How many mothers have told their sons and daughters not to waste their life playing video games online? Well, some of these mothers were wrong accusing their offspring of endlessly procrastinating: video gaming is slowly turning into a sport.
A virtual one, of course, but still. And not just any sport: some expect competitive gaming or eSports to become the spectator sport of the 21st century.
Gaming online has grown from a simple pastime into a massive phenomenon over the last decade. And the growth of eSports is unbroken: the number of viewers is climbing fast, and so is the amount the industry makes each year.
According to Newzoo, eSports will generate revenues of over $1 billion this year, down from its previous estimates due to the lack of major live events but still growing compared to last year.
eSports are similar to traditional sports when it comes to revenues but there are key differences between the two.
Teams and leagues
The structure of eSports is similar to traditional sports: there are teams competing in one or more disciplines, organized in leagues, and participating in various tournaments.
With most of the action taking place online, though, the eSports teams’ revenue streams are different: they rely much more on sponsorship.
It shouldn’t be a surprise that most sponsors come from the world of gaming or technology.
Among them, you find several major brands in the gaming business – developers, hardware manufacturers, accessory brands, and their likes – and companies active in other areas, from tech giants like Amazon to entertainment giants like Tencent.
Another important source of revenue for eSports teams is prize money. For this, of course, they have to win – but when they do, it usually pays off.
Invictus Gaming, the Chinese eSports team that won the 2018 League of Legends World Championship, took home $2.4 million out of the event’s $6.4 million prize pool.
Most teams, in turn, don’t rely on prize money as their main source of revenue – they often use it as leverage when negotiating sponsorship and advertising deals.
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And, like “traditional” sports, eSports also generate revenue from advertising, endorsements, and merchandise sales.
Players promote products and services through their streaming channels, and tournaments show ads to their viewers. Advertising revenue made up almost 20% of the eSports industry’s total revenue in 2018.
Like “traditional” sports teams, eSports teams often sell their own merchandise – or go beyond “their own”.
Last year, Team Liquid signed a deal with Marvel to sell exclusive, superhero-themed merchandise, and UK-based Fnatic signed with none other than Hello Kitty, selling threads sporting the famous cat’s likeness. With an eSports headset, of course.
What is the future of eSports? Will it ever become an Olympic sport? There is no way to know this right now. For the time being, it is here, making a lot of money – and it is expected to do so in the foreseeable future.