How Does Esports Make Money?

esports is a billion dollar industry with multiple revenue streams. But how does esports make money? Read on to learn about the different ways that professional gamers and tournaments generate income.

Introduction

esports is a form of competitive video gaming that has evolved into a multi-million dollar industry. Professional gamers earn salaries and prize money from tournaments, while fans spectate games online and in arenas around the world. But how does esports make money?

There are several ways that esports organizations generate revenue. The most common way is through sponsorships and advertising. Brands will pay to have their name associated with an esports team or tournament, and they will also buy advertising space on streaming platforms like Twitch. Esports organizations can also generate revenue from ticket sales, merchandise, and game publisher support.

How do esports teams make money?

Esports teams make money through a variety of ways including sponsorships, advertising, merchandise, and ticket sales. Many teams also have their own gaming arenas that they use to host events and generate revenue. Let’s take a closer look at each of these revenue streams.

Sponsorships

In traditional sports, teams are typically sponsored by companies that want to reach the team’s fanbase. The same is true for esports, with the major difference being that esports fans are far more engaged with sponsors than traditional sports fans.

Esports teams often have multiple sponsors, with each sponsor usually signing a multi-year deal. The most common sponsorships are for energy drinks, gaming peripherals, and apparel companies. Esports teams also bring in revenue through live event tickets and merchandise sales.

Media rights

Today, the biggest source of revenue for esports teams is media rights. This includes things like sponsorship, advertising, and broadcasting fees. Sponsorships are deals where a company will pay an esports team to promote their products. Advertising is similar, but it generally happens during broadcasts instead of being a direct partnership with the team. And broadcasting fees are paid by networks like Twitch or YouTube, who show esports matches to viewers.

Media rights deals can be incredibly lucrative for teams. For example, in 2018 cloud gaming platform Logitech G paid $2 million to become the exclusive peripheral sponsor of Evil Geniuses, one of the biggest esports teams in North America. And in 2019, German automotive giant Mercedes-Benz signed a deal worth $8 million with global Esports organization FaZe Clan.

Merchandise and ticket sales

Many esports teams generate revenue through the sale of merchandise. Fans of esports teams are often willing to purchase team jerseys, hats, and other apparel. In addition to selling merchandise, some esports teams also sell tickets to their matches. Families and friends of players may purchase tickets to watch them compete in person.

Game publisher support

The vast majority of professional esports teams are sponsored by one or more game publishers. This is similar to how traditional sports teams are sponsored by companies that sell food, cars, or alcohol.

The benefits for game publishers to sponsor esports teams are two-fold. First, it helps them promote their games to a wider audience. Second, it gives them a way to keep professional players happy and engaged with their games.

remember that the goal of game publishers is to make money, so they will only sponsor teams if they think it will ultimately help them make more money.

How do esports leagues make money?

Sponsorships

In traditional sports, teams are brick-and-mortar entities that rely on ticket and merchandise sales, along with television rights deals, to generate revenue. While esports organizations also have some of these same revenue streams, they differ in that they are often structured as digital entities and have many more opportunities to bring in sponsorship dollars.

As the popularity of esports has grown, so too has the amount of sponsorship dollars flowing into the industry. In 2019, global esports sponsorships are expected to reach $649 million, up from $355 million in 2017, according to marketing intelligence firm Statista. The majority of this growth is coming from endemic companies — businesses with a natural connection to the gaming industry — such as PC and console manufacturers, energy drinks, and snack foods. But a growing number of non-endemic brands are also getting involved in esports sponsorships as they look to tap into the coveted 18-34 year-old male demographic.

What’s driving this growth? For endemic brands, sponsoring an esports team or event is a way to build credibility and reach potential customers who may be interested in their product but not yet familiar with their brand. Non-endemic brands see sponsoring an esports team or event as a way to reach millennials and Gen Zers — two demographic groups that are notoriously difficult to engage with through traditional advertising channels.

There are a variety of ways for brands to get involved in esports sponsorships. The most common is through direct partnerships with teams or events, but brands can also sponsor specific players or leagues. And while some sponsorships take the form of traditional advertising (placing logos on players’ jerseys or on signage at events), others are much more experiential, offering fans opportunities to interact with brands in real life through meet-and-greets, autograph signings, and other activations.

Media rights

Media rights are the biggest source of revenue for esports leagues. like any other sport, esports leagues make money by selling the broadcasting rights to their events to media companies. These companies then sell advertising and sponsorships around the broadcasts or include the league’s events as part of their paid-for content packages.

Esports media rights deals are typically multi-year agreements worth millions of dollars. The biggest deal to date is the seven-year, $300 million agreement that Riot Games signed with BAMTech in 2017 to sell the broadcasting rights to its League of Legends championship series. But there are plenty of other big deals out there, including:

-The $170 million, three-year deal that Blizzard signed with Twitch in 2018 to broadcast its Overwatch League.
-The $90 million, two-year deal thatFACEIT signed with Turner Broadcasting in 2016 to broadcast Counter-Strike: Global Offensive tournaments on TBS.

These deals tend to be structured so that the majority of the payments are made in the final year, giving leagues a strong incentive to continue running their competitions for multiple years.

How do esports tournament organizers make money?

Tournament organizers make money from a variety of sources, the most common being sponsorships, ticket sales, and merchandise. Some organizers also generate revenue through advertising, though this is less common. Some of the largest esports tournaments, such as The International, also have prize pools funded by the community, through crowdfunding efforts.

Sponsorships

Tournament organizers make their money primarily through sponsorships and advertising deals with big brands. These companies are interested in reaching the young, male demographic that watches and plays esports. In return for their investment, they get their products placed in front of this key audience.

Tournament organizers also generate revenue through ticket sales, merchandise, and other sources. But the bulk of their income comes from sponsorships and advertising.

Organizers typically sign multi-year deals with sponsors. The length of the deal depends on the size of the brand and the tournaments they’re interested in sponsoring. Some of the biggest brands in esports, like Intel and Red Bull, have been involved with the scene for years.

Media rights

Broadcasting and media rights are the most commonly used method of monetization for traditional sports, and it is no different for esports. Organizers sell the television or online rights to stream their events to media companies, who in turn show it to the general public. The organizers will also work with these media companies to create sponsorships and advertisements within the broadcast itself. In exchange for this, the media companies will give a portion of their earnings to the tournament organizers. This is usually the largest source of revenue for tournament organizers, as it requires little effort on their part after the initial negotiation and contract signing.

Ticket sales

Organizers make money off of ticket sales to esports events. Just like traditional sports, people will pay to watch their favorite teams compete live. In addition, some organizers also sell tickets to online viewers, who can then watch the tournament unfold from the comfort of their own homes.

Another source of revenue for organizers comes from sponsorships. Big brands are eager to associate themselves with the growing world of esports, and they’ll pay good money to have their logos displayed at tournaments. Organizers can also make money by selling advertising rights to streaming platforms like Twitch, which will then show ads during tournament broadcasts.

How do esports broadcasters make money?

The revenue model for most esports broadcasters is a combination of advertising, sponsorship, and subscription fees. Advertising is the most common revenue stream because it is the easiest to set up and generate income from. Sponsorship and subscription fees are less common, but they are growing in popularity as esports becomes more mainstream.

Advertising

Much like traditional sports, esports broadcasts often feature commercial breaks in order to generate revenue from advertising. This is typically done in the form of 30-second pre-recorded commercials, or ‘ad spots’, which are played during pauses in the action. These ad spots can be sold by the broadcaster directly, or through an advertising agency.

Another way that esports broadcasters generate revenue is through sponsorships. This can take the form of product placement, where items such as energy drinks or gaming peripherals are prominently displayed during the broadcast, or it can be more direct, with a company’s logo appearing on screen. Sponsorships can also extend to team jerseys and other branded merchandise.

Sponsorships

The biggest source of revenue for esports broadcasters comes from sponsorships, which account for 43% of the industry’s total income. endemic esport) teams and tournament organizers receive the majority of their funding from these sponsorships, which come in many forms. The most common sponsorships are direct financial investments, product placement, or a mix of both.

large companies outside of the gaming industry have started to invest in esports, drawn in by the popularity of the space and the opportunity to reach a young, tech-savvy demographic. These non-endemic sponsors typically invest in sponsoring specific events or teams in order to reach this demographic en masse.

How do esports publishers make money?

Esports is a type of competition that is facilitated by electronic systems, particularly video games; the input of players and teams as well as the output of the Esports system is mediated by human-computer interfaces. Esports often takes the form of organized, multiplayer video game competitions, particularly between professional players, individually or as teams.

In-game microtransactions

In-game microtransactions are digital goods that can be bought within a game for real-world money. These items generally offer no competitive advantage, but they may be cosmetic or otherwise offer benefits that make the game more enjoyable to play. For example, in Fortnite, players can purchase new character skins and emotes. In League of Legends, players can buy experience boosts to level up their characters faster.

Typically, a small percentage of players spend a lot of money on in-game microtransactions, while the vast majority spend very little or nothing at all. This business model is sometimes referred to as “freemium” because the core game is free to play, but players have the option to pay for additional content.

In-game microtransactions are the primary source of revenue for many esports publishers. According to SuperData Research, they generated $897 million in revenue in 2018 alone. This is likely to grow in the coming years as esports becomes more popular and more publishers enter the market.

Conclusion

The esports industry is still growing, and it is unclear how long this growth will continue. However, it is clear that esports is a big business and there are many ways that esports organizations can make money. With the right mix of sponsorships, advertising, merchandise, ticket sales, and prize money, esports organizations can generate a lot of revenue.