Behind the Scenes: The Business of Esports
The Growing Market of Esports
Esports has transformed from a niche pastime into a booming global industry over the past decade.
With millions of fans, competitive gaming has become a major entertainment and cultural phenomenon, generating billions of pounds in revenue each year.
In this post, we’ll explore the business side of esports and provide an insight into its various aspects.
Check out our post: A Beginner’s Guide to Esports: Understanding the Basics
Esports companies generate revenue from a variety of sources, including:
- Sponsorships and advertising
- Media rights
- Merchandise and ticket sales
- Game publisher fees
- Betting and fantasy esports
Let’s examine these revenue streams in more detail.
Sponsorships and Advertising
As esports attract a large, engaged, and predominantly young audience, it’s no surprise that brands are eager to associate themselves with the industry.
Sponsorship deals can range from sponsoring individual players, teams, or entire leagues and tournaments. In addition to sponsorships, advertising also plays a significant role, with ads being displayed during live streams, on social media, and in other esports-related content.
The sale of media rights is another major revenue stream for the esports industry. Platforms like Twitch, YouTube Gaming, and Facebook Gaming compete for exclusive broadcasting rights to popular esports events.
These deals can be worth millions of pounds, as platforms benefit from the increased viewership and engagement that esports events generate.
Merchandise and Ticket Sales
Esports fans are known for their passion and loyalty, which translates into revenue through merchandise and ticket sales.
From team jerseys and accessories to in-game items and virtual goods, fans are eager to support their favourite teams and players.
Additionally, live esports events draw large crowds, with ticket sales contributing to the industry’s bottom line.
Game Publisher Fees
Game publishers often charge esports organisations and tournament organisers fees for the right to use their games in competitions.
These fees vary depending on the game’s popularity and the size of the event. In some cases, publishers may also share a portion of their in-game revenue with esports organisations, incentivising them to promote the game and contribute to its growth.
Betting and Fantasy Esports
Esports betting and fantasy platforms have gained traction in recent years, with fans looking to test their knowledge and skills by wagering on the outcome of esports matches.
These platforms generate revenue through a combination of fees, commissions, and advertising.
The Esports Ecosystem
The business of esports is supported by a complex ecosystem of stakeholders, including:
Game Developers and Publishers:
Game developers and publishers are the driving force behind the esports industry, as their games form the foundation of competitive gaming.
Developers create games that are specifically designed for competitive play, such as Dota 2, League of Legends, and Counter-Strike: Global Offensive. They also provide ongoing support and updates to these games, ensuring that they remain balanced, engaging, and relevant to the esports community.
Publishers, on the other hand, play a critical role in the business side of esports. They provide the licenses that allow tournaments and leagues to use their games in competitions, charging fees for the right to do so.
Publishers may also invest in the growth of the esports industry, sponsoring events, and providing marketing and promotional support to help attract new players and fans.
Esports Teams and Organizations:
Esports teams and organizations are responsible for managing and promoting professional esports players.
They scout, recruit, and train players, providing them with resources, support, and guidance to help them succeed in the industry.
Teams also coordinate travel and logistics for tournaments and handle player contracts, sponsorships, and other business-related matters.
Esports teams often compete in leagues and tournaments, facing off against other professional teams for prize money and recognition.
The most successful teams can earn millions of pounds in winnings and sponsorships, making them some of the highest-earning professional athletes in the world.
Tournament organizers are responsible for planning and hosting esports events, from small local competitions to large international tournaments.
They handle logistics, including venue selection, player registration, and event promotion. They also ensure that the events run smoothly, providing referees, judges, and other staff to oversee the matches.
Tournament organizers may also provide prize money and other incentives to attract top-tier players and teams, helping to ensure that their events are competitive and exciting for both players and fans.
In addition to prize money, successful tournament organizers can also generate revenue from ticket sales, merchandise sales, and sponsorships.
Broadcasters and Streaming Platforms:
Broadcasters and streaming platforms play a critical role in the esports industry, providing a way for fans to watch their favourite players and teams compete.
Platforms like Twitch, YouTube Gaming, and Facebook Gaming offer live streams of esports events, allowing fans to watch matches from anywhere in the world.
They also provide chat functions, allowing fans to interact with each other and with the players themselves.
Broadcasters and streaming platforms generate revenue through advertising, sponsorships, and subscriptions. They may also pay for exclusive broadcasting rights to high-profile esports events, providing a source of income for tournament organizers and game publishers.
Brands and Sponsors:
Brands and sponsors play a significant role in the business of esports, providing financial support and promotional opportunities to teams, tournaments, and individual players.
Sponsorship deals may involve providing funding, equipment, or other resources in exchange for exposure and branding opportunities.
In addition to traditional sponsorships, brands may also partner with esports teams and players to create branded content, such as sponsored social media posts, videos, and live streams.
This type of content can help to increase brand awareness and engagement with younger, tech-savvy audiences.
Betting and Fantasy Esports Platforms:
Betting and fantasy esports platforms allow fans to engage with esports in a different way, by wagering on the outcome of matches or by creating fantasy teams made up of their favourite players.
These platforms generate revenue through a combination of fees, commissions, and advertising.
Betting on esports matches is becoming increasingly popular, with some estimates suggesting that the global esports betting market could be worth billions of pounds by 2025.
Fantasy esports platforms, meanwhile, provide a way for fans to engage with the industry on a deeper level, by building their own teams and competing against other fans.
Players and Fans
Finally, players and fans are at the heart of the esports industry. Players are the ones competing in esports events, showcasing their skills and competing for prize money and glory.
They are often signed to esports teams or organisations, which provide them with support and resources to improve their skills and compete at the highest level.
Fans are the driving force behind the growth and success of the esports industry. They are passionate and dedicated, often spending hours watching live streams and attending live events.
Fans can also support their favourite players and teams by purchasing merchandise and tickets, contributing to the industry’s revenue.
In addition, fans often participate in online communities and discussions, sharing their opinions and engaging with other fans.
These communities provide a sense of belonging and community, fostering long-term support and loyalty among fans.
Each stakeholder plays a vital role in the growth and success of the industry. As the esports market continues to expand, new opportunities will emerge for businesses and individuals looking to get involved in this exciting and dynamic sector.
The Future of Esports Business: investing in the future of esports
With the esports industry showing no signs of slowing down, it’s clear that the business side of competitive gaming will continue to evolve and adapt to meet the demands of its growing audience. Future developments in the industry may include:
- Increased investment in esports infrastructure, such as arenas, training facilities, and broadcasting studios
- The rise of mobile esports, providing new revenue opportunities for publishers, advertisers, and other stakeholders
- Greater focus on player welfare and wellbeing, with organisations investing in support services for their players
As the esports industry matures, we can expect to see even more innovation and investment in the business of esports, leading to a more professional and sustainable industry for all involved.
Frequently Asked Questions
What are the main revenue streams in the esports industry?
The main revenue streams in the esports industry include sponsorships and advertising, media rights, merchandise and ticket sales, game publisher fees, and betting and fantasy esports.
How do game publishers make money from esports?
Game publishers make money from esports through fees charged to esports organisations and tournament organisers, as well as through in-game revenue sharing agreements with esports organisations.
Who are the key players in the esports ecosystem?
The key players in the esports ecosystem include game developers and publishers, esports teams and organisations, tournament organisers, broadcasters and streaming platforms, brands and sponsors, betting and fantasy esports platforms, players, and fans.
What is the future of the esports business?
The future of esports business may include increased investment in esports infrastructure, the rise of mobile esports, and a greater focus on player welfare and wellbeing.
Is the esports industry a good investment opportunity?
As the esports industry continues to grow rapidly, it presents potential investment opportunities for individuals and businesses interested in the gaming sector. However, it’s essential to carefully research and understand the industry’s risks and challenges before investing.
Newzoo (2021). Global Esports & Live Streaming Market Report. Retrieved from https://newzoo.com/insights/trend-reports/newzoo-global-esports-live-streaming-market-report-2021-light-version/
Business Insider (2020). How Esports Companies Make Money. Retrieved from https://www.businessinsider.com/esports-ecosystem-market-report
Forbes (2021). The Future of Esports: Opportunities for Brands, Gamers, and Investors. Retrieved from https://www.forbes.com/sites/forbesbusinesscouncil/2021/05/11/the-future-of-esports-opportunities-for-brands-gamers-and-investors/?sh=6deeb05a1c8f