How Esports Companies Make Money?

Esports companies make money in a variety of ways. Some of the most popular include sponsorships, advertising, merchandise, and tickets.

Introduction

In the past few years, the esports industry has seen explosive growth. The global esports market is expected to generate revenue of $1.1 billion in 2019, up 27% from 2018, according to Newzoo’s Global Esports Market Report. And the number of esports enthusiasts—people who watch or play competitive video games—is also on the rise, reaching 443 million people worldwide in 2019.

With this rapid growth has come increased interest from companies looking to cash in on the esports boom. But how exactly do esports companies make money? Here’s a look at the three main ways:

1. Media Rights
2. Sponsorships
3. Merchandise and Tickets

The three main ways esports companies make money

Esports companies make money through a variety of methods. The three main ways are through sponsorships, advertising, and merchandising. Sponsorships are when a company pays an esports company to have their brand name or product associated with the team or players. Advertising is when a company pays an esports company to place ads on their website or in their streams. Merchandising is when an esports company sells merchandise with their team or player’s name or logo on it.

Sponsorships

One of the most significant sources of revenue for esports companies comes from sponsorships. Twitch, for example, has sponsorship deals with a number of companies, including T-Mobile, Xfinity, and Logitech. These sponsorships typically involve the company’s logo being placed on the streamer’s page, as well as verbal mentions during streams.

In addition to these direct sponsorships, there are also indirect sponsorships from companies that advertise on Twitch. For example, when you see an ad for Gillette during a stream, that is another form of esports sponsorship.

Similarly, tournament organizers also receive sponsorship deals from companies looking to reach the esports audience. These deals can take a variety of forms, but commonly involve placement of the company’s logo at the tournament venue and on broadcast graphics.

Advertising

The esports industry is still in its nascency, which presents opportunities for companies with innovative advertising models. Non-endemic brands are flocking to esports to target the valuable 18-34 demographic that is notoriously difficult to reach.

Advertising in esports comes in many forms, the most common of which are digital, in-game, and event sponsorships.

Digital advertising includes pre-rolls and mid-rolls on live streams, as well as banner ads on websites and social media platforms popular with esports fans such as Twitch and Reddit.

In-game advertising appears as product placements within the game environment itself. For example, Coca Cola has been an in-game advertiser in League of Legends since 2011.

Event sponsorships are ubiquitous in traditional sports and are becoming increasingly common in esports as well. Event sponsorships can take many forms, from title sponsorships to more targeted sponsorships of specific tournament features such as player cams or analyst desks.

Tournament prize pools

The prize pools for esports tournaments have continued to grow exponentially in recent years. In 2018, the Dota 2 International had a prize pool of over $25 million, while the Fortnite World Cup offered a prize pool of $30 million. While some of this money comes from game developers, a large portion of it is provided by sponsors and outside investors.

Tournament organizers also make money from ticket sales, merchandise, and broadcast rights. In some cases, these revenue streams can dwarf the prize money that is up for grabs. For example, the League of Legends World Championship drew in over $5 million in ticket sales alone in 2018.

Conclusion

To conclude, there are many ways for esports companies to make money. Some of the most common include sponsorship, advertising, merchandise sales, and ticket sales. There are also many other less common ways, such as through gaming content production and betting. Whatever the case may be, it is important for these companies to diversify their income sources in order to stay afloat and continue growing the industry.