Esports organizations and the money they make

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Esports have been reportedly making a ton of good money these days. Newzoo projects that esports revenue in 2019 will grow up to $1.1 billion dollars. This is a 27% year-on-year increase. To a layman, these numbers seem reassuring. Still, I was curious how is this shared among esports organizations and the different players in competitive gaming.

To start off, let’s break down esports revenue numbers. Of $1.1 billion dollars, the largest segment goes to sponsorships at $456 million dollars. Famous brands throw these dollars to professional teams in esports organizations.

Brands sponsor esports because they want to reach the coveted audience of esports – millennial males.

Interestingly, not only brands endemic to the gaming vertical are betting on this. Non-endemic brands such as Coca-Cola and Budweiser are taking this opportunity to form partnerships with esports organizations, developers, and publishers to make their brand known.

This turnout is no pushover.

Media rights generated $251 million dollars through media property. Broadcasters pay these monies to secure the rights to broadcast esports content.

Given the proliferation of online streaming and increased acceptance by mainstream broadcasters, this revenue segment sees the largest growth potential.

Advertising revenue, a mainstay for video content, sees revenues of $189 million dollars. Last but not least, merchandise & tickets and publisher fees round up the rest of the contributing dollars.

By far, the largest gainers are likely companies who have consciously recognized the importance of this audience and made the effort to understand and communicate with them.

Brand activation can happen relatively seamlessly in esports, much like in traditional sports.

For example, jersey logos, branded equipment, allocating screen space as ad inventory – these are tried and tested methods.

Esports are basically organized gaming competitions at the highest professional level and these competitions typically come with a purse. Because of the general optimism, I wanted to spend some time analyzing how these prize pools have changed over time.

Hence, I compiled top tournament prize pool data from Esports Earnings.

Graph showing growth of esports revenue prize pool
We’re seeing massive jumps in tournament purses year after year.

It’s heartening to see the esports prize pool continuously grow year on year as it hits a high of $86 million dollars this year.

In total, esports paid out $270 million dollars in the past 8 years.

The previous 3 years paid out three-quarters of this! In other words, we are really only just getting started.

Digging deeper next, I start to notice some interesting trends. First, I filtered out small-scale tournaments by only retaining those that have a purse of at least $1 million dollars. The tournaments were then grouped by games or franchises. Finally, I visualized the data on a 100% column chart to see how the purse distribution is like annually.

Graph showing distribution of esports purse by game title
Dota 2 and League of Legends are constant powerhouses in esports.

When it comes to the bigger competitions, Dota 2 and League of Legends have definitely been trailblazing the path forward for the other esports titles. Over the years, we also see an increasing amount of titles having at least a $1 million purse, from just 3 titles in 2013 to over 10 titles in 2018. We are still tapping on new sources of esports revenue so this is a good trend.

An over-reliance and skew of revenue towards one title does not showcase a healthy diversification of professional gaming content.

Therefore, an undesirable outcome of the above is that we’re potentially sidelining viewers who are interested in other competitive genres.

Another takeaway is the slow insurgence of mobile esports. While the main attention is still taken up by traditional PC and console titles, mobile-only titles like Arena of Valor, and mobile-friendly titles like Hearthstone and Fornite are making apperances in 2018.

Players playing Vainglory a mobile esports
Mobile esports titles could be the next big thing. (Photo: Fortune)

In conclusion, where has the money gone? Many places apparently and not just esports organizations. I am particularly excited about the potential in genre diversification and further mainstream acceptance. Unlike traditional hardware and software sales, this vertical stands on its own. The bigger picture is seeing the growth of gaming as a whole, and the future of esports will play a very big part in that.

Have you heard of Google’s latest entry to cloud gaming with Stadia? Read this post to learn more.

Do you watch esports too? How do you think esports will affect the gaming industry? Comment below to share your thoughts.

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