Over 200 million fans went crazy when China’s Invictus Gaming (IG) routed European rival Fnatic in League of Legendsfinale in 2018. For the first time in the history of the championship, a Chinese firm came out on top, reported American online publisher TechCrunch.
The League of Legends triumph set off a domino effect with more and more Chinese esports clubs clinching trophies at PUBG (PlayerUnknown’s Battlegrounds), Hearthstone, and Arena of Valorcompetitions.
China is the largest gaming market in the world. According to the 2018 China E-sports Development Report, the industry is worth more than CNY 5 billion (USD 725 million). At this rate, the Chinese esports sector is poised to cross CNY 20 billion (USD 2.9 billion) by 2020. The number of gamers is estimated to hit 300 million.
Multi-million dollar investments
In September, Chinese esports firm QG, which has won four season championships at China King Pro League, completed a CNY 100 million (USD 15 million) Series A round from VC firm Toutoushidao Fund (头头是道投资基金).
In May, esports club Edward Gaming (EDG) secured CNY 100 million (USD 15 million) in a Series pre-A funding round, jointly led by Yao Capital (曜为资本) and China Capital Zhongcai Fund Management (中偶基金联合).
In April, Vici Gaming (VG) closed a CNY 50 million (USD 7.2 million) Series A round of financing from Fortune Capital (达晨创投), Entertainment Works (娱乐工场), and Joy & Recreation Capital (逍遥资本).
China’s predominant live-streaming company Douyu (斗鱼) has received USD 630 million in a Series E round from Tencent (腾讯). NYSE-listed Huya (虎牙) closed a USD 460 million Series B round led by Tencent on the same day.
As of June 2018, a total of 16 investments worth CNY 7.69 billion (USD 984 million) were made in the sector.
Monetisation is the biggest challenge faced by esports players in China. Even big clubs like RNG are caught in a “high cost, low return” situation, reported tech news aggregator 36kr.
Chinese clubs spend big bucks on player signings, salaries, staff hiring, event management, advertisement and so on.
The expenses run up bills in millions of dollars. On the other hand, the primary revenue comes from sponsorship money followed by broadcast rights, advertising and ticket sales.
Chinese esports clubs are on the lookout for more channels to keep the money coming. Internet cafes attract significant number of players by offering high-end computers and esports centres profit from running events. “Chinese companies are still trying to figure out the offline esports model,” said Zhou Jie, manager of all-women’s league Killer Angels.
However, the stakeholders remain optimistic. “We are making a loss, but it is not a big deal. The loss becomes less and less every year, and we can break even someday,”said Lu Wenjun, chief executive of team OMG.
The esports industry is at a crossroads now. The videogames chokehold has set the sector back a bit. However, the investments keep coming in. Wang Sicong, son of China’s fifth-richest man Wang Jianlin, who established the IG team in 2011, continue pumping millions of dollars into his club. The regulations have not dampened the sportsman spirit of the esports players.