM, Victor served in senior management roles in a variety of industries, including consumer products, food and beverage, technology, banking, and financial services. Currently, Victor’s core industry and subject matter expertise lies within technology.

Victor has substantial IT risk advisory experience leading and coordinating ERP software selections and implementations, IT general controls review, segregation of duties analysis, cybersecurity, and system and organization controls readiness and attestation. In 2018, Victor was selected as a senior analyst in RSM’s cutting edge Industry Eminence Program, which positions participants to understand, forecast and communicate economic, business and technology trends shaping the industries RSM serves. These senior analysts advise clients on conditions impacting middle market leaders.

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