The esports industry is getting a lot of attention right now with the general news media seemingly writing about the highest paid players and the biggest events every single week.
It is all about money as this is what makes the headlines and attracts the crowds but what these newspapers rarely discuss is where that money comes from.
Who is paying players and teams, how can they earn a consistent income, and where does the tournament prize money come from?
Tournament Prize Money
In a game of football the money comes from the organization that stands to profit from it the most, be that FIFA or the FA. In the FIFA World Cup for instance FIFA gives the hosts some of the funds needed to stage the tournament, supplies the teams with money for entering and winning and earns its share of the spoils through tournament profits.
Believe it or not, the esports industry works the same way with games’ publishers assuming the organizational role. These publishers want to turn their games into esports as it is free publicity and greatly increases the profits. To encourage this, they will launch tournaments and events and offer prize money to the entrants.
The organizers can recover some of their expenses through sponsorship and broadcasting rights, but really, it’s all about the publicity. If they can convince a generation of gamers to devote their hard-earned money and time to their game, they’ll earn a massive income for years to come.
Publishers also license the rights to other organizers, who then host events featuring those games. The organizers can attract the crowds and earn money from tickets, sponsorship, entrance fees, and broadcasting; the players get paid to win, and the publishers get the publicity. It is a win-win!
Teams and Players
Obviously, one of the biggest sources of income for an esports team is tournament prize money. There are millions of dollars at stake in these tournaments and if an esports team can scoop the grand prize, they will earn enough to keep playing for two or three years.
But they can’t rely on that success and even if they could, what about all the time it took them to practice and prepare? It takes hours of daily practice to become that good and no one can afford to devote that time for free.
Established teams use sponsorship, merchandising and online advertising to sustain itself, but a new team will look for an investor. That investor will pay for the team’s equipment, time and entrance fees; they will ensure they can eat and keep a roof over their heads. In exchange, the investor will earn a share of all the team’s income, whether that be from tournament earnings or sponsorship.
The same is the case for individual esports players. Of course, to get an investor a player needs to prove his or her worth and they often do this by making a name for themselves through streaming or winning regional/online events.
Again in many ways, it’s like football. Players strut their stuff for local teams, get picked up by a scout and if they’re good enough, they will go on to earn millions.