Newzoo: esports economy projected to hit $1.5 billion by 2020

Fans cheer during the LCK All-Stars Vs EU LCS All-Stars game at the League of Legends All-Star Event, at the Palau Sant Jordi in Barcelona on Dec. 10, 2016. Provided by Riot Games

A report from esports marketing analytics firm Newzoo projects revenue in the space will reach $696 million this year, and the esports economy is expected to eclipse $1.5 billion by 2020 behind growth in brand investment.

Brand investment accounted for nearly three-quarters of revenue in the esports economy this past year, which grew by 41.3 percent, according to the report. North America has the largest esports market revenue share with $257 million expected in 2017. That number is projected to more than double to $607 million by 2020, largely behind sponsorships.

Viewership and brand loyalty are major drivers of the surge as well. Esports viewership is expected to reach 385 million unique viewers in 2017, and nearly half of those viewers identify as enthusiasts.

"Esports is not only growing exponentially as a new independent business and industry, it is also accelerating the convergence of various established industries," Newzoo CEO Peter Warman said in the report.

"For brands, media, and entertainment companies, esports provides a chance to capitalize on the favorite pastime of digital natives and Millennials: playing games and watching game content. With the arrival of live streams and events, gaming has entered the realm of broadcasters and media that can now apply their advertising business model to a market previously out of reach for them."

Over the past year, several large brands have pushed into the esports market. Early in 2016, Bud Light made a large esports campaign push. Other beverage companies such as Red Bull and Monster have also entered the market, and names like cosmetic brand Axe jumped into the fold.

Recently, sportswear company Adidas made its first esports partnership as well. Investments such as those have helped the esports economy grow 41.3 percent year-over-year, according to the report.

The Newzoo report excludes betting, both traditional casino bets and in-game items bets, such as Counter-Strike: Global Offensive skins gambling. In 2016, Las Vegas sports books opened bets on the casino floor for an esports competition, Intel Extreme Masters Oakland, for the first time. Meanwhile, skins gambling accumulated over $5 billion in bets taken, according to research by the firms Eilers & Krejcik Gaming and Narus Advisors.

Newzoo notes in its report that it does not account for betting in its numbers because the betting industry is independent of esports itself.