Ukraine has the potential to become a European esports hub after its government recognized the video game competitions as an official sport and their players as athletes.
Now, its local players have the legal option of going professional.
In electronic sports, teams of professional players compete in video games like League of Legends, Dota 2, Counter-Strike and Fortnite. To win, they need strategy, patience and grit — just like in any other kind of sport. But instead of physical power, esports players rely on the capacity of their computers and brains.
Until recently, this gigantic industry remained in the shadows in Ukraine. Now, however, local esports businesses can play fair.
For example, Ukrainian companies can officially employ esports players, organize international tournaments and work under Ukraine’s jurisdiction — paying taxes and registering their businesses in the country.
That will be good for the economy, according to experts. Ukraine is an attractive location for esports fans and players from abroad as it offers affordable accommodations, high-speed internet and a convenient geographic location. However, the country needs money and better infrastructure to host large-scale tournaments.
Given that the industry is new, venture capitalists are hesitant to invest — they focus more on electronic commerce, artificial intelligence and outsourcing, according to Yura Lazebnikov, the Managing Partner of WePlay Esports, the worldwide esports media holding with Ukrainian roots.
But the government clearly upped its game by taking esports seriously. It can now analyze the market, gather more data and potentially attract investors.
“Venture capitalists are ready to support companies whose businesses and industries they understand well,” said Bogdan Svyrydov, an associate from Ukrainian investment fund AVentures Capital.
Risky industry
Globally, esports is a $1-billion industry with nearly 500 million followers. It continues to grow even amid the COVID-19 pandemic because players can compete online.
They use platforms like Amazon-owned Twitch to stream live events to millions of viewers. High viewership gives star players recognition and money: For winning top competitions in games like Dota 2, international participants can receive up to $34 million.
As the coronavirus suspends sporting events, many investors set their sights on esports, according to Svyrydov.
However, the industry is novel and untamed — investors don’t know where to put their money and ask esports pundits for advice, said Artur Yermolayev, vice president of the Ukrainian Esports Federation.
Experts estimate that Ukrainian esports is worth nearly $40 million, but no official statistic is available. This deters local investors because they don’t want uncalculated risks, said Svyrydov.
“Without deep business and industry understanding, investments look more like gambling,” he added.
While Ukrainian investors are still wary of esports, the global industry keeps growing: In 2018, it attracted over $4.5 billion of investments, according to Deloitte.
Many Ukraine-founded esports startups move abroad to find support. For example, Ukrainian Mobalytics which helps gamers to analyze and improve their performance, raised $11.25 million from the Almaz Capital and Cabra VC investment funds in July 2020.
By recognizing esports as an official sport, Ukraine is giving a boost to investors, said Eduard Anokhin, operations director of the Ukrainian Esports Federation.
The returns, however, won’t come immediately. Investments into esports are strategic, meaning that businesses can only profit in five or six years, according to Ivan Danishevsky, president of the Ukrainian Esports Federation.
Ivan Danishevsky is the president of Ukraine’s Esports Federation and the founder of Esports Charts, an analytical service that studies trends of esports development and streaming. (WePlay Esports)
Lucrative profession
The revenue in esports comes from advertising, sponsorship and media rights. For players, the biggest money comes from prizes.
For example, Danish-born Dota 2 player Johan Sundstein, 26, has amassed nearly $6.9 million in prize money from 117 tournaments.
Ukrainian Dota 2 players Vladimir Minenko and Roman Fominok are also on the list of the highest-valued athletes — each has earned nearly $1.5 million.
Although the industry seems lucrative, there are very few players in Ukraine who can earn big money, Danishevsky said. Among them is legendary esports team NaVi, which has amassed nearly $11 million in prize money in the past 10 years.
According to Lazebnikov, electronic sports offer many career opportunities for young people. For example, the Kyiv office of WePlay Esport employs over 400 Ukrainians — programmers, designers, operators, commentators and psychologists, among others.
But esports has many enthusiasts who do not crave cash and simply play video games for fun.
Ukrainian Denis Zhurid, 23, promotes esports on social media and streams games on Twitch and YouTube. At first, Zhurid didn’t think about profit. But as his audience grew and the industry became more popular, he too started to earn money.
In 2018, Zhurid joined the Ukrainian Esports Federation and now works on many esports projects.
“It is the work of my life…I have goals for the next 5, 10, 15 years. Of course, I like it,” Zhurid told the Kyiv Post.
Business interest
The explosive growth of esports has caught the eye of such companies as Louis Vuitton, Mercedes-Benz and Samsung. In 2020, around 70% of esports’ $974 million in revenue came from sponsorship, including brand investment.
WePlay Esports, for example, has partnered with Pepsi and McDonald’s, while the Ukrainian Esports Federation is supported by Visa and Privatbank among others. Businesses use esports to promote their brands to large audiences, Lazebnikov said.
Apart from brands, local esports companies profit from the industry too: They organize competitions, attract sponsors and own esports teams.
However, esports enterprises usually stay in the shadows because there are no laws to regulate them. According to Yermolayev, esports businesses often register as marketing agencies or non-resident companies. Some, even go offshore.
Nearly 90% of esports companies are registered in countries like Cyprus and Hong Kong, where taxation and legislation are better than in Ukraine, said Maksym Bednarsky, the founder of Esports Club Kyiv, an esports team that competes in Counter-Strike tournaments.
However, if Ukraine’s government creates a more conducive business environment for esports, it will make a fortune, according to Lazebnikov.
Yury Lazebnikov is a managing partner at the Ukrainian esports enterprise WePlay Esports. The company organizes esports tournaments, streams games, sells media rights for its content and promotes esports among other industries. Lazebnikov believes that Ukraine can become a mecca for esports because it has many talented players, good infrastructure and a convenient geographic location between Asia and Europe.
The industry has many talented players competing in Dota 2 and Counter-Strike — the most popular games among Ukrainians. The athletes can go to international tournaments, while players from other countries can participate in local esports events and bring money to Ukraine.
“Ukraine is the most convenient place (for esports) between Europe and Asia… We just need maximum freedom to attract the utmost from the whole world,” Lazevbnikov said.
