June 3, 2022

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Front Office Sports Pro

Happy Friday!

Pro is back this week with an updated Deal Tracker and Scouting Report on the domestic and international growth in the esports market. In this report, we look at the Forbes updated esports franchise valuations, the reasons for increased streaming viewership from 2021, monetization segments within the industry, and opportunities for growth.

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Esports Valuations Nearing Major Sports Leagues

Jasen Vinlove-USA TODAY Sports/Design: Alex Brooks

Earlier in May, Forbes released its list of the top 10 esports franchise valuations. The 10 most valuable esports companies are worth a combined $3.5 billion, up 46% from the last edition in December 2020.

But certain key events in the interim have swung valuations and caused investors to look at the business models behind esports franchises.

In October of 2021, FaZe Clan revealed that it was planning to go public through a SPAC merger. While the announcement was a surprise, the valuations attached to the deal were even more staggering.

At the time, it was announced that FaZe was already worth $650 million and would reach $1 billion with the money it raised in the deal.

The deal valued FaZe Clan comparably to the MLB’s Miami Marlins ($990M) and the NHL’s Detroit Red Wings ($990M). The valuation surpassed the $305 million Forbes had estimated FaZe Clan was worth just 10 months earlier.

The monumental valuation was also a signal that the esports industry had resumed its growth trajectory after a few years when team values had largely flatlined and revenue growth stalled.

Fast-forward to 2022, and the narrative has changed. Certain fundamental issues have been raised concerning FaZe Clan’s business operations.

In an amended SEC filing last month, FaZe Clan revised its forecasts downward, with many skeptics pointing to the company’s $36.9 million net loss for 2021.

Regardless of the isolated FaZe Clan issues, the esports market is back and looking to continue its strong growth trajectory.

  • In 2022, the global esports audience will grow +8.7% year-on-year to reach 532 million. Esports enthusiasts — those who watch content more than once a month — will account for just over 261 million.
  • The number of esports enthusiasts will grow to 318 million in 2025, with a CAGR of +8.1% (2020-2025). In 2025, the total audience will surpass 640 million.
  • Esports will generate nearly $1.38 billion in revenues globally by the end of 2022. China accounts for nearly a third of worldwide esports revenues.
  • Digital and streaming are the two fastest-growing revenue streams for esports, with 2020-2025 CAGRs of +27.2% and +24.8%, respectively.

Want to learn more? Check out the full Scouting Report here.

ICYMI: Last month, we published another Scouting Report on the impact of the crypto market crash on existing sports partnerships. You can access that report and our other research at Pro HQ

Deal Tracker

Deal Tracker

This week’s Pro Deal Tracker highlights: 

  • AC Milan, the Italian Serie A soccer club, was purchased by Red Bird Capital for $1.3 billion.
  • New Zealand Rugby, the organization that operates the national rugby team of New Zealand, sold a $131 million minority stake to Private Equity firm Silver Lake.
  • Kryptomon, operator of a blockchain gaming platform creating the next step in the evolution of crypto-gaming, raised $10 million of venture funding in a deal led by NFX. 
  • WIN Reality, developer of a VR-based training tool designed to offer athlete evaluation and development, raised $49 million through a combination of Series A and Series A-1 venture funding in a deal led by Lago Innovation Fund.
  • Tripp, developer of a digital psychedelic platform promoting emotional wellbeing and transformative states, raised $11.2 million of venture funding in a deal led by BITKRAFT Ventures, Amazon Alexa Fund, and Qualcomm Ventures.   

Try out the full Deal Tracker.

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Written by Liam Killingstad

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