If you’re an investor or just curious how esports organizations make money, I can give you a bit of introduction on how tournaments, teams and casting agencies work. I won’t go into the number of esports but I’ll talk strictly about how each org makes money. This will be part 1 of a the series “How do esports orgs make money”. In part 1, I will start with tournaments, then talk about teams and then casters / agencies.
How do tournament organizers make money in esports?
Tournament organizers make money in esports in the following ways:
Sponsorships & Advertising
Sponsorships are the lifeblood of most esports organizations. It’s estimated that roughly 40-45% of revenues come from sponsorships at the moment. Esports relies VERY HEAVILY on this type of revenue.
Advertisements are related to esports event and general content creation. For example, that redbull placement you see in events is tied to a strategic advertisement. They are generally in the range of 15-20% of total dollars.
That adds up to a whopping 55-65% of revenues for these two segments alone. Wow! You usually see these combined when speaking about revenue in esports. For the purposes of this conversation I’ll talk about it as general sponsorship even though they slightly differ.
Endemic vs Non Endemic Sponsorships
Endemic and non endemic sponsors are also important to talk about. Endemic esports sponsors are those who are tied to the esports ecosystem. They’re your headset makers, mice makers, monitor makers and keyboard makers that are seen at every event. They make items specifically targeted to gamers. Non-endemics can be seen as businesses that benefit from marketing in esports but do not necessarily participate in the ecosystem. For example, a non endemic can turn endemic depending on their marketing efforts.
This is pretty self explanatory, ticket sales are a significant source of revenue for tournament organizers. If you sell 3,000 tickets and charge $50, that’s $150,000 in revenue. It’s quite difficult to achieve those numbers at the moment but hopefully we get to consistent levels of sellouts for some events!
Broadcast rights are a source of revenue for tournament organizers as well. Generally, tournament rights are sold to other streaming companies abroad. For example, if a tournament organizer is holding a LAN event, they’d want to sell their rights to foreign languages to further monetize. In turn, the foreign language casters sell their own sponsors on the event and provide their own casters as well.
Another way to sell your broadcast rights are on linear TV. This is a fancy word for traditional TV. I’ve never done this but I know of a few that have. There are a ton of things to watch out for with this. Generally publishers will not give you access to sell your rights to TV companies without talking to them or getting a significant cut.
It’s important to check what your tournament license states when selling rights. For example, it may be OK with the publishers, but what does your contract at twitch or youtube say? Make sure you double check and always ask.
In game monetization
If tournament organizers get this one, it’s ez money ez life. In game monetization is one of the biggest money makers for publishers in esports. Out of the $1.2 billion figure it’s estimated that 30% or so goes to the publisher DIRECTLY. Esports is definitely a marketing tool for publishers but for the rest of us this money goes a long way.
In game monetization can vary from game to game, sometimes it’s a chest (check out or chest in Dota 2 we got in a while back), sometimes it’s a tournament logo or skin and sometimes it’s some sort of hardware raffle or ticketing system. It really varies. Having these relationships take time and say that the publishers trust you greatly.
Merchandise is another way tournament organizers make money. It could be a split with teams at events or just straight up sell their own merchandise (if anyone want some BEAT Invitational swag just let me know).
It can vary from shirts, keychains, signed memorabilia and more. This honestly isn’t a huge revenue generator at the moment as a lot of esports merchandise is quite faux pas.
Esports Consulting / White Label
See that esports tournament that has been planned, ran to perfection and looks super similar to the other organizers? Chances are, in some games, that there is a white label service behind the scenes actually running the tournament. White labeling is for example slapping on another label on a product and calling it on your own. For example, sponsor X wants to brand their own tournament. They can either hire all the staff inhouse or they can just outsource it to an expert who does that specific game daily / weekly. This makes way more sense to white label the event.
So there you have it! A quick guide on how tournament organizers make money. It’s not fully comprehensive but this is a general guide. In part two I’ll discuss how teams make money and the eventually casters / agencies.
If you have any questions feel free to contact me below on the form or leave a comment below.