“Dissociation” of billion dollar revenue of eSports companies: Sponsors are a source of life, the future is directed towards stadiums like other sports

The popularity of video games is pushing eSports to become a billion-dollar market with revenue estimated to reach 1.65 billion USD by 2021. Electronic sports companies are also witnessing an explosion of revenue and value.

Cloud9, the world’s most valuable eSports company, is valued by Forbes for about $ 310 million (2018). Meanwhile, Team SoloMid is right behind with a valuation of 225 million USD and is still growing steadily.

Investors also do not hesitate to continue pouring capital for these companies. In October 2018, Cloud9 received $ 50 million from the ring of Series B. Team SoloMid also attracted an investment of $ 25 million from well-known venture capitalists and athletes.

ESports revenue increased rapidly and steadily each year, estimated to reach 1.79 billion USD in 2022.

How are these eSports companies so attractive and growing so fast? Where do their sales come from?

Sponsors

Sponsorship is considered the life of eSports. According to Newzoo’s forecast, eSports revenue in 2019 is expected to reach 1.1 billion USD, and the largest contribution is from donations, 465 million USD.

Sponsors pour money to eSports companies in exchange for the brand appearing on the athlete’s shirt or in the online broadcasts, events and taking photos. They come from all fields, food, drinks to sports wear.

Some brands focus on events and tournaments such as a $ 30 million contract, valid for four years between Nike and Tecent’s League of Legends Pro (China). Meanwhile, other brands focus on individual players. Best of all, Red Bull’s deep partnership with the Twitch star – Tyler “Ninja” when the brand has taken full advantage of the huge audience to increase awareness and revenue. In addition to pure advertising, the beverage company also released limited edition Red Bull cans from early April this year.

Red Bull’s hand-held Ninja has a limited edition with his own picture.

Broadcast rights

ESports tournaments are attracting huge viewership and continuously increasing after each year. The 2018 World Legends Alliance Championship has recorded 99.6 million viewers online, with the number of viewers simultaneously reaching the highest level of 44 million, breaking the record of the finals of 2017.

Therefore, it is not uncommon for broadcast rights to account for nearly 20% of total eSports revenue, almost exclusively for game developers and tournament organizers – third parties. To get the rights to broadcast major tournaments like OWL and LCS, organizations have to pay a small amount of money.

The main revenue sources of eSports companies include sponsorship, broadcasting rights, advertising, selling goods and game releases.

Newzoo estimates revenue from broadcast rights of eSports companies will reach 251.3 million at the end of 2019 and reach $ 400 million after two years.

Currently 44% of e-sports media revenue comes from North America, mainly due to the sports culture that is deeply embedded in the region, where many large companies are concentrated. In the future, opportunities to make money from broadcast, media will include personalization, exclusive role content, and the function of removing ads.

advertisement

Advertising is the third largest source of revenue for e-sports companies. In it, content is the key factor when they have to make the audience excited and want to see. For eSports, most ads are displayed on Twitch, Amazon’s leading popular online streaming platform.

Sell ​​goods and tickets

Unlike traditional sports such as football, baseball, … sales from the sale of jerseys, accessories or tickets do not account for a significant proportion in the eSports market. In 2019, this figure is expected to reach over 100 million USD.

However, selling live tickets for the tournament is a potential source of revenue and makes the games more attractive, as typical as the Overwatch League or the League of Legends Championship. In 2017, 40,000 tickets to the final of the World Championship for League of Legends (LOL) in Beijing’s “Bird’s Nest” stadium were sold out. Last April, 23,000 seats watching League of Legends in North America were dispersed after less than four hours of opening, causing the organization to add another 3,000 units.

Events, tournaments filled with stadiums that hold tens of thousands of people worldwide will step by step help eSports get closer to regular sports, thereby boosting ticket sales.

In addition, the proceeds from the game distribution also contributed more than 95 million USD to the total market revenue.

Currently, Tecent Game is the largest game publisher in the world by revenue, market capitalization value reaches 475 million USD. The Chinese giant currently owns 100% of Riot Games – which runs the League of Legends league and many other tournaments around the world. Besides, the market also witnessed the explosion of training companies, owning professional players such as Cloud9, Team SoloMid, …