eSports and competitive video game playing is becoming a major influence in the sports world. Despite the number of differences between eSports and the “traditional” sports, the similarities in the business models are overwhelming. However, the eSports industry and the companies, brands, sponsors, teams, and gamers are setting a new business model for this 21st century sport. While traditional sports have given the parties involved some key areas to think about as this industry matures, eSports will set its own path.
Revenue Streams
eSports has two different revenue streams. The first is traditional video game and merchandise sales. This includes the purchase of the actual game as well as in-game purchases, and merchandise and other purchases tied to the game.
The second revenue stream is from the eSports competition themselves. Much of the revenue from eSports competitions comes from the broadcasting of these events. Streaming eSports has become highly lucrative both online (Twitch was bought by Amazon for $970 million in 2014) and through traditional broadcast media (TBS’s ELEAGUE averaged 500,000 viewers in primetime in 2016). The rights to broadcast these events are lucrative and give the eSports competition environment financial incentive to grow, raising the industry’s profile for a number of parties.
Sponsors
With growing viewership and increased overall visibility, eSports is in the midst of a gold rush for sponsors trying to reach the large, youthful demographic. Companies like Coca-Cola, Red Bull, Samsung, and others have all jumped into this space sponsoring events, teams, and gamers.
With sponsors come expectations, and those expectations create motivation for all of the parties involved to grow eSports and make it better.
The Wild West of Gaming
Currently, eSports is structured similarly to professional tennis. There is a wide swath of tournaments with different prize pools, standards, level of competition, and visibility. However, unlike professional tennis, there are a number of different leagues. The European Sports League, World Cyber Games, Major League Gaming, Intel Extreme Masters have all tried to gain influence in the space but with a vast number of games and a growing number of teams and eSports athletes, there is room for each; with that comes the risk of businesses in any budding industry – losing market share quickly.
These leagues are all still in their infancy and each is set up differently and has its own problems and benefits.
eSports Athlete Rights and Issues
Many gamers are thrilled to have the opportunity to play their favorite titles professionally. What could be better than gaming for a living? However, eSport athletes, team owners, tournament organizers, and others associating with or employing these athletes have a number of issues that can cause serious legal problems. Employment laws, intellectual property rights, contracts, wages, insurance, and other problems are bubbling below the surface. With no eSports athlete union there are few common standards for leagues and teams which can be chaotic for all parties involved.
The Future of eSports
eSports is in its infancy. All of the parties have the opportunity to shape the industry. Video game manufacturers can develop games specifically for the eSports landscape. Team owners can structure contracts with their athletes, sponsors, and staff to best benefit everyone on their squad. Athletes can grab a foothold on their intellectual property rights and negotiate contracts to their advantage. At the end of the day, each of the interested parties need to protect their interests.
Right now is the time for all parties involved with eSports to determine what the industry looks like and operates decades from now, so it is important that all of the decisions being made are well thought out and the ramifications of decisions are discussed before setting a precedent.