The esports landscape can be broadly segmented into publishers, event organizers, platforms and teams/players.
Publishers such as Riot Games, Valve, Activision Blizzard and Electronic Arts (EA), develop, market and distribute video game titles, and to the extent the game is shipped in physical form, publishers are also responsible for manufacturing. They also control commercial rights for games and license content to third parties and event organizers.
Event and League
While game publishers often fill the role of event organizer, competitions can also be promoted by third parties such as Electronic Sports League (ESL), a leading independent organizer of esports events and leagues.
Esports fans consume content almost entirely through online platforms, such as Twitch, YouTube and Major League Gaming (MLG), which stream live competitions, user generated videos, publisher generated videos and other events.
Teams and Players
Esports teams and players earn revenue through prize money, merchandise sales, sponsorships and media rights (popular teams or players can be paid to exclusively stream on specific sites). For players, teams provide logistics, practice locations, coaches, and now salaries. Esports teams can compete in a single video game or field players across multiple titles.
Dealing with the Glitches
In the rapidly maturing and evolving esports landscape, it is still important to understand the challenges the industry will face in the years ahead.
The ubiquity of programming, along with millions of hours of content on streaming sites, has created a cluttered and diluted landscape. The confusion makes the competitions less approachable for fans, as well as for potential sponsors and media partners. Going forward, publishers may seek to focus on a smaller number of titles and events.
Without unionization, esports leagues can be subject to antitrust lawsuits if they set rules around how teams transact for players.
Currently, there are no universally recognized organizations charged with setting standards or regulations for esports. Leagues can lack proper governance and in some cases teams and event organizers have accused publishers of exercising too much authority. At the same time, there are no set rules regarding player issues such as drug use or gambling.
For games such as Counter-Strike (CS:GO), sponsors may be reluctant to be associated with guns and violence. At the same time, there is no real consensus on how to insert commercials into an esports broadcast. A lack of reliable measurement is also a concern for sponsors looking to accurately calculate ROI.
In general, the monetization challenge for esports is identifying a revenue stream from a fan base that largely consumes its product online for free. Revenue until now has primarily stemmed from sponsorships. In order to grow, publishers and leagues will likely have to take a different approach to license and window content. Revenue growth towards the level of traditional sports leagues may also require streaming content on television.
Entering the Big Leagues
Despite the challenges, the esports playing field has hit notable milestones in becoming an established industry while continuing to expand and offer new revenue opportunities. Certain leagues, such as the Overwatch League (OWL) have utilized a traditional approach and adopted a professional sports franchise model with geographic-based teams. Economically, OWL is also structured similar to other sports, with separate revenue streams for the league and individual teams. Meanwhile, publishers like Electronic Arts continue to invest in competitive gaming and focusing the company’s strategy more on driving engagement through its entire player base rather than generating direct esports–related revenues. In the last few years, the company has expanded into more games, modes and events with corresponding live services monetization opportunities, which has driven strong engagement and profit benefits. Above all, the competitive gaming industry has forged its own path and has already grown larger than many have realized. By gaining traction among publishers, event promoters, platforms, teams and investors, all of whom see prime opportunity for monetization and growth, esports is well on its way to becoming a mainstream industry.
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