Investment Opportunities in eSports for Norling PLC

Executive Summary

This paper examines the opportunities of investing in E-sports for the investing company Norling PLC. It explores the eSports, reveals its definition and describes the most popular types of computer games. In the course of examining, it analyzes the international picture of the industry, its peaks and valleys, and money-making opportunities for the company in the industry. In addition, the paper explores the costs and risks associated with the investing in eSports, what the company will have to pay for, and where it can lose money. Finally, on the basis of the research made, recommendations are formulated for the Norling PLC whether it should invest in the eSports and where the investment is more likely to be refunded.

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Introduction

In our time, eSports are a part and parcel of the lives of many young people. Children, teenagers and even adults prefer to play a couple of games when coming home. But for many people, gaming is not only a hobby but also their work. Not only gamers but also many companies earn huge money in eSports, as it is one of the most viewed and the most highly paid sports in the world. One of such companies who want to earn on eSports is an investing company Norling PLC. However, it wants, first of all, to find out whether it is profitable to invest in this type of industry. Thus, the paper will examine and analyze the investment opportunities in eSports for Norling PLC and make relevant recommendations.

Findings and Analysis of eSports

eSports is a gaming competition which uses computer technology, where the computer simulates a virtual space within which the competition takes place (BBC n. d.). The most popular types of computer games are Multiplayer Online Battle Arena and First Person Shooters. In the MOBA games, there are two teams of players that compete with each other (Urban dictionary 2009). Each player controls one character that can be become stronger during the match.

The ultimate goal is to destroy the main building of the opposing team. The most popular representatives are the League of Legends and Dota 2. The FPS is based on the battles that use firearms and projectile weapons from a first-person: the player perceives what is happening through the eyes of the main character (Techopedia n.d.). The most popular representatives are Call of Duty: Modern Warfare 2 and Counter-Strike: Global Offensive.

International Picture of the Industry

eSports are rapidly gaining popularity. NewZoo predicted that by 2018, the annual income from the eSports will be $765 million, and the number of its fans will exceed 165 million people (NewZoo 2015). In 2013, the number of eSports viewers was 71,5 million. With the increasing number of viewers, the prize money grows, too. Thus, in 2009, the prize was 3.5 million dollars, and in 2015, it was 71 million dollars, as it can be seen in Appendix A (NewZoo 2014). Moreover, it is expected $465 million eSports revenue growth, as shown in Appendix D (NewZoo 2015).

eSports are more popular in the Western part of the world. Thus, in the USA, there are twice as many fans as in Europe, as seen in Appendix B (NewZoo 2014). Besides, there are 89 million eSports enthusiasts that regularly view or participate in eSports, as shown in Appendix C (NewZoo 2014).

The Sports industry would have grown even without people who consume the product, without channels that broadcast the competitions, brands that sponsor it, leagues that organize it etc. (NewZoo 2015). However, it is hard to predict whether this industry will further develop or not. Everything depends on the factors mentioned above.

The Money Making Opportunities

The creation of an eSports team is associated with high costs. Thus, this business is not profitable, but many organizations work on the estimated value of the teams. Organizations can make a profit by selling the team’s brand (shirts, hats, and equipment), streaming, entertaining, sponsorship, and making agreements with other organizations (Djuricic 2015). However, a significant part of such a business model is based only on advertising contracts. Also, the team can win a large sum of money in a tournament. The last world tournament prize fund of Dota 2 - The International 2015 surpassed even the fund of Wimbledon.

However, no team can guarantee its victory in the tournament, so including such income in the business plan does not make sense. The prize money for the organizations is but a nice bonus. Moreover, only near $500 per month can be expected from small sponsors and only $3000 per month from big sponsors (Djuricic 2015).

Potential Costs Involved in Creating an eSports Team

Creating an eSports team involves paying salaries to the gamers as well as sending the team to the tournaments. Some tournaments pay for the arrival of teams, but not all. The expenses also include the purchase of equipment, gaming devices, players’ uniforms, working with the fans, the creation and support of the website and social networks, content creation, among other expenses. Thus, the organization will have to pay near 155.430,00 pounds annually for constant expenses (Appendix E).

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Moreover, the above cost is estimated for one competition and for one squad only, but usually, teams have more than one squad. Besides, the salaries should increase as the performance of team members become better. Additionally, the organization will have to pay near 22.518,40 pounds for equipment. Thus, it will have to spend near £177.948,40 for one squad and one competition (Appendix F).

Potential Risks of Investing in this Type of Opportunity

There are many risks associated with investing in eSports. First of all, there is no equivalent value. A company investing in eSports cannot be sure that the results will be successful. Besides, investment in eSports may not be compared to the investment in physical assets. If the investment fails, there is nothing to sell for break even. Additionally, it is hard to calculate how successful the gamer will be and how long the industry’s prosperity will last, and therefore to calculate earnings. Moreover, in eSports, a professional gaming career is very short, which does not allow building a long-term relationship with the gamer (DiChristopher 2014).

Recommendations

It is therefore not recommended for Norling PLC to invest in the creation of an eSports team. This is explained by many risks involved, by the vague prospects and chances to be successful, and by the high costs associated with the creation of the team.

Taking into consideration that Norling PLC has previously invested in a successful company that designs app-games for mobile phones and that it has an interest in products and business ventures involving new technologies and wants to target the youth market in particular, it is recommended for Norling PLC to continue investing in the safer mobile app market. The company already has great experience in this industry and has already developed the customer base. Moreover, the mobile app market is more sustainable and ranks consistently high. Investing in this kind of business is not as risky as in the eSports. Additionally, it is recommended to establish connections with Samsung or Blaupunkt, who are the leading players in this sphere.

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Conclusion

In conclusion, eSports is a gaming competition that is very popular nowadays, and its popularity continues to grow. There are millions of fans and viewers of eSports. However, it is not stable, and therefore, it is hard to forecast future trends in the industry. Additionally, there are vague money-making opportunities for investors. The profit may mainly come from the advertising contracts that may not cover the expenses involved. Further, there are high costs associated with creating an eSports team. Norling PLC will have to pay near £177.948,40 for one team and one competition.

Moreover, there are also many risks associated with the investment. Thus, the eSports is a fast-moving business that has no equivalent value with the high turnover of gamers, where the profits are difficult to predict. Thus, it is not recommended for Norling PLC to invest in eSports, but rather in a safer and studied mobile app market.

Violence Sells, but at What Cost?

Today, many children are passionate about computers, especially computer games: in the game they are no longer passive observers and have the opportunity to influence the events of the virtual world. The total monthly viewership of Twitch – the leading website for videos on videogames, hit 51 million (Puri 2015). Moreover, it was purchased for almost 1 million dollars by amazon.com (Mac 2014). There are even suggestions that e-Sports could one day capture the viewers of popular soccer or hockey (Ewalt 2013). The revenues of eSports are expected to be $250 million with 113 million fans (NewZoo 2015).

However, the most popular videogames are based on murders and fighting. Some think that the passion for violent videogames can make people more hostile, while others believe that such games can help acquire new skills and improve social networking. Thus, it is necessary to examine and analyze whether the violence in videogames can have an adverse effect on users, especially considering its growing popularity, by analyzing the evidence from the researches made in the field.

There is much evidence of the negative influence of violence in videogames on gamers. The number of "dead" and "wounded" is often a quantitative indicator of the achievements of the player in the game: the greater the number of victims, the more points, therefore, the more the player will be satisfied. All this quickly influences the child’s mind. US scientists have proven that gamers are adversely affected when contemplating the blood and violence in the virtual world (Brooks and Morley 2011). During the study, researchers made an MRI of the volunteers before and after playing computer games.

As a result, the MRI data obtained before and after the "immersion" of the examinees in the virtual world was different in each case. As Dr Yang Wang stated, the functionality of young people’s (predominantly male) lobes of brain changes if they often play violent video games, even at home (Brooks and Morley 2011). These brain areas are directly related to the control of emotions and aggressive behaviour. Thus, violent video games alter consciousness, subconscious, and internal organs.

In 2002, a study was published in the journal Aggressive Behavior which suggested that the more teens are involved in shooters or similar games, the more aggression will be in their behaviour (Funk et al. 2002). The hypothesis of scientists who conducted the study was confirmed. However, there is an opinion that it is not the violence in videogames that make people aggressive. Thus, the link discovered in the study is rather weak. Also, the sample size is confusing: only 32 teenagers were examined by the psychologists (Funk et al. 2002).

In 2013, Matt DeLisi, a sociology professor, published data on the 227 juvenile offenders (Iowa State University 2013). On average, each of them committed nine acts of violence - from starting a fight to beating parents. According to DeLisi, teenagers’ passion for video games can be a risk factor for criminal behaviour. However, DeLisi initially treated adolescents with criminal reputation, and people who are prone to aggression may quite limit their interests to games and movies with scenes of violence due to their individual features (Iowa State University 2013).

Additionally, there was an experiment conducted at the University of Missouri, where 70 volunteers played games both with and without violence for 25 minutes (Kaiser 2011). Then, they were shown photos with various scenes, including the scenes of violence. The volunteers further participated in a game where they could stun an opponent with a loud sound. The brain of the examinees who were playing Call Of Duty or the Hitman showed little response to the image with the aggressive plot, and in the game with the sound, they gave the signal louder than those who played the peaceful games. According to researchers, this shows that aggressive video games make the brain more violent and less compassionate (Kaiser 2011).

In 2008, Kutner and Olson published a book based on a study which included data on 1,200 students from the 7th and 8th grades and the information from interviews with their parents (Kutner and Olson 2009). The authors found that the engagement in violent videogames is associated with an increased risk of aggressive behaviour (fighting, property damage) and school problems (conflicts with teachers, low scores) among the examinees (Kutner and Olson 2009). However, it is important to understand where is the cause, and where is the effect. Games may lead to aggressive behaviour and reduced academic performance, but then, more aggressive, asocial children may show more interest in aggressive video games. Such children are less capable of learning. Thus, the problems with education are a logical outcome of their personal traits. Kutner and Olson also state that aggressive games may help to cope with anger. They also show the shortcomings of the previous studies: insufficient sample sizes, inaccurate formulations, and shortcomings in the data analysis (Kutner and Olson 2009).

It is necessary to mention one serious drawback of the scientists’ hypothesis about the direct connection of videogames to real violence. There is much more said on the role of the media in contributing to aggressive behaviour than on the negative impact of games. The scenes of violence appear not only in videogames - blood, fights, and insults are to a large extent presented on TV screens, on the Internet, and in social networks. Of course, all this also makes people less sensitive to the pain of others and turns aggression into something common. Besides, one should not forget that children do not like to differ from their peers. If the child does not play videogames and falls out of the common cultural environment, he or she becomes an outcast in the classroom, and the risk of aggression towards them increases.

In 2002, the experts from the US government agency studied the information on 41 people who participated in the school shootings (Vossekuil et al. 2002). It turned out that only 12% of murderers were addicted to violent videogames (Vossekuil et al. 2002). The American scientist Christopher Ferguson also studied the influence of videogames on aggressive behaviour of adolescents (Ferguson 2015). He studied how often adolescents meet violence on TV and in videogames. Separately were considered problems with neighbours, family relationships, antisocial personality traits of teenagers and their environment. After analyzing the data, Ferguson did not find any connection between the violation of the law and the violence the teenagers were exposed to in videogames or on TV. What really could predict the involvement in illegal actions of a teenager were the teenager’s depressive symptoms (Ferguson 2015).

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Moreover, a group of researchers from the University of Texas and the University of Michigan discovered that it is people’s emotional outburst and subconscious understanding of doing bad things during the game that promotes the emergence of a sense of guilt for what the person did (Donovan 2014). Bad behaviour, even in a virtual environment, makes a person more morally sensitive and receptive to the awareness of the negative side of violence and other deviant behaviours (Donovan 2014).

Thus, violence in video games can be said to have a little adverse effect on users. Blaming videogames in making people aggressive is to look for a scapegoat. Games can trigger active actions of unbalanced people but are not able to turn a normal teenager into a killer.

In conclusion, violent videogames are very popular. The monthly viewership on Twitch reached 51 million (Puri 2015). Moreover, the number of fans of eSports is expected to be 113 million people (NewZoo 2015). Violence in video games makes people more violent on the micro-social level, but it is difficult to say whether this aggression extends beyond the limits of acceptable social norms. The connection between major crimes and playing video games is doubtful. Most likely, people who break the law and are violent towards others initially have personality traits that contribute to avoiding communication and isolating oneself in simple entertainment. Lack of empathy, anxiety, and the inability to express own feelings significantly impede communication of such people, shifting their gaze from the human faces to the monitor. In this light, playing videogames is a symptom of the problem, not its cause.

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