How Esports Organizations Make Money?

Many people are interested in how esports organizations make money. There are a few different ways that these organizations generate revenue. Some of the most common include sponsorship deals, advertising, and merchandise sales. Let’s take a closer look at each of these sources of income.

Sponsorships

The most common way for esports organizations to make money is through sponsorships. Brands will pay to have their name associated with a team or player, and in return, the team or player will help promote the brand. This can come in the form of social media posts, wearing branded clothing, or even just having the brand’s logo on their website.

Advertising

Advertising is one of the most popular ways for esports organizations to make money. Many brands are eager to jump on the esports bandwagon and gain exposure to the highly coveted millennial and Gen Z demographic by sponsoring teams and players.

Organizations can bring in revenue through advertising in a variety of ways, including banner ads on their website, product placement in team jerseys, and ads played during tournament broadcasts. Some brands also choose to sponsor entire tournaments or events.

One of the most successful sponsorship deals in esports history is T1’s multi-million-dollar partnership with Adidas. As part of the deal, Adidas became the official apparel partner of T1 and had its logo prominently displayed on all of the team’s jerseys. The partnership was a major coup for Adidas, as it helped cement the brand’s place in the competitive gaming world.

Branding

Organizations in the esports industry make money through a variety of means, but the three most common are through sponsorships, merchandise, and prize money.

Sponsorships are one of the most important sources of revenue for esports organizations. Brands will sponsor teams and players in order to have their logos displayed on team uniforms, gear, websites, and social media accounts. The amount of money that a brand will spend on a sponsorship depends on a number of factors, including the size of the organization, the prominence of the team or player, and how often the sponsorship will be displayed.

Merchandise is another significant source of revenue for esports organizations. Many teams have their own line of apparel and gaming gear that they sell to fans. Fans are also able to buy team-branded in-game items from some games, such as League of Legends skins. A portion of the proceeds from these sales go to the teams or players that they are supporting.

Finally, prize money is also a important source of revenue for esports organizations. Teams and players can earn prize money by winning tournaments or placing well in competitions. The amount of prize money that is available varies depending on the tournament or competition, but it can be significant. For example, The International 2018 – an annual Dota 2 tournament – had a prize pool of over $25 million.

Merchandise and Apparel

One of the most common ways for Esports organizations to make money is through merchandise and apparel. This is because fans of Esports teams are usually very passionate and will want to support their team by purchasing team apparel. Not only does this give the organization a source of revenue, but it also helps to promote the team and increase brand awareness.

Sales

Organizations merchandise and apparel. Fans love to purchase merch to support their favorite teams, especially when that team is winning. All of the top organizations have successfully tapped into this revenue stream by selling a wide variety of merchandise, from jerseys to hoodies to mousepads. Some organizations have even taken it a step further and released their own line of branded energy drinks or chips.

Licensing

Organizations in the esports industry make the majority of their revenue from three sources: merchandise, sponsorship, and licensing. Out of these, merchandising is the most prevalent, bringing in around 35% of an organization’s total revenue. While this number may differ based on the organization’s size or popularity, it’s a constancy in the industry.

The importance of merchandise revenue for esports organizations can be seen in the fact that many have their own apparel lines. For example, Fnatic has an entire online store dedicated to selling apparel and other physical products with its branding. Not only does this provide a significant source of revenue for the organization, but it also helps to increase brand awareness and expand its reach to new audiences.

It’s important to note that while merchandise is a significant source of revenue for esports organizations, it’s not always easy to turn a profit from selling physical products. The margins on apparel and other physical goods are often quite low, which means that organizations need to sell large volumes of product to make up for this. Additionally, the shipping and logistics involved in selling physical products can be complicated and expensive. As a result, many organizations choose to focus their merchandising efforts on selling digital products such as wallpapers or mouse pads instead.

Media Rights and Events

Many people are interested in how esports organizations make money. The most common way for these organizations to make money is through media rights and events. Media rights are when an organization sells the broadcast rights to their matches to a third party, such as a television network or an online streaming platform. Events are when an organization hosts a tournament and charges an entry fee for players to compete.

Live Events

While most sports take a break during the offseason, esports are played year-round. Tournaments are usually spread out throughout the year, with many taking place online. But just like traditional sports, esports also have live events where fans can watch their favorite teams and players compete in person. These events usually take the form of large conventions or festivals, and they’re often sponsored by major gaming companies.

Major live events usually have an entrance fee, but they also offer prize money for the winners of each tournament. The prize pools for these events can range from a few thousand dollars to hundreds of thousands of dollars. The largest esports event in history was The International 2018, a Dota 2 tournament with a prize pool of over $25 million.

In addition to prize money, many esports organizations also make money from sponsorship deals and advertising. These deals can be with brands that are interested in the gaming industry or with brands that want to reach the gaming audience. For example, Red Bull is a major sponsor of several professional gaming teams and has its own line of energy drinks designed for gamers.

Tournaments

While stadiums are being built and fanbases are spilling out into the real world, there’s still one big way that esports organizations make money: tournaments. Tournaments have always been the lifeblood of esports. From the early days of Cyberathlete Professional League (CPL) and World Cyber Games (WCG) to today’s massive Dota 2, League of Legends, and Counter-Strike: Global Offensive (CS:GO) events, they’re how players show off their skills and earn a living.

Some tournaments are hosted by the game developer themselves. Riot Games, for example, hosts the annual League of Legends World Championship, which has a prize pool of over $2 million. But many are organized by third-party tournament organizers (TOs), some of which have been around almost as long as esports itself.

The most well-known TO is probably Major League Gaming (MLG), which was founded in 2002 and has hosted events for games like Halo, Call of Duty, Gears of War, and Overwatch. ESL is another TO with a long history in esports; it was founded in 2000 as a Counter-Strike clan league before evolving into one of the biggest organizers in the scene. IEM, or Intel Extreme Masters, is ESL’s flagship tournament series.

These TOs earn revenue from a few different sources. The most obvious is sponsorship; companies will pay TOs to have their logos prominently displayed at an event or on broadcasts. Some TOs also sell broadcast rights to networks like ESPN or TBS, which helps reach a larger audience but obviously limits where and when people can watch the event. Finally, many TOs sell tickets to their events; last year’s IEM Oakland had over 10,000 attendees per day.

Online Events

According to a report by Newzoo, online gaming revenues are growing at a 9.6% CAGR, reaching $196 billion by 2022. esports is one of the key drivers of this growth. The industry is expected to grow from $194 million in 2017 to $1.4 billion by 2020, according to a report by Newzoo and Market Research Future. The majority of this revenue will come from three sources: advertising, sponsorship, and media rights.

As the popularity of esports increases, so does the demand for live streaming content. Platforms such as Twitch and YouTube Gaming have emerged as the primary destination for esports fans to watch their favorite teams and players compete. This has driven up the price of media rights for premier esports events. For example, Riot Games’ League of Legends Championship Series (LCS) sold its media rights for $300 million in 2017, a 100% increase from the previous year.

The rise in popularity of esports has also led to an increase in sponsorship opportunities for brands looking to reach the young, male demographic that makes up the majority of esports fans. Brands such as Coca-Cola, Red Bull, Intel, and ASUS have all sponsored major esports events in recent years.

With the rapid growth of esports, online gaming is poised to become one of the most lucrative industries in the world. Esports organizations that can capitalize on this growth will be well-positioned to reap the rewards.

Game Developer Support

The global esports market is expected to grow from $1.1 billion in 2019 to $1.8 billion by 2022, according to market intelligence firm Newzoo. The majority of that revenue will come from sponsorships and advertising, with game developer support being a distant third.

In-Game Purchases

In-game purchases are one of the most popular ways for esports organizations to make money. These purchases can be things like character skins, avatar upgrades, and new weapons. Many gamers are willing to spend money on these items, which can generate a lot of revenue for esports organizations.

In-game purchases are not the only way that esports organizations make money, but they are a significant source of income. Other ways include sponsorships, advertising, and ticket sales.

Crowdfunding

Crowdfunding is the process of raising money from a large number of people, typically through the internet. It’s a relatively new way to finance projects, and it’s become popular in the gaming industry due to the high cost of making video games.

There are a few different platforms that Esports organizations can use to run crowdfunding campaigns, the most popular of which is Kickstarter. Others include Patreon and IndieGoGo.

Crowdfunding campaigns are often used to finance game development, but they can also be used to cover other expenses such as tournament prize pools, event hosting, and player salaries.

One of the benefits of crowdfunding is that it allows organizations to tap into a large pool of potential supporters. However, it’s important to note that not all projects will be successful. It’s important to set realistic goals and have a strong marketing strategy in place before launching a campaign.

Player Salaries and Prize Pools

While many people think that playing video games can’t be a lucrative career, there are actually a few ways that professional gamers can make money. The most common way is through tournament winnings and player salaries.

Player Salaries

Most professional esports organizations take a percentage of the winnings as their cut, and then use that money to cover player salaries and other expenses. This means that, in order for an organization to be successful, they need to not only win tournaments but also place highly in them.

Prize Pools

Esports organizations make money through player salaries, prize pools, and sponsorships.

Player salaries are the biggest expense for any esports organization. The average esports salary is $60,000 per year, but top players can earn millions of dollars per year. For example, the top League of Legends players in South Korea earn an average of $2.5 million per year.

Prize pools are another big source of revenue for esports organizations. The largest prize pool in esports history is $34 million, which was awarded at the International 2018 tournament for the game Dota 2. Most esport tournaments have smaller prize pools, but they can still be very lucrative for organizations. For example, the average Counter-Strike: Global Offensive tournament has a prize pool of $200,000.

Organizations also generate revenue through sponsorships and partnerships. These deals can be worth millions of dollars per year. For example, T-Mobile is the exclusive sponsor of the Overwatch League, and their deal is worth $21 million over two years.