Simply put, esports are multiplayer video games, played in front of a large, paying, televised audience. Gamers from all over the world compete in esports in their varying forms, with popular titles consisting of League of Legends, Dota 2, Fortnite, and Call of Duty.
But how does this industry work, and more importantly, how do they generate so much money?
Sources Of Revenue
Sponsorships And Advertisements
Sponsorships are used by organizations to advertise themselves to other people. In this case, the sponsorships are used to promote the organizations’ sponsors.
There are many different types of sponsorships, some of which include: advertising, product placement, and product endorsements.
Streamers get paid by companies for advertising them, and as well as representing whole teams during major esporting events.
Individual players may also have their own sponsors as well as a means of generating revenue from their own personal followers.
Advertising is another way that organizations make money. Companies use these ads to market their products to potential customers.
When you watch a match streamed on Twitch, you see ads for products like phones, laptops, and video games. You might even see ads for your favorite team!
Ticket Sales
Esports teams also make money by selling tickets to fans for large sporting events, such as Blizzcon or similar spectacles.
Attendance numbers can be as high as tens of thousands of people, often in neutral venues like conference centers or multi-use arenas, and as such the revenue is split between the teams and the organizers.
However, with the rising popularity of esporting events, and the incredible wealth of esports stars, it is highly likely that specific sporting locations will begin to pop up in the not too distant future.
Merchandise
Organizations sell merchandise such as jerseys, hats, shirts, posters, and other items. Merchandise is sold at events and online, and some teams sell their own branded merchandise while others hire third parties to create it.
Individual streamers and gamers may also have their own merchandise to sell, especially if they have specific fan bases with quirky names and traditions.
This is a good way of building a sense of community, and with that sense of community comes more revenue.
It is also a great way for fans to become part of the action.
As celebrity culture extends beyond the limits of the television and cinema screens, with the help of social media services.
It is more important than ever for fans to be able to communicate with their favorite celebrities, an area where streamers and youtubers are ahead of the curve.
Media Rights
Teams and streamers get paid when their content is shown in advertisements, videos, or podcasts, and organizations sometimes pay for exclusive interviews with famous players.
Media rights are important because they give the organizations an opportunity to make money.
Esports organizations need to get broadcast rights for their events in order to make money by selling them to people who want to watch them. This means that they have to negotiate deals with broadcasters or streaming services to be allowed to stream their events.
Through sites such as Twitch, streamers can communicate with and stream to millions of users every day, and this it is paramount for organizers to capitalize on these fanbases if they are to get the maximum revenue.
The number of hours viewed and streamed each month almost doubled in 2020 compared to 2019, showing just how popular they have become amongst the gaming community especially.
Sponsors and advertisers receive a cut of the revenue from online viewing, and streamers and organizations can also make money from donations.
People donate because they want to support their favorite channels, and streamers can offer extra behind the scenes perks or prizes for those fans who are kind enough to support them financially.
These paywalls are becoming increasingly popular, both on Twitch, youtube, and in the podcasting world.
Winnings
Another addition to these sources of income are cash prizes attained through tournaments. These leagues and tournaments often feature large cash prizes, and this type of event can be very lucrative for an organization if it wins.
Some organizations also hold contests or giveaways. They may ask fans to submit questions about gaming or esports, where the lucky winners will receive prizes. Other organizations host charity drives, which raise money for charities.
Cash prizes are largely responsible for the large amounts of wealth attained by leading esports gamers, with many making millions of dollars from single competitions.
Potential Costs Involved
There are costs involved in running an esports team.
Most organizations hire employees to manage the business side of things. For example, managers might work at the front desk, handle customer service calls, or organize events.
The cost of hiring employees depends on how big your company is. If you only have one employee, you probably won’t need to pay much. However, if you have 50 employees, you’ll likely have to pay salaries.
You should budget enough money to cover all of your expenses, as if you don’t have enough money to cover your costs, you could find yourself losing money. That’s why it’s important to plan ahead and save money before starting an esports organization.
Conclusion
And there we have it. I hope in reading this article you have answered any questions you may have had about the esports gaming industry.
It’s not hard to see why it has become such a popular phenomenon, especially amongst young people.
The merging of competitive sporting events with the lucrative video game industry seems like a no-brainer.
And with the emergence of operators such as Twitch allowing gamers to stream to their own fan bases, it fits seamlessly into modern social media celebrity culture.
My name is Ashley Newby and I want to put integrity back into esports and get the hype surrounding them paramount once more. During my teenage years, I happened to stumble across a Street Fighter tournament online and I was hooked.
From that day, I have kept up with and watched many tournaments including Valorant, Super Smash Bros, and League of Legends. I even got to compete in my first one earlier this year!
