Many of the world's leading companies have sponsored the nascent esports scene in a bid to appeal to the young, tech-savvy audience it attracts. Brand owners can no longer rely solely on traditional media like television, radio and print, and esports offers a compelling opportunity to market their wares to a new generation of consumers.
The cash allows tournament organisers to invest in making the scene more professional. Prize pools grow larger and esports franchises pay higher salaries as a result of sponsorship money, allowing more gamers to turn professional.
This has helped drive exports to new heights, but some fans are concerned that the scene is selling out and that corporate giants might ride roughshod over proceedings, ripping the heart and soul out of the competitive gaming sector. Others fear that the bubble may burst and that sponsors will pull out.
Could esports survive without sponsorship? Or would that signal the death knell for the scene?
A Huge Array of Sponsors
Sponsorship is the highest-grossing revenue stream for the esports sector. NewZoo values the industry at $1.1 billion in 2019, and $456.7 million of that is down to sponsorship.
There are two types of esports sponsor: endemic and non-endemic. The former sells products used in the esports sector, so it benefits from the industry growing. Intel is a great example of an endemic esports sponsor.
It launched the Intel Extreme Masters back in 2006, so it is a long-standing supporter of the scene. In December 2018, it signed a $100 million deal with event organiser Electronic Sports League (ESL) to extend its sponsorship until 2021.
Non-endemic sponsors are simply brands that want to appeal to competitive gaming fans, despite their products not actually being used in the scene. CocaCola and Red Bull are huge sponsors of the sector, car manufacturers like Mercedes Benz, BMW, Honda, Nissan, Kia, Toyota and Audi have all piled in, and food brands like Dorito's, McDonald's, Chipotle and Kit Kat are all sponsoring esports too.
Apparel firms like Nike, Adidas and Puma are all getting in on the action, technology companies such as Samsung and Microsoft are heavily involved and financial sponsors keep growing, including MasterCard, PayPal and Quicken Loans.
Securing Media Rights Deals
Esports is increasingly being treated like traditional sports. Various NBA franchises and Premier League clubs have esports teams, and the franchise owners are investing heavily in competitive gaming due to its vast potential.
Traditional sports leagues are a lot less reliant on sponsorship than esports. The NFL earns more than $6 billion annually through TV rights deals with Fox, CBS, NBC, ESPN and DirecTV. The NBA receives $2.7 billion per year through a rights deal with EPSN, ABC and Turner Sports. The Premier League makes around $4 billion per year through TV deals.
This dramatically decreases their reliance on sponsorships, and the esports sector should be heading in a similar direction. The fastest-growing esports revenue stream by far is media rights, and it would be healthy for it to draw level with the money raised through sponsorships and then become the main revenue stream for the sector.
Mainstream broadcasters from around the world are paying to show Overwatch, StarCraft and CS: GO tournaments, but digital streaming companies offer the biggest opportunity. Twitch, YouTube and smaller operators like Mixer are all vying for supremacy in this field, and the esports sector can make increasing amounts of money in the future by tying up more lucrative streaming deals for the exciting content it provides.
On websites like esportsguide.com you can even find the updated calendar in real time of the next tournaments and the result of the matches
Boosting Live Attendance Figures
Traditional sports franchises also make a lot more from ticket sales, merchandising and food and beverages than esports companies. Tottenham Hotspur sells season tickets for £1,995 ($2,523) apiece. When you multiply that by tens of thousands of seats, it adds up to a fantastic revenue stream. North London rival Arsenal charges £1,768 ($2,236) and it also charges a small fortune for a chicken pie and a pint of lager.
The median price of a ticket at the New England Patriots' Gillette Stadium is $468, while a beer will set you back $7.50, a soft drink costs $4, a hot dog is $3.75 and parking is $40.
Esports simply lacks this revenue stream. There are some big tournaments held at stadiums, but they cannot fit many fans inside them. The world's largest esports-focused stadium was revealed in Arlington this year, but the maximum capacity is just 2,500.
Tournaments have typically been held on a small scale, but that is starting to change. A reported 19,000 fans packed into the Arthur Ashe Stadium in New York City - normally the home of the US Open tennis tournament - to watch the Fortnite World Cup this summer. A further 12,000 people filed into the Wells Fargo Center in Philadelphia to watch this year's Overwatch Grand Final.
Generating a Modern Image
Esports franchises are also becoming more sophisticated when it comes to selling merchandising. One of the reasons Drake invested heavily in 100Thieves was its success in selling apparel, and he is helping drive that on further.
If the esports sector can crack media rights, ticket sales and merchandising, it could absolutely thrive without sponsorship. However, it is hard to imagine brand owners deciding to cut their spend on esports deals. If anything, it is likely to ramp up significantly in the years ahead.
Sponsors can reach a target group that is difficult to communicate via traditional means. It allows them to generate a young and modern image and tie themselves to something consumers are passionate about.
The challenge for the sector is to spread its income around better. NewZoo's figures have been criticised as over-inflated, but they also exclude some significant contributors to the esports economy.
The Broader Esports Economy
Competitive gaming fans love to bet on the action, and firms like Unikrn offer odds on all manner of markets. This helps fuel viewership numbers and increases the amount of money linked to the sector: Eilers & Krejcik Gaming estimates that global wagering on esports will hit $8 billion this year and then increase to $13 billion in 2020.
It also does not take into account the money that publishers make through in-game microtransactions. While they are not directly tied to esports, competitive gaming has fuelled the popularity of titles like League of Legends.
LoL fans spend more than $1 billion per year on these microtransactions. Dota 2 players buy battle passes in the knowledge that some of the money is funnelled into the prize purse for The International. Epic Games is banking on esports to maintain the performance of Fortnite, which generated $2.5 billion in 2018.
When you factor that in, esports seems less reliant on sponsorships. They are still a crucial part of the mix, and the industry faces a challenge in boosting other revenue streams, but esports is still a relatively new sector and there is every reason to think it could succeed.
