Esports Organizations’ Money Game: How They Generate Revenue and Stay Profitable

Every gamer finds the economics of esports fascinating. Playing video games for a living is now a real option. Players can earn a regular salary from esports teams, no matter where they play.

How do esports teams generate enough income to pay their players well?

Esports organizations vary in size, so their operations will differ. Newer organizations often focus on prize pools for support. Larger teams work like complete esports businesses. They connect with wider communities and have different ways to earn money. Esports teams are discovering new ways to earn money. They get sponsorships, secure media rights, and partner with brands, such as Irish online casino. This approach boosts their global reach.

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Prize Pools

Many people think esports organizations earn most of their money from prize pools. This brings in money for teams. Yet, most prize pool winnings often go to the players as bonuses. Players and organizations share the prize money percentage. It can change from team to team and game to game.

Esports organizations usually take a cut from total prize pools. Still, this gives them a way to earn money.

Sponsorships

One of the most important revenue sources for esports organizations is brand sponsorships. Top esports organizations have many active fans. Their younger and loyal audience is a big opportunity for brands.

Commercial partnerships form a core way for esports organizations to make money. These brands get different perks, including jersey spots and custom ad campaigns. Here are some major brand deals from 2024:

• Team Vitality is renewing its partnerships with JBL Quantum and GG.BET, ALDI, and Crédit Agricole.
• FaZe Clan is launching an energy drink flavor with GHOST.
• NRG Esports is partnering with Panda Express.
• Revenant Esports is teaming up with AMD as a title sponsor.

In 2021, TSM announced a $210 million deal. This 10-year agreement gave naming rights to the cryptocurrency exchange FTX. As a part of this deal, the organization changed its name to TSM FTX. Yet, the deal was put on hold more than a year after FTX got caught in a legal issue and went bankrupt. Still, this highlighted how valuable brand sponsorships can be in esports.

UK esports group Guild Esports shared its 2023 financial report. As of December 31, 2023, its sponsorship pipeline reached £5 million.

Merchandise Sales

Esports teams make money by selling official merch to their fans. This can include selling official esports jerseys. Many groups also offer hats, t-shirts, and jumpers.

100 Thieves, a North American esports team, is among many now focusing on apparel. This move helps them diversify their revenue. Many esports teams now market themselves as lifestyle brands, not gaming teams.

Brands can boost their sponsorship deals by selling more esports jerseys. This helps get their logo on team jerseys.

Esports and gaming have also seen a growing number of merchandising collaborations. A great example of esports merchandise is the LIQUID X MARVEL SPIDER-MAN apparel line. G2 Esports is joining forces with Ralph Lauren, the famous American fashion brand. Together, they will launch a new apparel line.

If an organization has effective marketing, merchandise can generate a lot of money. It also helps raise awareness of the esports brand. 100 Thieves revealed in 2021 that it made $2.5m (~£2.3m) in one month from its ‘Foundations’ apparel line.

Revenue Share and In-game Items

Esports publishers have created franchised leagues. The League of Legends EMEA Championship (LEC) and MLB Professional League (MPL) Indonesia are examples. Teams must buy slots to take part. For example, the Call of Duty League (CDL) had a reported $25M buy-in, often paid over time. In return, teams get guaranteed spots, better sponsorships, and revenue sharing.

Many franchised leagues struggle to make money. Because of this, they are turning to partnered leagues. Here, teams team up with publishers for marketing, revenue sharing, and tournament spots. Examples include the VALORANT Champions Tour (VCT) and PUBG Mobile Super Leagues (PMSL).

These models offer financial stability, but they cut down the number of teams at the top level. Revenue-sharing deals offer a way for esports teams to earn money. For example, Riot Games split $33M from the VCT 2023 Champions Bundle. This shows how teams can profit from in-game activations and partnerships in leagues.

Funding

Despite securing different sources of revenue, most esports organizations still struggle with profitability. This is mainly because running a team incurs huge expenses. Esports teams invest heavily in player and staff salaries.

They also spend on gaming facilities and travel costs. Also, even with its popularity, esports is still a new niche in the larger gaming industry.

Funding is important. It’s not revenue, but it provides cash for esports organizations to keep operating.

Esports winter is a term for the financial issues in esports. Because of this, investments have fallen.

Diversification

As mentioned, esports is still comparatively nascent. Many esports organizations struggle with profitability. So, they are looking for new ways to make money.

Over the last few years, esports organizations have begun diversifying into esports-related avenues. This can mean launching talent management agencies, such as 8Bit Creative from Soul Esports. The UK esports team Team Endpoint aims to use current facilities to increase chances. They plan to offer a media and boot camp rental service.

Conclusion

Esports teams are not only about prize money anymore. They also earn from sponsorships, merchandise, and in-game items. These help keep them running, but many still struggle financially. Teams find new ways to make money and grow their brand to survive. Esports is constantly changing, so teams need to adapt. They need to stay competitive. They should find smart ways to earn money while also supporting their players.