'It's Only Going To Continue To Grow': The Economics Of eSports

As the competitive eSports arena continues the shift toward a franchise-based league model, new opportunities to expand the viewer base and generate revenue have arisen.

Ownership

As the eSports arena grows in popularity and scope, the landscape increasingly resembles that of a professional athletic association.

Franchises — such as The Netherlands-based Team Liquid — recruit rosters of players and compete across multiple titles such as “StarCraft," “Rainbow Six," “FIFA” and “Dota," among others.

Revenue

Roughly 70-80 percent of revenue for eSports franchises comes from sponsorships and advertising, Loup Ventures' Steve Van Sloun said in a note earlier this month. 

The figure includes advertisements shown during televised event livestreams as well as brand sponsorships of teams and product placement, Van Sloun said. 

“Companies are flooding eSports players and teams with sponsorship opportunities, and it is only going to continue to grow," he said. 

Merchandising in the form of in-game “skins” — different designs or color schemes for playable characters — also contributes to revenue, according to Loup Ventures. Like sports jerseys, fans can purchase the skins of their favorite eSports teams.

Other sources of revenue include ticket sales and tournament winnings.

Leagues

Three franchise leagues operate in the eSports world: the League of Legends North American Championship Series, NBA 2K League and the Overwatch League.

Becoming Viewer-Friendly

Esports leagues differ from traditional sporting franchises in that they were primarily made for players as opposed to viewers, OurCrowd partner Yori Nelken told Benzinga.

Competitions, which are generally viewable in person or via a livestream, generally last for hours, limiting the viewer base to professional gamers and serious enthusiasts, Nelken said. 

“We believe there is significant opportunity to make this a viewer-friendly space." 

Blink, which is backed by OurCrowd, aims to utilize artificial intelligence capabilities to detect and record highlight moments from hours of gameplay and consolidate them into shorter, viewer-friendly clips. Ronen Shoval, the company's CEO, said its goal is to make all gameplay video "easy and fun to view." 

Nelken estimates that such initiatives will greatly expand the addressable esports audience and create new revenue generation capabilities for franchises.

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Photo by Piotr Drabik/Wikimedia.