How do Esports teams make money?
Esports teams are still thriving and growing despite the COVID-19 setback
It’s no surprise that the esports industry keeps growing and it’s largely thanks to the teams creating competition and engagement. Unfortunately, these teams often struggle to survive and grow, especially during the global COVID-19 pandemic. With tournaments moving online for nearly 12 months now, earning revenue from live events is impossible. Clearly, teams are still thriving and growing despite the setback and fans wonder how esports teams still make money and generate revenue streams.
How Esports Teams Make Money
As of this writing, revenue and profit reports on the biggest esports companies and teams are not public. Because of this hidden piece of information, many don’t know about the finances behind the scenes. Besides the best of the best, most esports teams are not profiting and actually lose money over time. Running an esports team usually does not generate revenue at first and takes lots of building. So how do esports teams make money and create sustainable sources of revenue?
Tournament Prize Money
The most obvious method to earning revenue as an esports team is winning tournaments. Although prize winnings are a very inconsistent way to make money, it’s the most natural way for them. And in order to win, teams need quality players no matter the cost. Just like in the sports world, some esports teams will sign expensive contracts to get the best players.
Fans recently saw this in the League of Legends esports scene. Cloud9, one of the best teams in North America, signed a multimillion-dollar deal to acquire Luka “Perkz” Perković from G2 Esports, arguably the best team in Europe. Though not disclosed publicly, strong rumors state that Perkz makes over $2 million a year from his three-year contract.
Now, what happens when the team can’t win? Much of a team’s success comes from how they perform in competitive video games. If the team can’t field a good roster or never gets the chance to leave grassroots tournaments, this eliminates an entire method of revenue. Unlike in sports, however, relying on tournament money is unsustainable and even luck-based. Even the best teams know to capitalize on multiple avenues instead of throwing all resources into the best team.
Esports Sponsorships
Knowing that tournament prize winnings are not a consistent source of revenue for esports who want to make money, sponsorships are the first step to something more stable. In the esports industry, sponsorships make up the majority of revenue for teams. Thanks to its growth, viewership stats peak higher each year and more fans join in on the scene. The potential audience and reach that exists for brands is massive and sponsors know that.
Most sponsors of esports teams and companies consist of hardware and electronics companies because of the shared relevance with the two fields. However, non-endemic brands are jumping into the scene too. Supplement company G FUEL uses esports and gaming creators as a frequent path to target more fans. Even auto companies like Mercedes-Benz and BMW, which seemingly have nothing to do with esports, sponsor some of the best teams in order to tap that huge audience.
Analytics company Newzoo found the data on esports revenue streams in 2020 and showed sponsorships making up over half of the revenue. Out of $950.3 million in the 2020 data gathered, $584.1 million came from sponsors. This figure will only keep growing in 2021 too as esports teams and orgs start signing more streamers and content creators.
Streaming and Content Creation
A recent development for esports teams looking to make money and find growing revenue is using content creation. A successful esports team doesn’t restrict itself to purely competitive pro players. Signing notable streamers can create new opportunities, reach, and branding for the team.
It may not directly profit the team to sign a streamer, but the potential audience of the stream is what teams should look out for. Especially if the creator sees strong growth and will get even bigger. When connecting with sponsors and partners for campaigns, the biggest factor they look for is potential reach. Since top streamers reach consistent audiences of thousands and tens of thousands of viewers every stream, it’s natural to tap into that. In particular, this is where sponsorships and partnerships truly shine when seeing such large audiences.
Organizations like Team New Age and FaZe Clan are signing popular streamers and content creators. TNA actively uses its $3 million gaming mansion to create video content to grow its brand and monetization on video streaming platforms. Just two months ago, Envy Gaming signed BotezLive, a pair of Twitch streaming sisters who play chess and since helped grow the team’s social media followings and reach. These content creators can be found everywhere, including Twitch, YouTube, and now TikTok.
Ads and Apps
Using ads for digital placements is another way for esports teams to make money. As teams and brands grow, they’ll see more traffic on their websites, which can be monetized via ads. Team Liquid showcases this through Liquipedia, a major information hub for everything in esports. With how often the community wants updated information on teams, players, games, etc., placing ads on Liquipedia becomes a stable revenue flow.
Developing software and tools is yet another stream of revenue esports teams can delve into. Though working on other applications takes resources and investment, it can pay off when done currently. The Blitz coaching application, for example, tracks and gathers various in-game data for games like League of Legends, CS:GO, VALORANT, and more to conveniently provide it all for players. Owned by Team SoloMid, a major American esports company, Blitz is currently free but plans to offer premium services to the thousands of players who use it.
Merchandise
Another traditional method esports teams use to earn revenue comes from the sale of merchandise. Although selling products has nothing to do with esports directly, the popularity of the brand drives more sales. With social media helping drive companies to success, teams should convert that following and engagement into sales. Generally speaking, teams that win more will gain a stronger social media presence, which translates to sales. Obviously, it’s not that easy and takes a good social media and marketing team to start.
The best esports team that takes advantage of this is 100 Thieves. While they may not always be a top performer competitively, their brand grew quickly over the past few years. Thanks to the leadership of owner Matthew ‘Nadeshot’ Haag and powerful marketing, 100 Thieves boasts every revenue option on this list so far. 100T focuses on limited high-quality items for its expansive clothing lines, creating a unique appeal that every esports fan wants.
Esports teams don’t need to stay limited to their own resources anymore either. Now that the industry is booming, finding partners is another effective way to create exciting gear. Team Liquid actually partnered with Marvel for special merchandise and product activations. Earlier last year, FaZe Clan partnered with the NFL for merchandise, fundraising, and an event. As more and more esports teams look to other methods of monetizing their brand, partnerships will become even more important.
Virtual Esports Engagement Platforms
So far, the discussed opportunities on how esports teams can make money are common ideas. But the best company leaders and executives find new initiatives to monetize and make sustainable profits without settling on the norms. North American esports teams came into the spotlight recently with fan engagement platforms. Virtual platforms to mimic the engagement at live stadium events now exist.
In January, Team Liquid launched Liquid+ alongside the news of the company renewing its 10-year partnership with Alienware. Similar to Cloud9 Stratus, announced in November 2020, Liquid+ brings a new platform to monetize fan engagement. By providing a virtual platform for Team Liquid’s fans, it incentivizes membership purchases in order to reap the benefits of giveaways, statuses, and unique esports experiences.
“In our next chapter, we’re going bigger than we ever have by introducing programs that contribute to fans and players, starting with our Liquid+ launch, and open up the esports industry to underrepresented voices,’ Team Liquid co-CEO Steve Arhancet stated in a press release.
When thinking of how to make money as an esports team, new creative approaches like these are what the industry needs. Sustaining off tournament winnings alone is not enough. Seeking new innovative ideas not only brings revenue for the organization and team but also revitalizes the industry with new methods. The top esports teams succeed in nearly every one of these methods when it comes to consistent revenue streams and profitability. As time progresses, other successful methods will surely emerge too.
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