Esports, or competitive video gaming, is a rapidly growing industry that has exploded in popularity in recent years, with tournaments offering prize pools reaching into the millions of dollars. The global esports market is projected to generate $1.1 billion in revenue in 2020, with a global audience of 495 million people. Professional teams, sponsors, and streaming services are all playing critical roles in the industry’s growth and success. Sponsors are particularly important, providing the majority of the revenue through brand exposure and advertising. The future of esports includes increased involvement of traditional sports teams and owners and the integration of virtual reality and augmented reality into esports events.
The Business of Esports: How Teams, Sponsors, and Streaming Services are Changing the Game
The Rise of Esports
Esports, or competitive video gaming, has exploded in popularity in recent years, with tournaments offering prize pools reaching into the millions of dollars. According to a report by Newzoo, the global esports market is projected to generate $1.1 billion in revenue in 2020, with a global audience of 495 million people. And with the COVID-19 pandemic forcing the cancellation of many traditional sports events, esports has become an even more attractive option for fans and sponsors alike.
The Role of Teams
As the esports industry has grown, so too have professional teams. Similar to traditional sports, esports teams are composed of professional gamers who compete in tournaments representing their team. These teams are often categorized by the games they play, such as League of Legends, Overwatch, and Fortnite, among others.
Esports teams create revenue primarily through sponsorships, merchandise, and tournament winnings. Sponsorships are particularly lucrative, with companies like Intel, Coca-Cola, and Nike recognizing the value of sponsoring these teams and tournaments. Teams will often have a primary sponsor, such as Team Liquid’s partnership with Alienware, and will also have additional sponsors for specific tournaments or events.
The Importance of Sponsors
Sponsors are critical to the success of esports teams and events since they provide the majority of the revenue. In return, sponsors receive brand exposure, often in the form of logos on team jerseys and other merchandise, as well as advertising opportunities during livestream broadcasts.
One notable sponsor in the esports industry is Red Bull. In addition to sponsoring teams and events, the energy drink company has its own esports team, Red Bull Gaming, and sponsors its own tournament series, Red Bull AdrenaLAN. The company’s investment in esports has paid off, with reports indicating that its esports efforts have helped increase brand recognition and preference among younger consumers.
The Role of Streaming Services
One of the most significant changes to the esports landscape has been the rise of livestreaming services. Platforms like Twitch, YouTube Gaming, and Mixer allow fans to watch matches live and interact with other fans and players in real-time. These platforms also allow teams and players to build out their own audiences and to generate revenue through subscriptions, sponsorships, and ad revenue.
Streaming has become a crucial part of the esports business, with some tournaments and events only broadcast via streaming services. One notable example is the Overwatch League, which signed an exclusive streaming deal with YouTube Gaming in early 2020. This deal reportedly came with a hefty price tag, suggesting just how valuable these streaming rights have become.
The Future of Esports
Esports is still a new and rapidly evolving industry, with new games, teams, and tournaments popping up all the time. However, there are a few trends that seem likely to shape the industry’s future.
One of these trends is the increased involvement of traditional sports teams and owners in esports. Franchises like the Philadelphia 76ers and the Miami Heat have invested in esports teams, recognizing the potential for growth in the industry. The involvement of these traditional sports entities could bring increased legitimacy and revenue to the esports industry.
Another trend is the integration of virtual reality and augmented reality into esports events. With the development of VR and AR technology, it’s becoming increasingly feasible to host esports events that are entirely virtual or that incorporate real-world elements into the game. These events could help further break down the boundaries between traditional sports and esports, making the latter even more appealing to fans and sponsors alike.
Conclusion
The esports industry is still in its early stages, but it’s growing rapidly and shows no signs of slowing down. With the involvement of professional teams, sponsors, and streaming services, the industry has become increasingly lucrative and competitive. As technology continues to evolve and more investors enter the market, the industry is poised for even more growth and innovation in the years to come.