$1.3 Billion esports industry - you will be thinking this is some kind of joke. But it’s a reality; the world of esports is excelling day by day. Each day, thousands of teams compete, and so the industry is booming like never before.
But now the question is are these teams making money the right way and how they are earning these lump sum amounts. When you see such a huge revenue generated by the industry, it means surely people are getting profits and so they are spending their time and money in this gaming world.
Whether it’s merchandising, leak payments, sponsorship, or you are talking about gaming investments, businessmen are doubling, or you can say rolling out their payments even to 10X within the esports world.
But this is just the half-truth. Although they are earning this kind of money, it doesn’t mean They have it so easily. When the FTX bankruptcy issue made the headlines, TSM issued a statement about stable and profitable business.
But don't you think this statement hints at some dark secrets of the gaming world? The truth is that although teams are making profits, not all esports teams are profitable.
In 2021, there was an article that stated 100T was not profitable at that time, but they were hoping to generate profitable revenues from their teaming business in future. This blog covers some of the known ways esports teams switched to earning profits. There are even some myths discussed about the ways esports teams are making money and to which extent they are true.
How do esports teams make money?
Sponsorships
The first and foremost where’s esports industry generates revenue is partnering with the sponsors. Beam sparked now with brands. These sponsors help them in selling their products and services to their fans and other audiences.
Everything, whether it is logo display or product placement comes under this branding sponsorship deal. Brands market the team in campaigns and superb quality collaborations.
Some well-known names, including Red Bull, Razer, and even BMW, have to invest huge amounts of money in esports sponsorship and are now generating thousands of dollars each day with this opportunity.
Merchandising
Another way esports teams make money is by merchandising the sales. Whether you talk about accessories, clothing, or any other things that these teams sell through their websites or events, all fall under the merchandising business category.
There are even some teams that have their own production and in-house distribution. This way, they can take their profit money up to the maximum level.
On the other hand some teams also partner with merchandise sellers who help them out in their production and distribution approach.
Streaming and Content Creation
People usually think streaming never generates that much money compared to other options. But in the world of esports, it’s easy to generate money with content creation and live-streaming efforts.
There are quite a number of players who generate money from subscribing fees, our generation and even donation scenarios on a variety of platforms including YouTube and Twitch.
Although teams are unable to get any direct financial benefits with these streaming and content channels, still live streaming plays a key role in engaging with your audience and to attract sponsors.
Tournament Winnings
Another way to generate revenue is to win money by playing tournaments. But in this case, although the team wins a huge amount of money, individual players still get a smaller portion of the revenue.
When the prize distribution money is given to Dan, players get the maximum amount of money. For example, the T14 won the Newbee, they smartly cut out 10% share of the prize money. Then the remaining amount was distributed among the players.
Media Rights
In traditional sports, media also play a key role in generating revenue. Sponsors get media rights, and they generate a stream of revenue for this smart activity. But any sport does not work like that.
However, the esports industry is now switching to media rights choices, too. People are now generating income by selling their broadcasting agreements like the Overwatch League.
But still when you have free video platforms like YouTube and twitch it actually becomes a challenging task to monetize your media rights.
Investments
Businessmen also invest in traditional sports teams, and over time, they actually not just get their investments back but start a stream of revenue with this strategy. The same goes with esports teams; the investments people provide help the industry to expand over time.
People now collaborate with teams and help each other by introducing investment money in the team, so they can grow the esports world the same as the traditional sports industry.
Revenue Sharing Agreements
Leagues and developers share their revenues to get smooth revenue for a longer period. It means sharing all the profits the team and leads get in every way. Whether you are talking about sponsorship, social media deals, and even merchandise sales, every profit will be shared among the developers and the leagues.
For instance, the League of Legends championship series earned a huge amount of shared revenue by partnering with gamers. Now, both teams are earning financially stable revenues due to this partnership.
Do esports teams make money from streaming?
One of the major myths that is prevailing nowadays is that esports teams get huge lump sums of money from broadcasting rights, live streamings and even YouTube. Although this was true in the early days of the esports industry, people are making a lot of money from streaming on Twitch and Justin TV.
One of the teams, counter logic gaming, armed thousands of dollars, with the help of streaming on twitch. After some time they partnered with Own3D, and Azubu and so got exceptional profits.
In those days, they earned incentives from 1000 viewers; according to an estimate, they were earning $10,000 every month with ads. But still, this was an initial deal that paved the way for future exclusive deals.
But now the industry has changed quite on a huge level, now a few teams get to earn money with YouTube and Twitch by doing ads generation. And even players are no longer entrusted in getting low streaming payments.
Now as compared to the streaming choice these sports teams are making money with the help of sponsors, by advertising their products to their fans.
Developers and leagues
Another scenario, esports teams make money with leads and developers. Usually tournaments and leads offer a significant amount of money to each team and ask them to participate in the tournament.
Now you will be thinking how these tournaments make money to pay the players, so they hold the broadcast rights and generate tons of revenue with this strategy. People get to pay for tickets, and merchandise sales and other scenarios bring money for these tournaments.
Is esports profitable?
It's time to say goodbye! But you will be thinking whether esports is profitable or not. Although the esports industry is quite profitable, still there are teams and organizations who are struggling for a long time in the industry to generate profits.
However it’s easy to generate revenue and double it up, with smart strategies and planning. Usually most of the teams who play in the esports world, get to know how the marketing industry works.
If you want to prevail in the industry and sustain for a longer time, you have to invest with patience and smartness in this industry. Long story short, to prevail in the eastwards world and generate a lump sum amount of money, you have to target the industry with every strategy.
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