11 Monetization Strategies of the Esports Gaming Industry
With more people getting involved in the electronic sports gaming industry, interest will continue to grow. The growth of monetization in the gaming industry has to do with 3 major factors. The financial returns involved, the additional aspects that go into a game, and communities that help each other by sharing tips on game development and helping one another out when they are stuck with a problem.
Esports presents a unique opportunity for brands to connect with their target audiences in a way that traditional media cannot. Esports is growing at an exponential rate and as it continues to evolve, so will the opportunities for brands to engage directly with their consumers. Let’s discuss furthermore the different monetization strategies in the esports industry.
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Esports Current Monetization Strategies
As gaming continues to grow, so do the ways companies can monetize the business. In 2019 out of the total $1096 million revenue generated 41.8% came from media rights, 34.3% came from sponsorship, 22.4% came from merchandise and tickets, 14.8% came from advertising and 3% came from game publisher’s fees. Many esports monetization strategies have been used to generate revenue. The most popular ones are:
Sponsorships – This is where a brand pays for a player’s contract, which includes salary and appearance fees. Brands like Coca-Cola and McDonald's have recently gotten involved in esports sponsorship deals with teams across multiple games. They may also provide funds towards travel costs so players can compete at tournaments away from their home cities when possible.
In-Game Advertising (IGA) – This is where brands advertise their products inside of a game without interrupting gameplay.
Merchandising – Brands sell merchandise to fans of the game, which can include t-shirts, jerseys, hats, and other items that are sold at events or online stores. These items help increase visibility and brand awareness among fans who may not otherwise know about certain brands.
VIP Programs – These are programs that offer exclusive access to players or content creators for a fee.
Advertising - Companies can buy advertising space on their websites or social media pages, or they can sponsor events where they'll be able to place ads directly on players' jerseys and other gear.
Affiliate programs - Companies can partner with companies like Twitch or Amazon and offer them exclusive access to their product/service. This is a great way for smaller companies without much funding behind them (but still want some exposure) to get their foot in the door and earn some money from people who might not otherwise have purchased from them if not for this opportunity.
Game publisher fees - In the past, many game publishers would pay for licenses and then sell them to players. In the case of professional players, this could happen through salary or bonuses. But with the rise of streaming platforms like Twitch, YouTube, and Mixer, more publishers have turned to other methods of monetization.
Game publishers are the ones who pay for the rights to broadcast their games and make money from that. They usually own the league where their game is played, or they have a partnership with an existing league.
Game publisher fees are paid by teams and players. The amount paid depends on a variety of factors, including the size of the tournament and its popularity in comparison to others.
The game publisher releases a game and controls its sales of it. Most publishers have a revenue share with their players, which is usually around 50% of all sales made through their games. They have a flat fee for each player that joins their server, while others only pay out after a certain number of matches are played.
For example - Arena of Valor, which has hit the top of the charts in both mobile and PC gaming, has garnered $6 million in revenue over the past year through game publisher fees. F2P games like Fortnite and PUBG have also proven to be lucrative for publishers as they attract millions of players who pay money to access premium content.
Ticket sales -In recent years, streamers have been able to generate significant revenue by selling tickets for events where they play games live on stage for fans in person. This has become especially popular among League of Legends streamers who can sell tickets for events like League Championship Series (LCS) Finals or even international tournaments through secondary ticketing platforms like StubHub or Viagogo.
Esports tournaments have a lot of spectators, and those spectators are monetized with tickets sold via online ticketing platforms like Eventbrite or StubHub (among others). These tickets can be used to watch a match live or as a reward for purchasing something related to your favorite team or player (such as clothing).
They can be physical tickets that you need to print off yourself, or they can be digital tickets that are emailed to you once you purchase them online. Some ticket sales are free, and others charge a fee for each ticket purchased, but no matter what type of ticket sells well and has good margins, there will always be people who want them so they can go to events and watch esports competitions live! Some tickets are sold at face value, while others sell for hundreds or thousands depending on how popular the event is.
Media rights -Media rights refer to agreements that allow brands to use esports content for advertising purposes on their websites and social media pages without charging a fee from the brand itself.
Media rights are licenses that allow brands to use clips from matches in their videos or broadcasts without having to pay extra money for them. This is how big organizations such as Turner Sports or ESPN get their footage on television networks like NBC Sports Network or TBS.
Players often earn millions from winning championships and Twitch viewership numbers continue to grow each year thanks to increased integration.
Prize pools - Prize pools are the total amount of money that is given to players who achieve victory in an event. The money can be split between teams or individual players. The most prominent examples of this are League of Legends Worlds and the World Championships for Counterstrike: Global Offensive. Another example of a popular prize pool is the World Championship Series, which is held by Blizzard Entertainment and features games like Overwatch and Heroes of the Storm. In both cases, these tournaments have a large prize pool with millions of dollars at stake! Prize pools are an excellent way to incentivize pro players and build brand loyalty among fans.
Esports betting and fantasy sites – Many websites allow fans to place bets on their favorite teams or players’ performances during tournaments. These sites usually offer a variety of different types of betting options: single matches; series (which include multiple matches); or full events (which include all matches for a specific tournament). Some sites also offer live streaming coverage of major events so that viewers can watch them as they happen. This type of site has been around for several years now and is becoming quite popular among casual fans who want to get involved in the action without having to attend any events themselves. Also, it is such an accessible audience for brands.
The monetization strategy of esports organizations is often interdependent with those of their leagues and media channels. Since it is still early, there is no standard consensus on best practices and models to employ, but there are some leading indicators that could indicate trends in future monetization.
Esports have been gaining market attention, and prize pools have been increasing as more tournaments occur, more leagues are formed and investors pump capital into organizations that are looking to expand the boundaries of esports. As a result of the increased attention given to the esports industry with investors looking for their piece of the pie, there is a push from within the gaming industry and esports organizations to increase revenues, which could lead to how future esport organizations generate revenue.