Business Economics

How did esports investment go viral? #ECONOMICS


Newman, J. I., Xue, H., Watanabe, N. M., Yan, G., & McLeod, C. M. (2020). Gaming Gone Viral: An Analysis of the Emerging Esports Narrative Economy. Communication & Sport, 2167479520961036.


In this article, we use narrative economics to analyze the social conditions promoting the growth in private investment in esports—specifically in North American esports teams and franchises. Investment in the esport industry has outpaced revenue growth and esport teams do not have a proven cash flow model. To understand this disjuncture, we draw upon the narrative economic approaches developed by Robert Shiller and colleagues who have demonstrated how the public narrative holds the potential to influence economic behavior—and whereby following a popular story might lead to irrational investment, labor, or consumption practices. We provide a quantitative analysis of published stories that shows the virality of esport narratives is consistent with epidemic models and that business investment narratives are spreading faster than general esport narratives. We then provide a mixed method analysis that demonstrates the central narrative of esport stories is one of growth, opportunity, and sport-esport synergies. We conclude with a discussion about the industrial and theoretical implications of studying viral stories as they relate to preconditioning economic behavior in the sports industry

The Data

The study analysed the contents of 16,669 news articles and reports from 2003-2019 to identify how esports were discussed as investment/business opportunities. 


“The narrative conditions of investment are likely to be particularly important in esports because it does not yet have a proven cash flow model, so investments are based on speculations about how the industry can and will evolve” 

“the story told was often that all esports needed was an influx of capital and an expansion of the managerial and marketing practices of traditional sport, and then the business would take off.”

“the results cannot be used to infer whether esport investments were rational or irrational; instead, we argue that investments such as those speculatively made in esports, require a supporting narrative in order for investors to make sense of limited data and an uncertain future”

“It is possible that investments in esport teams will end up being profitable in the long-run and that the sport-based narratives identified in the study helped actors identify esports’ potential earlier than they could have without the supporting sport-based narratives. Alternatively, it is possible that sport-based narratives lead investors to make poor investments.”

Our Take on it

This article is not an easy read for non-specialists. There’s lots of complex jargon associated with narrative economics that can make it difficult to plough through. However, at its heart is an attempt to examine stories about esports that may explain the investments being made into the industry. It talks about how esports as an investment sector went viral and how those narratives drew on analogies to sport to sell the value of investing into esports.In other words, they said ‘look what’s happened to the economics of sport, that can happen with esports too’ that. Yet, the IP issues around esports is very different and the authors note that these nuances were not terribly clear to investors. It also mentions how access to varied markets was a key story within these articles that discuss the opportunity and how crucial the player community as role models has been to frame these ideas. Finally, it notes that the esports industry as being relatively free from investment conflicts was a key catalyst in selling the opportunity to investors.  Overall, this means that investors may be gambling on a sector that has yet to fully figure out how wealth is distributed and so could be a risky proposition” – Professor Andy Miah

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