Thanks to the development of technology and official recognition, today a new band of "athletes" are flexing their muscles. The computer screen is their stadium where they take on the persona of heroes and vie with one another in a virtual world. For many, these on-screen matches are just as mesmerizing and full of nail-biting suspense as any conventional sport, be it tennis or soccer.

These are the e-sports gamers who, before 2018, were little known to the public even though, in their own way, they worked as hard as conventional athletes. Worse, some even regarded them as computer game addicts.

Things changed last year when the Chinese delegation won two golds and a silver at the six e-sports demonstration events in the 2018 Asian Games in Jakarta, Indonesia, including Arena of Valor, a popular multiplayer online battle game developed by Timi Studio Group and published by China's leading games publisher Tencent with 200 million monthly active players on average.

In fact, the 2018 Asian Games was a huge breakthrough for e-sports itself, being the first time it was included in an international sports tourney.

Later, the Chinese e-sports club Invictus Gaming won the title in the 2018 League of Legends World Championship in the Republic of Korea (ROK) in November. Since then, Chinese e-sports players have become widely acclaimed.

"The excitement of Chinese gamers at the victory was a great encouragement for the e-sports industry. It proved that e-sports can also win honor for the country like traditional sports," Wei Jizhong, honorary Vice President of the Olympic Council of Asia, said. With young people's interest in e-sports growing and technology developing, e-sports will become a trend, he added.

Revenue gap

In China, e-sports had gained official recognition a long time ago, becoming the 99th sport acknowledged by the General Administration of Sport of China. However, it remained in oblivion mostly due to lack of understanding. Now with things changing, the sport is gaining momentum and becoming more standardized and professional. Currently, there is a buzz that e-sports could be listed as a sport in the Olympic Games.

"We found that after 2018, we have more commercial sponsorship projects which are also for longer periods," Dai Bin, Vice President of the Marketing Department of Tencent Interactive Entertainment, a division of Tencent, said.

In 2018, Tencent's 90-odd e-sports projects had an average sponsorship period of 14 months, almost triple the time the previous year. The longer duration reflects the sponsors' increasing confidence in e-sports' future growth, Dai said.

According to a report by audit company PricewaterhouseCoopers, by 2020, China will overtake the ROK to become the second largest player in the global e-sports market after the United States. By 2023, the annual revenue for China's e-sports industry is estimated to be $392 million and in five years from 2020, China's e-sports revenue is likely to grow at an average annual rate of 21 percent.

The number of China's e-sports users—those who watch e-sports events and have some knowledge of e-sports—is expected to exceed 350 million this year and the value of the e-sports ecosystem is poised to hit 13.8 billion yuan ($2 billion), according to a report by Penguin Intelligence, Tencent's data platform.

However, e-sports events, especially top-level ones, still lag behind traditional sports in sponsorship revenue, Penguin Intelligence said.

It said the revenue of e-sports mainly comes from sponsorships, the sale of broadcasting rights and users' payment to see the events live streamed. Altogether, they account for 77.1 percent of the total revenue, while ticket and derivative revenues constitute 15.3 percent. Therefore, the potential of e-sports' business value can be further tapped, which requires the upgrading of its business model.

Hou Miao, Manager of Tencent's E-Sports Division, told Securities Times that the development of the e-sports industry should not be limited to operating e-sports clubs. Fans can help attract various industries to join the e-sports ecosystem, which would see the benefits go beyond championships and prizes.

Policy support

China's local governments and enterprises are stepping up efforts to promote e-sports.

On June 20, the southern province of Hainan issued preferential policies on e-sports, including tax cuts for companies that contribute to the local economy, a visa-free regime to facilitate international e-sports players' taking part in competitions in China, and exploring new live-streaming channels.

Hainan Resort Software Community, an industrial park for Internet companies, will set up a 1-billion-yuan ($145.7-million) special fund and offer permanent residence to e-sports professionals.

Beijing, Shanghai, Guangzhou in south China's Guangdong Province, Xi'an in the northwestern province of Shaanxi and Chongqing in the southwest have also launched supportive measures.

"E-sports can't develop without policy incentives," Wei said, adding that the support should focus on addressing problems and drawbacks.

Private companies are going full steam to tap the industry. E-commerce giants such as JD.com and Suning.com have their own e-sports clubs to create a new business model combining e-commerce with e-sports and tapping the purchasing power of the large number of the clubs' online users.

Online multiplayer games publishers such as Perfect World and the Giant Interactive Group are holding e-sports tournaments and designing e-sports products, which are accelerating the industry's growth.

Tencent, whose revenue from copyright licensing of e-sports events was 370 million yuan ($53.8 million) in 2018, has signed over 50 sponsorship deals with more than 30 companies, who will fund the Internet giant's e-sports events. Earlier this year, it set up Tengjing Sports, a 530-million-yuan ($77.06 million) joint venture, with video game developer Riot Games in Shanghai to promote its e-sports business.

Tencent has also launched a promotional campaign for e-sports, which sees it cooperating with local governments over e-sports events and venues, building an e-sports ecosystem. Currently, the participants include Zhuhai in Guangdong, Xi'an and Shanghai. Hainan is expected to join in its second phase.

"E-sports introduce young people and new industries to cities while cities provide venues and favorable policies for the e-sports industry," Hou said. "It is essential to make good use of the local government's policy support to establish a better e-sports ecosystem."

Cheng Wu, Vice President of Tencent, said in the future, e-sports should attach more importance to nurturing gamers and other participants in the industry, the industrial ecosystem as well as applying new technologies.

By the end of 2018, there were just 71,000 e-sports gamers in China. The need is for at least 150,000 more, which means there is a gap that cannot be filled overnight. Thus, talent is a key issue for sustainable development of e-sports.

This year, the updated list of occupations released by the Ministry of Human Resources and Social Security includes e-sports operator and e-sports player among 13 new occupations created due to changes in technology and lifestyle. In addition, 51 vocational colleges have applied for permission to introduce a major in e-sports.

New growth driver

Chen said e-sports is reinvigorating itself and has begun to reward other industries in recent years, becoming a growth driver for live-streaming platforms, manufacturing of hardware equipment, development of derivative products and the construction of venues.

The cultural and creative industry with e-sports as a major component has showed robust growth since the second half of 2018. E-sports has transformed from a form of competition into a growth driver for many traditional industries. Tourism is an example. E-sports will serve as a catalyst for international travel and a great opportunity for cities to be known to foreign audiences.

Since the birth of e-sports is closely related to technology, with wireless communication technology upgrading to 5G and the rapid development of virtual reality and artificial intelligence technologies, the gaming experience will be optimized.

The new star on the block is a virtual commentator who can make real-time commentaries during e-sports events. It is just the tip of the iceberg. A lot more new technologies are waiting to be harnessed to benefit the industry.

Copyedited by Sudeshna Sarkar

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