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eSports as a business: The lucrative world of eSports

eSport teams have multiple revenue streams, ranging from sponsorships to merchandising, offering a lucrative business model for companies.

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Quantumrun Foresight
February 8, 2022

Insight summary

The eSports industry, with its minimal startup costs and potential for significant earnings, is attracting the attention of businesses worldwide. This sector, which relies heavily on sponsorships and advertising for revenue, is also seeing a shift in societal perception, with video game events gaining broader acceptance as legitimate sporting events. The industry's expansion into emerging markets, resilience in the face of global crises, and potential environmental implications represent key aspects of its future trajectory.

eSport as a Business context

In 2021, there was a notable surge in the monetary rewards offered to eSports teams. As the global economy gradually recovers from the COVID-19 pandemic, we can anticipate a significant escalation in the number of eSports events. This expansion is compelling businesses to pay more attention to the eSports industry, given the impressive revenue figures reported by some of the leading eSports teams worldwide.

Establishing an eSports team demands minimal initial investment, yet the business model and potential earnings are considerable once the team becomes operational. This income is largely due to various revenue channels accessible to them. Sponsorships and advertising form the primary income source, accounting for nearly 74 percent of revenue for prominent eSports teams, accordig to data from Newzoo.

Subsequent major sources of income encompass prize money, ticket sales, and merchandise. In December 2020, the total prize money for CS:GO tournaments reached a sum of USD $14.75 million, with DOTA 2 following closely at USD $8.87 million. These high-stakes eSports events not only provide teams with a chance to achieve recognition and glory, but also offer substantial media exposure.

Disruptive impact

As the eSports industry expands, we can expect a shift in societal perception towards video game events. The escalating broadcast revenue for major eSports events is a testament to this. Furthermore, the rising popularity of eSports events in emerging markets, such as India, is likely to draw more sponsorships in the years to come. This trend could lead to a broader acceptance and recognition of eSports, not just as a form of entertainment, but also as a legitimate sporting event.

The market value of leading eSports teams, including TSM and Cloud9, is already in the hundreds of millions of dollars. Despite the temporary setback caused by the pandemic, early signs in 2021 indicated a swift recovery for the industry. This resilience demonstrates the potential of the eSports industry to withstand global crises and continue to grow. For businesses, this could mean a more stable and reliable sector to invest in.

The rise of eSports events in markets, such as India and China, suggests a significant growth trajectory for the industry in the upcoming years. This expansion into new markets presents opportunities for local economies and job creation. For governments, it could mean a new sector to support and regulate, leading to the development of policies and infrastructure to accommodate this growing industry.

Implications of eSports as a business

Wider implications of eSports as a business may include:

An ever-increasing pool of prize money that is projected to increase substantially once the effects of COVID-19 start to wane.

A big rise in event streaming viewership numbers which may condition a larger portion of the population to normalize viewing other forms of streaming content.

Increased sales for gaming hardware manufacturers and suppliers due to increased gaming popularity.

Continued investment in video gaming software and gaming interfaces, innovations that may spur software, hardware, graphics, interface, and content innovations in other industries.

Economic growth in emerging markets, creating new job opportunities and contributing to local economies.

More young people choosing to pursue careers in this industry, leading to a shift in traditional career paths.

The energy consumption of eSports, from powering data centers to the electricity used by gamers, having environmental implications, pushing the industry to seek more sustainable energy solutions.