How Does Esports Organizations Make Money?

Esports organizations make money through a variety of means. Some of the most common include sponsorships, advertising, merchandising, and ticket sales.

Introduction

Esports organizations generate revenue through a variety of means, including sponsorships, media rights deals, advertising, merchandise sales, and ticket sales. While some esports organizations are owned by major corporations like Comcast and ESPN, many are independently owned and operated.

Due to the global reach of esports and the huge potential for growth in the industry, esports organizations are able to command large sums of money from sponsorships and media rights deals. For example, in 2018, Cloud9 signed a sponsorship deal with Staples worth $3 million per year. Likewise, in 2019, G2 Esports signed a three-year deal with French energy drink company Red Bull that is reportedly worth $2 million per year. Similarly, T1 Entertainment & Sports signed a five-year partnership with investment firm XP Investment Group that is reportedly worth $22 million total.

Sponsorships

The most important part of an esports organization is the team. It’s the face of the company that promotes its brand and takes home the prize money. Most of these companies are based in North America or Europe, with a few popping up in South Korea, China, and Australia. The teams typically have six to 10 players and a coach who help them train for competitions.

To make sure the players are representing the company well, some esports organizations require their teams to wear uniforms with the sponsors’ logos. They also might have to use specific gaming equipment provided by the sponsor or promote the sponsor’s energy drink during tournaments. In return, the sponsors help to cover the cost of tournament entry fees, travel expenses, and player salaries. Some of the biggest sponsors in esports right now are Intel, Coca-Cola, and Red Bull.

Media Rights

Organizations in esports make the majority of their revenue through media rights deals, which grant third-party broadcast partners the right to show matches and other events featuring the organization’s teams and players. These deals are typically negotiated on a per-year basis, with organizations signing contracts that run for one to three years.

The size of these deals varies widely, as do the ways in which they are structured. Some media rights deals are “all-in” packages that grant a broadcaster the exclusive right to show all of an organization’s matches across all of its teams and players in a particular game title. Other deals are much narrower in scope, granting broadcasters the right to show only a portion of an organization’s matches or events, or the right to show matches featuring only a subset of its teams or players.

Media rights deals usually include a combination of up-front payments and performance-based payments. The up-front payments are typically higher for all-in packages than for narrower packages, and they increase on a per-year basis if an organization renews its contract with a particular broadcaster. Performance-based payments usually take the form of revenue sharing, with organizations receiving a percentage of the advertising and sponsorship revenue generated by broadcasts featuring their teams and players.

Merchandise and Tickets

Organizations generate revenue through a variety of methods. The most common include merchandise sales, ticket sales, sponsorships, and advertising.

Merchandise sales are a significant source of revenue for many organizations. Fans can purchase jerseys, mousepads, and other items with team or corporate logos. Some teams also sell team-branded energy drinks, supplements, and other products.

Tickets are another significant source of revenue for many organizations. Esports events are often held in large stadiums that can accommodate thousands of spectators. Tickets prices vary depending on the event, but typically range from $20 to $100.

Sponsorships from corporations are a major source of revenue for many organizations. Corporations typically provide cash or in-kind support in exchange for branding and marketing rights. Esports organizations often sell sponsorships to companies in the gaming industry, but non-endemic companies are increasingly getting involved as well. For example, Coca-Cola sponsors several esports teams and events.

Advertising is another source of revenue for many esports organizations. Organizations often sell advertising space on their website or livestreams of their events. They may also sell advertisements on team clothing or in-game items that players can use.

Game Developer Contributions

One of the biggest sources of revenue for eSports organizations come from game developers. The game developers are responsible for designing, developing, and releasing the game that is being played in the eSports tournaments. To ensure that their game is being played in tournaments, they will often directly or indirectly support eSports organizations by providing them with prize money, contributing to their operating costs, or hiring their employees.

Conclusion

In conclusion, esports organizations make money in a variety of ways. Some earn revenue through sponsorships, while others make money through merchandise sales or ticket sales to events. Some esports organizations also have their own gaming leagues, which can generate additional revenue.