- Very few making money from industry
- Revenue only $5.30 per fan
- Problems over gambling sponsors
Saudi Arabia’s aggressive entry into e-sports, marked by the $60 million Esports World Cup and the successful bid to host the 2025 Olympic Esports Games, has grabbed global headlines.
Yet a multitude of challenges to the commercialisation of e-sports could blunt the kingdom’s ambitions to become a global force within this thriving new industry.
The term e-sports covers organised competitive video gaming. Saudi’s National Gaming and Esports Strategy aims to boost the sector’s GDP contribution to SAR50 billion ($13.3 billion) by 2030, develop 250 gaming companies and create nearly 40,000 jobs.
Simon Leaf, a partner in the sports practice at the UK law firm Mishcon de Reya, told an event in London last month that the country’s cultural norms complicate some sponsorship deals.
“A lot of the traditional sponsors of e-sports have been gambling [companies], for example, and that’s an issue in the kingdom,” Leaf said at the UK-Saudi Sports Investment and Innovation Forum.
“If you’re an e-sports organisation, [or] a team, [and] if your sponsors are unable to exploit the rights because you’re in a territory where you are not able to display the sponsorship logo, then that’s something that needs to be thought about.”
Netherlands gamer research company New Zoo says sponsorship deals make up e-sports’ highest-grossing revenue stream, accounting for nearly 60 percent of the entire market.
Leaf also pointed to the global industry’s broader profitability challenges, which Saudi Arabia must now navigate.
“In e-sports, you look at the numbers [of viewers] and they’re incredibly impressive – but very few people were making money from the industry,” he said.
“Google, who run YouTube, and Amazon, who run Twitch, were doing pretty well. But a lot of other people in the ecosystem were struggling to make it profitable from a financial perspective.
“The main challenge [is] how do you get that return of investment, particularly when you’re spending as much as you are in the kingdom.”
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Further complications arise with data handling because of regulatory differences between Saudi Arabia and Europe, adding another layer of complexity for sponsors and the kingdom’s wider tech sector.
“It’s not as easy to transfer personal data between the UK and Europe and Saudi Arabia,” Leaf said.
“For example, there was an issue where the Saudi organisers of a particular event wanted to access email addresses and contact details of the people that had bought subscriptions. Had this been a European event, that would be much easier to overcome. I don’t want to scare everyone into thinking you can’t transfer data between Saudi and UK. You can. You just need to think about it in advance.”
Barriers to business
Leaf said the general barriers to doing business in the kingdom were “still relatively high”.
“They [have] definitely come down, but even to operate there at the moment, it can take several months to acquire a licence,” he said.
As Saudi Arabia continues to invest heavily in e-sports, with an impressive line-up of initial event sponsors such as Aramco, Adidas, TikTok, Stc Group and Pepsi, the return on investment remains to be seen.
A report by Deloitte in 2022 predicted that global e-sports revenue would pass $1.4 billion that year, primarily driven by advertising, co-streaming rights and sponsorships.
However, Deloitte said, this translated to only $5.30 per serious fan, far behind traditional sports partnerships.
US e-sports giants such as 100 Thieves and Evil Geniuses have been downsizing as teams struggle to turn a profit.
The Dublin-based company Research and Markets has predicted that the industry will be worth about $2 billion by 2030, while Deloitte expects growth in media rights, merchandising and loyalty programmes.
Despite hurdles, Turki Alfawzan, CEO of the Saudi Esports Federation, is optimistic that the kingdom’s strategy will pay off after it tested waters by hosting Gamers8, one of the world’s biggest gaming and e-sports events, which sold out.
“Wherever you have youth, you have more gamers,” he said. A majority of the Saudi population, 63 percent, is under the age of 30, and the country is home to some 20 million gamers.
“It’s a green field,” Alfawzan said. “We believe there is a gap and we want to fill this gap by the creation of gamers.”