How Does an Esports Team Make Money?

Esports teams make money in a few ways. Some of these include sponsorships, merchandise sales, and ticket sales.

Introduction

Esports teams are organizations that field players in professional video game competitions. Much like traditional sports teams, they’re usually sponsored by gaming companies or other brands and make money through a combination of prize winnings, merchandise sales, and sponsorships.

With the popularity of esports on the rise, more and more brands are looking to get involved with sponsoring teams. And as the competition for top sponsorships heats up, esports teams are raking in bigger and bigger deals. For example, in early 2018 it was reported that Fnatic had secured a €7 million (~$8.5 million) sponsorship deal with Vodafone, one of the biggest Telecom companies in the world.

While most of an esports team’s revenue comes from these types of outside investment deals, they also make money in other ways. For example, many teams generate revenue from merchandise sales, such as branded jerseys and mousepads. And as prize pools for esports tournaments continue to grow (the 2017 Dota 2 International had a prize pool of over $24 million), so too does the potential earnings for professional gamers on winning teams.

The three main ways an esports team can make money

Sponsorships

The most common form of revenue for an esports team is through sponsorships. Brands will sponsor teams in exchange for having their name associated with the team, and in some cases, the players. This can take many forms, from simply having the brand’s logo on the team’s jerseys, to sponsoring an entire tournament or league.

Sponsorships are often performance-based, meaning that the team will only receive a certain amount of money if they perform well. For example, a team might have a contract that says they will receive $X from their sponsor if they place in the top 3 of a certain tournament. This provides an incentive for teams to do well, as they can earn more money by performing better.

Media rights and broadcasting

Media rights and broadcasting are the lifeblood of traditional sports. The same is starting to become true for esports. The difference is that, rather than having a central governing body selling media rights on behalf of all teams in a given league, each team in an esports league is selling their own media rights. This gives each team much more control over their earnings, but it also requires each team to have a staff with the necessary skills to negotiate these deals.

In recent years, a number of companies have sprung up whose sole purpose is to help esports teams negotiate these kinds of deals. The most notable of these is probably Sliver.tv, which was acquired by Amazon-owned Twitch in early 2018.

Another relatively new revenue stream for esports teams comes from so-called “tournament organizers” or “event organizers.” These are the companies that actually put on esports tournaments and leagues. In return for shouldering the costs and risks associated with running these events, tournament organizers typically take a portion of the prize pool as their fee. This percentage can vary widely, but it is usually around 10-15%.

Prize money

The first way an esports team can make money is through prize money. This is money that is awarded to the team for winning tournaments or other competitions. The amount of prize money changes from event to event, but it can be very lucrative for teams that are able to win multiple events.

##Heading:Sponsorships
##Expansion:
The second way an esports team can make money is through sponsorships. Sponsorships are when a company pays the team to use their products or services, or to promote their brand. This can be anything from paying the team to use a certain type of energy drink during tournaments, to paying the team to wear a certain type of clothing with the sponsor’s logo on it.

##Heading:Advertising
##Expansion:
The third way an esports team can make money is through advertising. This is when a team allows a company to place ads on their website or in their videos. This can be a great way for companies to reach out to the millions of people who watch esports videos online every day.

Conclusion

The biggest way that esports teams make money is through sponsorships and advertising. Brands are willing to shell out big bucks to have their logos plastered on team jerseys and to have teams use their products. Teams also make money from game publishers, who often host major tournaments and leagues and distribute the prize money among the teams. Finally, many teams make a bit of extra cash by selling merchandises like team jerseys and mousepads.