There is a lot of money in eSports.
In fact, the industry was valued at $1.1 billion in 2021, far exceeding initial goals, and the eSports world seems just to be getting started. However, with millions of fans watching around the world, massive tournaments that fill stadiums, and tons of exciting footage, this does raise a question.
How do all these teams make their money? How is becoming an eSports team profitable?
There are a few different ways that teams can bring in revenue, and in this guide, we're diving into them all.
Sponsorships
The first way that teams make money is through sponsorships. Big companies like Coca-Cola, Red Bull, and Intel are all major players in the world of eSports. These companies offer both cash and products to teams that they sponsor.
This provides teams and eSports organizations some much-needed extra income for these organizations to help them pay for their players, gear, travel expenses, and other investments.
Prize Money
By far the most exciting way eSports teams earn money is through the winnings of global tournaments, and there's a lot of money to be won there.
For example, the International 2019, the most popular DOTA 2 world tournament, has a prize fund of $34 million, $15 million of which went to the winning team, OG. That's a lot of money coming in just through winning the tournament.
There are also large prizes for the top ten teams as well. In the International 2019, 2nd, 3rd, and 4th received $4 million, $3 million, and $2 million, respectively. Of course, most eSports teams will have teams in multiple games, meaning they have income coming in from many different tournaments.
Merchandise
Quite a large portion of an eSports team's income can come from merchandise sales. Teams often sell their fans branded t-shirts, hats, and other gaming-related products.
This provides a steady stream of income for the team and gives their fans something they can use to show off their loyalty and support, which helps build branding.
In 2022, merch sales accounted for around $107 million of eSports total taking, so it's not an insignificant amount.
Online Streaming and Content
Teams can also make money from streaming and content creation. Many teams have their own YouTube channels where they post highlights, interviews, and other interesting content. This can be an effective way to reach new fans and drive additional revenue for the team.
Sell Tickets and Broadcasting Rights
Teams can also make money from selling tickets to their matches. Additionally, broadcasting rights for tournaments can be worth a lot of money, and teams will often look to secure these contracts to bring in some extra income.
How Do eSports Tournaments Get Money?
How do the tournaments get this money in the first place?
Well, there are two main ways to go about it.
Firstly, sponsorships.
eSports tournaments gain a lot of attention and have a lot of eyeballs, which means it's a great place to advertise a product or service, especially if it's tech or gaming related.
On average, eSports teams have an average of seven sponsorships running at a time, whereas tournaments will have three or four. These will include some of the biggest brands in the world, including;
- Logitech (the fastest-growing eSports brand)
- HyperX
- Elgato
- Twitch
- DXRacer
- Secretlab
- Samsung
- Razer
- Red Bull
If you've ever seen a League of Legends broadcast, you'll have noticed that some of the in-game replays are sponsored by companies like Mastercard, or the question of the day (which is commonly aired throughout the World's series) is sponsored by KitKat.
These are companies that have probably paid millions of dollars (although the actual figures are kept secret) to have their names on screen.
And it makes sense.
In the previous 2022 Worlds series, the series peaked at 5.1 million viewers with over 141 million hours watched. This is an opportunity the companies don't want to waste.
Companies pay for the ad and sponsorship slots, pay the tournament organizers a lump sum, and some of this money will go into the prize pool to then attract eSports teams to come and compete, thus creating the entertainment that will draw in mass viewership.
It's a simple system, but one that's proving to be very successful.
However, this is not the only way the tournaments raise money.
An increasingly popular approach comes in the form of crowdfunding their prize pools.
If you're a gamer yourself, you may have recently seen a new feature added to your favorite games' in-game battle passes, including League of Legends, Overwatch 2, DOTA, and many more.
This feature states that 25% of the battle pass takings will go into the prize pool. In other words, the more casual players who buy the battle pass for the particular season the competition is running, the more money will be in the prize pool.
This technique has been used for a long time.
In 2016, DOTA used it to fund their International 2016, which has a base prize pool of $1.6 million offered by Valve. However, the contributed player prize pool reached a massive $19.1 million, meaning the total prize pool equaled a whopping $20.7 million.
League of Legends has done the same thing. In the same year, they boosted their prize pool from the $2.13 million base to $5.07 million just through crowdfunding their battle pass.
While it's awesome that game developers are doing this to give more money to the top players and create a more exciting opportunity in the eSports community to play and enjoy the culture, it's worth noting that this does mean the companies are pocketing the extra 75% of these battle pass sales.
In Riot's case, this would have been around $8 million in 2016 alone, so yeah. We all know our collective opinions on such a company! Nevertheless, these approaches guarantee that there's more to play for than ever before.
Conclusion
As you can see, there are various ways that eSports teams can make money. From sponsorships and merchandise sales to streaming and broadcasting rights, teams have plenty of opportunities to generate revenue. With the industry's continued growth, it's likely that these teams, and the eSports community as a whole, will only become more profitable in the future.