ISE01/18-19

• Electronic sports ("E-sports") has been gaining traction globally in recent years. It is a multiplayer video game played competitively for spectators, typically by professional gamers. With its high variations in game nature, it could be structured into different forms of competitions and different models of ecosystem could be created. Generally, e-sports involves game publishers, event organizers, sponsors, broadcasters, supporting professionals (e.g. coaches, referees and commentators), players and fans.
• With the advancement in technology over the past few years,^{1Legend symbol denoting For example, video streaming allows millions of audience across the globe to watch, share and experience the e-sports events at the online video platforms in addition to on-site participation.} e-sports has been developing rapidly in many jurisdictions and become a new sector with economic development potential. According to a global e-sports market report,^{2Legend symbol denoting See Newzoo (2018).} the global e-sports revenue is expected to reach US$906 million^{3Legend symbol denoting The top three revenue streams are sponsorship (40%), advertising (19%) and media rights (18%).} (HK$7.1 billion) in 2018 and the global e-sports audience will hit 380 million^{4Legend symbol denoting Among them, 57% are "Occasional Viewers" (who watch professional e-sports content less than once a month) and 43% are "Esports Enthusiasts" (who watch professional e-sports content more than once a month).}, an increase of 179% and 62% compared to the level of 2015. By 2021, the global revenue and audience numbers are expected to further soar by over 80% and 45% respectively.
• E-sports has also gained increasing international recognition. For instance, it was included as a demonstration sport^{5Legend symbol denoting The medals will not be counted in the overall medal standings alongside the official sports.} in the 2018 Asian Games in Jakarta and Palembang, Indonesia, and will be included as a medal sport in the 2022 Asian Games in Hangzhou. In Hong Kong, the Government is supportive of the development of e-sports and it has indicated that the development of e-sports would be placed under the innovation and technology policy at this stage.^{6Legend symbol denoting See Legislative Council Secretariat (2018).} In contrast to Hong Kong, South Korea is one of the early movers in developing e-sports and has devised targeted policies to foster the development since the early 2000s. This issue of Essentials aims to present the recent developments of e-sports in Hong Kong. It is followed by a discussion of the experiences and key initiatives undertaken by South Korea in developing e-sports from which Hong Kong might draw reference.

Recent developments of e-sports in Hong Kong

• According to the Report on Promotion of E-sports Development in Hong Kong issued by Cyberport, there are more than 300 000 players in the Hong Kong's e-sports sector. Most of them (93%) are men and more than a half (55%) are 18 to 21 years old. In 2013, Hong Kong's first e-sports professional gaming team was formed and the first tournament was held in the same year. Since then, audience numbers and prize pools of e-sports events have been increasing. To attract more visitors to come to Hong Kong, the Hong Kong Tourism Board hosted a three-day "E-sports & Music Festival Hong Kong" in August 2017^{7Legend symbol denoting In the 2017 event, three e-sports tournaments were organized which attracted an attendance of about 60 000 persons and 7.4 million online viewers watching online broadcasts.} and August 2018 respectively. More notably, in the recent Asian Games held in Indonesia, Hong Kong won a gold medal in one of the e-sports games.^{8Legend symbol denoting There were six e-sports games in the Asian Games, namely Arena of Valor (Honor of Kings International), Clash Royale, Hearthstone, League of Legends, Pro Evolution Soccer and StarCraft II. Among the six e-sports games, Hong Kong won a gold medal in Hearthstone.}
• The e-sports industry involves application of a wide variety of skills and technologies, including webcast, game design and development, and social media marketing. An online survey conducted by a youth service organization^{9Legend symbol denoting See the Hong Kong Federation of Youth Groups (2018).} revealed that about one-tenth of young people aged between 15 and 29 are interested in pursuing their career in e-sports. Recently, a "Diploma in eSports Science" programme has been launched by a tertiary institute, aiming at helping young people pursue career opportunities in e-sports.
• The Financial Secretary has committed in the 2018-2019 Budget a total of HK$100 million for Cyberport to promote the development of local e-sports sector, with half of the funding used for developing the Cyberport Arcade into a local e-sports and digital entertainment node, and another half for the support of development of e-sports technology and the industry as well as nurture talents.^{10Legend symbol denoting See Innovation and Technology Bureau (2018).}
• Promoting e-sports has been discussed at the meetings of the Legislative Council in the past two years. At the meetings, while Members generally showed support to the development of e-sports in Hong Kong, some have expressed concerns, including (a) inadequate e-sports venues in the city, particularly the feasibility of operating e-sports venues in industrial buildings and the related licensing requirements^{11Legend symbol denoting According to a media report, a commercial operator was operating an e-sports venue in an industrial building but was told by the Food and Environmental Hygiene Department for failure to obtain the proper licence. The e-sports venue operator alleged that he had made an enquiry to the Home Affairs Department about the licensing requirement but no response was given. The issue was raised by some Members at the Finance Committee meeting held on 13 July 2018. In response, the Secretary for Innovation and Technology replied that the Financial Secretary would hold an interdepartmental meeting to discuss the issue. See Harbour Times (2018).}, (b) insufficient training avenues for e-sports professionals, (c) strategy in promotion of e-sports, and (d) parents' possible negative perception towards e-sports.

Industrialization of e-sports in South Korea

• In South Korea, e-sports has been in existence for about two decades. After the Asian financial crisis in 1997, cybercafés, known as PC rooms/bangs, sprang up rapidly throughout South Korea as a result of the unemployed persons starting their independent enterprise with the financial support of the government.^{12Legend symbol denoting At that time, the government made use of the Cultural Industry Fund to provide low-interest loans to the unemployed persons. In 1999, the number of PC rooms surged to 15 150 with a year-on-year growth of 440%. See Ministry of Strategy and Finance (2014).} Many small game competitions were hosted in these PC rooms, leading to the rise of e-sports. Against this backdrop, e-sports was considered to have growth potential. In 2000, the Korea e-Sports Association ("KeSPA") was formed with the approval of the Ministry of Culture, Sports and Tourism ("the Ministry") to promote e-sports in South Korea.
• South Korea published a vision plan^{13Legend symbol denoting There were four main tasks under the vision plan: (a) expansion of basic infrastructure, (b) establishment of e-sports culture, (c) reinforcement of international cooperation, and (d) revision of laws/regulations and expansion of supportive systems.} in 2004, followed by a five-year plan^{14Legend symbol denoting There were five main tasks under the five-year plan: (a) expansion of e-sports as a national leisure activity, (b) strengthening the connection between e-sports and the game industry, (c) strengthening the country's global leadership in e-sports, (d) establishment of an environment to sustain e-Sports growth, and (e) turning the South Korean e-sports games into a national brand.} in 2010 to set out the developing framework of e-sports. In 2012, it further enacted the "Act on Promotion of E-sports (Electronic Sports)" which mandates the Ministry to allocate resources for promoting e-sports both locally and internationally. Through the civilian and the government's support over the years, e-sports has grown into a developed sector. According to a survey report^{15Legend symbol denoting See KOCCA (2017).} issued by the Korea Creative Content Agency ("KOCCA")^{16Legend symbol denoting It is a governmental agency in South Korea which oversees and coordinates the promotion of the cultural content industry.}, the e-sports market size in South Korea was 83 billion won (HK$556 million) in 2016 with a year-on-year growth of 15%. It has contributed particularly in (a) broadcasting, (b) streaming and other online sharing, (c) online and offline media, and (d) clubs and competitions with an employment size of over 10 000 persons in the four areas.^{17Legend symbol denoting In 2016, e-sports produced value added activities worth 63 billion won (HK$422 million) under these four areas.} The industry's flourishing growth has notably been underpinned by its strengths and efforts in the following areas.

Strengths in the technology and games sector

• Since the early 1990s, the South Korean government had been focusing on the expansion of its information and communication infrastructure. Nowadays, the country is among the top in the world in broadband networks, with 90% of all individuals using the Internet.^{18Legend symbol denoting See Organisation for Economic Co-operation and Development (2017).} Besides, South Korea has put in place a set of promotion policies to expand the games sector. Supportive measures included assisting game developers in games production and overseas export, investing in game content development, and promoting games culture. Reflecting the concerted efforts in promoting the games sector, from 2000 to 2012, the total revenue of the sector has surged from 836 billion won (HK$6 billion) to 7.8 trillion won (HK$54 billion), a nine-time growth in 12 years.^{19Legend symbol denoting See Ministry of Strategy and Finance (2014).} The solid growth of the sector has somewhat created a conducive environment for the rise of e-sports.

Expansion of e-sports facilities

• On the other hand, several infrastructure development projects were undertaken in order to allow the sizable e-sports competitions to take place. For instance, the first stadium designed specifically for online gaming was opened in Yongsan, Seoul in 2005 and another e-sports stadium was built in the city's digital landmark S-Plex Center in 2016. Currently, there are a total of eight stadiums for e-sports in South Korea.
• In 2016, KeSPA officially launched the "certified e-Sports PC club" service with an aim to improve the recognition for PC rooms. It was expected that these certified e-Sports PC clubs could provide standard facilities for e-sports players to train their skills as well as places to discover talent players in the amateur eco-system.

Professionalization of e-sports players

• To promote the professionalism of e-sports players, KeSPA operated a registration system and set out the qualification standards^{20Legend symbol denoting In order to register as a pro-gamer, the player has to win officially recognized game contests more than two consecutive times in one year and completed a training course. This is based on the unofficial translation of information on the website of KeSPA. For details, please see KeSPA (2018).} for the talents to register as professional gamers ("pro-gamers"). It also created a ranking system for certain e-sports games to rank the pro-gamers according to their performance in individual and team leagues. Through the recognitions, top pro-gamers will likely become the celebrities followed by fans. According to the survey report of KOCCA, the average annual salary (including prize money from e-sports competitions and earnings from live streaming) of pro-gamers was 98 million won (HK$676,000) in 2017.
• Furthermore, KeSPA also seeks to protect the welfare of pro-gamers. For instance, it has set out terms requiring e-sports teams to enter a minimum of one-year contract with a minimum pay of 20 million won (HK$138,000) with the players in the game season of 2015 for an e-sports game.^{21Legend symbol denoting See GosuGamers (2014).} Besides, it has reportedly signed agreements with professional service firms to provide financial management service and legal advisory service to the pro-gamers.^{22Legend symbol denoting See ESPN (2017).} On the other hand, it is very common for the top pro-gamers to become supporting professionals (e.g. coaches and game analysts) of e-sports when they step down from playing e-sports.^{23Legend symbol denoting See Daily Game (2015).}

Popularization of e-sports events and promotion as a tourism

• With the rise of PC rooms, e-sports competitions evolved to different types of e-sports leagues and tournaments (e.g. Pro League and KeSPA Cup) which were held across the country, with some being broadcast on television channels as a national event drawing high public attention. The abundance of competitions not just allow frequent competitions between e-sports players, but also provide opportunities for product advertising or branding through sponsoring the events or forming their own teams to compete in the matches. In 2016, there were 221 e-sports events held in the country, with a total prize pool of 4.6 billion won (HK$30.8 million).^{24Legend symbol denoting See KOCCA (2017).}
• With its high popularity, e-sports is further promoted as a tourism attraction. Recently, the South Korean government has launched an "e-Sports Stadium Tour Program" on a trial basis. Under the programme, a free e-sports tour is offered to 15 international tourists in each month where they are allowed to visit the S-Plex Center to know more about the history of e-sports and watch an e-sports competition.

Measures addressing concerns over the side effects of e-sports

• Popularity of online games and rise of e-sports have nevertheless generated concerns over its side effects to society. To avoid excessive game playing by children, in 2011, the South Korean government introduced the so-called Shutdown law which forbids children aged below 16 to play online games between 12:00 midnight and 6:00 am and the game companies are required to block children's access to online games during that time. The law is however controversial and has been subject to legal challenge.^{25Legend symbol denoting A constitutional appeal was filed by game developers, claiming that the restriction constituted over-regulation. Reportedly, in April 2014, the Constitutional Court judged that it was constitutional and the restriction was not deemed to be excessive in view of the side-effects of online game addiction. See BusinessKorea (2014).} One year later, it further introduced the voluntary "selective shutdown system" under which the game companies will, through adjusting the programme setting, restrict the online game playing time of the youths aged below 18 upon the request of the youths themselves or their parents.
• Apart from the above restrictive approach, the South Korean government has also introduced soft programmes aiming to change the perception of parents on games. Since 2008, the Ministry has been running the "game literacy" programme to help parents and teachers forge a more balanced view of games. Following this direction, different projects were launched. For instance, KeSPA held the Family e-Sports Festival annually to help foster a family gaming culture so that the older generation has a better understanding of gaming and the benefits that can bring to an individual and to a family.^{26Legend symbol denoting See KeSPA (2018).}

Concluding remarks

• With the rapid development and growing popularity of e-sports, the Government has started devoting resources to facilitate the development of the local e-sports sector. The South Korean government has adopted the multi-pronged approach to develop the sector, which included setting up the e-sports infrastructure, developing talents and professionalism, and creating an e-sports culture. While Hong Kong is still in the early stage of developing the e-sports sector, the outstanding performance of the Hong Kong e-sports players in the recent Asian Games showed that Hong Kong has its e-sports talents and the potential to become one of the global hubs in e-sports.

Prepared by Kent CHUNG
Research Office
Information Services Division
Legislative Council Secretariat
31 October 2018