Newzoo opens up on $1 billion esports valuation after criticism

Newzoo is giving a bit of insight into their frequently cited statistics on the growth of the esports industry.

In a lengthy article, the analytics firm opened up on its process and subtly pushed back against implications that they have been overly bullish regarding the future of the industry. It also pulled back the curtain on its valuation methods and offered a breakdown of how it sees the esports industry today.

“For esports data, publicly available financial information is scarce due to the relative youth of the industry,” Newzoo CEO Peter Warman said. “We, therefore, partner directly with numerous esports organizations across the globe... We receive their actual revenue data each quarter, providing us with a strong data-backed foundation for forecasting sponsorships, advertising revenues, and media rights deals, as well as merchandise earnings and fees spent on organizers.”

Though Newzoo does not specifically name names, the article seems to be a response to recent wide-ranging discussions that firms have been overstating esports’ reach and value to prospective investors. These concerns were detailed at length in a report by Cecilia D'Anastasio of Kotaku, who tackled this issue on a number of fronts. Kotaku’s anonymous sources discussed the industry in terms ranging from “inflated” to “completely unsustainable.”

The report discusses Newzoo specifically, with esports insiders from multiple areas of the industry questioning the legitimacy of their methods. The eye-popping numbers from Newzoo and other similar outlets offer a great deal of sizzle to uninitiated financiers, possibly without enough steak to go along with it.

To counter this, Newzoo honed in on its oft-cited $1 billion “global esports market revenue estimate.”

Newzoo esports economy breakdown

The number has been thrown around by many different outlets without proper context, which has led to accusations that the company was actively trying to inflate the industry. Newzoo gave a detailed breakdown on how it reached that valuation, accounting for different regions and areas of the industry.

The chart shows the different sources of revenue and what percentage that accounts for in each region. This highlights some of the key differences in business models between major markets, with advertising being huge in Asia while media rights make up a much larger chunk of North America.

Despite the post likely being a reaction to claims that its numbers were overstated, Warman stood by his firm’s math.

“Newzoo stands by its forecasts," Warman said.

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