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eSports companies are attracting venture capital and being targeted for acquisition. Here’s why

May 15, 2015, 4:00 PM UTC
Courtesy of Riot Games

There are over 134 million eSports fans today, according to SuperData Research, and by next year the company forecasts that number will increase to 153 million. That’s a huge global audience to tap into, and one that’s growing at a rapid rate. Companies that target the eSports fanbase are seeing their viewership explode, which makes them very attractive to investors.

UK-based startup Dingit, an high-definition eSports streaming platform, launched at the end of February 2015 with 7,000 viewers and grew to over 170,000 viewers by the end of April. Despite launching so recently, Dingit has already raised $1.8 million from venture capital companies like Black Green Capital.

“We have observed the explosive growth of eSports and Dingit brings a completely new paradigm to this sector,” David Rowe, CEO of Black Green Capital, says. “The Holy Grail for venture capital is to see an early stage company with access to a huge and expanding market and a rapid route to profitability.”

Mark Hain, CEO and founder of Dingit, says the plan is to obtain the content for eSports events and increase its calendar of events from 60 per month to 120 per month in the short term, and to scale the platform to reach larger numbers of viewers. Hain says the company is targeting 1 million viewers by the end of this year and a multiple of that in three years.

Dingit isn’t the only eSports company to receive venture funding. In March 2014, the Sapinda Group invested $34.5 million in high definition eSports broadcaster Azubu, which is based in Los Angeles and has offices in Vancouver, Seoul, and Berlin. The company says it has quadrupled its viewership since the beginning of 2015, but has not released any numbers.

And Amazon acquired Twitch, a streaming platform that launched in 2011, last September for $970 million. The company grew from 45 million monthly viewers and 90,000 broadcasters in 2013 to 100 million viewers per month and 1.6 million broadcasters in 2014, numbers which prompted Amazon to acquire the company.

“Now that eSports and livestreaming has been established as a viable business, channels will actively start to differentiate themselves and leverage what opportunity technology affords them,” says Joost van Dreunen, CEO of SuperData Research. “Dingit has a nifty system that tracks player input, which makes for an interesting additional layer of context when watching, especially, competitive gaming. Similarly, Azubu is integrating statscomparable to baseball’s batting averages, et ceteradirectly into gameplay, and is using it to set itself apart.”

DingIt offers a new ad model and new streaming technology . Traditionally, streaming platforms like Twitch, Youtube, and others use third party software and platforms to stream. Dingit and its partners have developed a new way to broadcast, stream, distribute the stream, and place video ads. Hain says because of the low cost of bandwidth this platform is 60% cheaper than competitors.

Hain believes the current advertising model of using pre-roll ads to interrupt live eSports action disengages the audience. Dingit can program all ads to play during natural breaks in the action. In addition, the lower overhead costs generate more profits from advertising.

Van Dreunen estimates that Twitch currently owns approximately 30 percent of the global eSports audience, so there’s room for new companies to establish themselves.