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How do esports teams make money?
Global esports revenues estimated to hit $1.1-1.2 billion in 2019, up 26-27 percent compared to last year. Esports money is typically made from advertising and sponsorship.
By 2020 the revenues can increase by 2% (selling media rights to video game production companies is booming).
By 2022, total global esports revenues could be $1.8 billion, according to Newzoo.
The overwhelming majority of revenue for esports teams comes from sponsorship deals.
This means it is so important for esports teams to network in order to secure lucrative sponsorship contracts as revenue streams that are available for traditional sports teams such as stadium revenue and broadcasting rights are not available to esports teams.
This, of course, is a very risky main source of revenue which gives disproportionate power over to the companies sponsoring the team.
The esports industry has been making progress in opening some additional avenues, however. Also, industry expects NJ sportsbooks to accept esports wagers in 2020.
A revenue-sharing model has been introduced in the League of Legends scene where team owners in China, Europe and North America have a stake in the ownership of the leagues they compete it and as a result, are entitled to a slice of the broadcasting and league sponsorship money from the game’s publisher, Riot Games.
This system works similarly to traditional sports leagues like the NFL.
A comparable situation has occurred in the Overwatch scene where a centralized Overwatch League houses all of the game’s top teams from across Europe, North America and Asia.
All of these teams currently compete in an arena in Los Angeles for now but the long-term goal is to have each team, each of which has chosen a city, to have their own stadium in their own city where they can host games.
For example, the Boston Uprising which is owned by Robert Kraft hopes to construct a purpose-built arena for their team to play in, in Boston.
This is being done in an attempt to foster local pride in a team and eventually allow teams to be able to collect revenue from selling tickets to their local matches.
This already happens with Chinese League of Legends teams where several of them have their own stadiums in their “home” cities such as Shanghai, Hangzhou and Xi’an where they play their weekly games.
The goal for esports teams seems to be establishing a revenue model that is similar to the proven and reliable revenue models of traditional sports teams.
Photo by Philipp Keller