e-sports, or competitive video games, have grown into a billion-dollar business. Esports has gained a lot of fans around the world, so teams now work like professional sports teams, with big sponsors, paid players, and real money coming in.
But just how do these e-sports groups make money? This article looks at the main ways that top teams make money. We will look at the main ways that the event makes money, such as through sponsorships, media rights, merchandise, content monetization, and prize money.
Esports teams are both like and unlike traditional sports teams when you look at their business models. Esports is still pretty new, but it has already shown that it can make real money through creative digital methods.
Learning about the money side of e-sports gives you a unique look into their rapid growth and what it takes to build a long-lasting franchise in the gaming industry, which is becoming more and more competitive.
Table of Contents
- 1 Overview of esports
- 2 Popularity and growth of esports
- 3 Revenue Sources for Esports Teams
- 4 Major Expenses for esports Teams
- 5 Strategies for Financial Success
- 6 Future Outlook
- 7 Conclusion
Overview of esports
Esports are organized, competitive leagues and events for video games. Popular MOBA games like League of Legends and Dota 2 are played by e-sports teams. So are first-person shooter games like Counter-Strike: Global Offensive and Overwatch, real-time strategy games like StarCraft II, and sports games like FIFA and NBA 2K. Professional gamers on these teams train and compete in a way that is similar to how athletes do it.
Popularity and growth of esports
In the past ten years, e-sports have become incredibly popular. Esports events can now be seen by millions of fans around the world thanks to live streaming sites like Twitch and YouTube Gaming. Newzoo says that the esports industry will make more than $1.5 billion by 2023, up from more than $1 billion in 2019. Because of this, e-sports teams now work like regular sports teams, with big-money investments, sponsors, paid players, and merchandise sales.
Revenue Sources for Esports Teams
As esports continues to grow, teams have developed diverse revenue streams. Here are the major ways esports organizations make money:
Most e-sports teams get most of their money from sponsorship deals. Getting their logos on team jerseys, in arenas and on TV broadcasts, or in branded content is how sponsors pay to get their names seen. Sponsors for the best e-sports teams pay millions of dollars a year. These sponsors range from computer hardware companies like Intel to well-known brands like Red Bull and Nike.
Media rights and streaming
Major esports leagues negotiate media rights deals for exclusive broadcasting and streaming. For example, Activision Blizzard signed a $90 million 2-year deal with Twitch for exclusive Overwatch League streaming rights. Teams also generate revenue from streams of their own practices, tournaments, and player personalities. Subscriptions, ads, and sponsorships tied to proprietary content provide recurring revenue.
Merchandise and tickets
Esports teams make money selling branded apparel and accessories globally through online shops. Large events also generate significant ticket sales. For instance, the 2019 League of Legends World Championship had over 100,000 live attendees. VIP experiences like meet-and-greets create additional sales opportunities.
Esports teams and players get prize money when they win tournaments, but it’s not their main source of income. Teams that win a championship can win a lot of money. There were more than $40 million in prizes at the 2021 Dota 2 International. The winning team got $18.2 million.
Major Expenses for esports Teams
Of course, esports teams also have significant operating costs:
Star esports athletes can make millions per year in salary and bonuses. A team might pay a top player upward of $5 million as a franchise cornerstone. However, most pro players earn much less, with average salaries in the low six figures. Payrolls can quickly add up with team houses, coaching staffs, and substitute players.
Esports teams incur expenses related to training facilities, team houses, equipment, travel, support staff, analytics, and more. Established franchises spend millions per year on performance infrastructure. Many also invest in minor league rosters and amateur development pipelines.
Marketing and content creation
Building their brand through online and grassroots marketing is a big investment for esports organizations. Producing polished content for YouTube, social media, and live streaming requires dedicated staff and equipment. Some teams also purchase ad campaigns and billboards in key markets.
Strategies for Financial Success
Given their costs, esports teams must be savvy to sustain profitability. Here are some key strategies:
Cultivate star players
Every great sports franchise is built around superstars. Great players drive fans, viewership, engagement, and ultimately revenue. Scouting and developing elite talent is crucial. Esports teams invest heavily in salaries and infrastructure to attract and retain superstars.
Build the brand
Teams focus on content, social media, and community-building to build their brands. Developing a brand identity through style, entertainment, and storytelling allows teams to connect emotionally with fans worldwide. This expands sponsorship appeal and sales reach.
Beyond competition, esports athletes are content creators. Streaming personalities like Ninja have millions of subscribers. Teams participate in the economics, selling merchandise and sponsorships while taking a cut of player stream revenue. Content monetization provides a diversified income source.
What’s next for the esports industry and team revenue potential?
Continued growth expected
Esports revenue should keep growing at a double-digit rate in the near future. Investors believe the industry still has substantial room for expansion relative to traditional sports. Emerging markets in Asia also provide growth upside.
New revenue opportunities
Teams will likely explore newer money-making opportunities like NFTs, metaverse activations, licensed betting, and blockchain-based games. Spreading into these digital spaces aligns with their young, internet-native fanbase.
Sustaining growth long-term may prove difficult. Teams face risks like declining game popularity, over-investment, and inflating player salaries. Adapting business models and diversifying revenue will be key to weathering disruptions.
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