The global esports industry is set to generate revenues of $1.1bn this year and is growing at an exponential rate, according to figures from data firm Newzoo. Primary sources of revenue for esports organisations are sponsorships and advertising, broadcasting rights, ticket sales and merchandise, as well as investments and partnerships. Advertisers are drawn to esports because of its global reach and younger, technology-savvy audience. Traditional sports teams and companies have invested in the sector to share expertise and exploit the potential of the market, which is anticipated to expand further as esports becomes more mainstream.
The Business of Esports: Understanding the Financial Landscape of Competitive Gaming
Introduction
The esports industry has seen exponential growth in recent years. What was once considered a niche hobby for gamers has now turned into a multi-billion-dollar global industry. According to Newzoo, the esports industry is expected to reach a global revenue of $1.1 billion in 2020. But what exactly is driving this growth? Understanding the financial landscape of competitive gaming can give us insight into what makes this industry so lucrative.
Sponsorships & Advertising
One of the primary sources of revenue for esports organizations comes from sponsorships and advertising. Esports teams and individual players can become brand ambassadors for companies looking to reach new audiences. Similar to traditional sports, advertisers are drawn to esports due to its global reach and younger, tech-savvy audience. In addition to team and player sponsorships, ads can also be integrated into live streams and events. In 2019, esports advertising revenue generated over $200 million globally.
Broadcasting Rights
Another significant source of revenue comes from broadcasting rights. Streaming platforms like Twitch and YouTube have played a huge role in bringing esports to the mainstream. These platforms have allowed players to build their brands and connect with fans while also providing a way for companies to broadcast their events. In 2018, Amazon’s Twitch paid $90 million for the exclusive broadcasting rights for the Overwatch League. Other streaming platforms like YouTube and Facebook are also investing heavily in esports broadcasting rights.
Ticket Sales & Merchandise
Esports events have also become a major source of revenue for organizations. In 2018, the League of Legends World Championship sold out the 20,000 seat home arena of the NBA’s Golden State Warriors in just four minutes. Fans are willing to pay top dollar for the chance to see their favorite players compete in person. Merchandise sales also play a role in generating revenue. Esports teams and players have apparel lines and other branded products that fans can purchase, providing yet another stream of income.
Investments & Partnerships
Esports organizations have also seen large investments and partnerships with traditional sports teams and companies. In 2019, the Philadelphia 76ers acquired esports team Dignitas, and the Houston Rockets acquired Clutch Gaming. The involvement of these traditional sports teams provides both financial and strategic benefits, as the organizations can share expertise in areas like marketing and event management. Large companies like Coca-Cola and Intel have also become involved in esports through partnerships and sponsorships.
Conclusion
The financial landscape of esports is constantly evolving, but one thing is clear – the industry is booming. The mix of sponsorships, advertising, broadcasting rights, ticket sales, merchandise, investments, and partnerships has created a lucrative industry that continues to grow year over year. As esports becomes more mainstream and continues to attract investment, it will be interesting to see how the financial landscape evolves, and which organizations will emerge as leaders in this growing industry.