The economic spillover of the esports industry

Image credit: Interactive Software Federation of Europe (ISFE)

A lot is said about the money generated in the esports sector. It seems simple enough: gaming tournaments are organised, teams and players contest the tournaments, and media companies and brands exchange audiences for sponsorship revenue. But there is a whole other side to the esports industry that is not even accounted for as ‘esports revenue’.

Esports demands logistics that must be provided by an industry of tertiary services. For every stage that is set, for every city that hosts an event, or even for every player that signs a contract, there is a supporting structure that benefits from the expansion of competitive gaming.

Still mostly in the digital world, for now, it is important to note that esports is a sector inside a much bigger endeavour: the video games industry. As publishers create games capable of generating interesting competitive stories to attract audiences, esports can — in a way — be considered as essentially big marketing activations that promote publishers’ products, from the games themselves to in-game purchases.

In the ‘Guide To Esports,’ the Interactive Software Federation of Europe (ISFE) highlight the case of Valve’s Dota 2. During its flagship The International tournament, the sale of its ‘Battle Pass’ digital product was promoted. Battle Pass revenues surpassed $137m (~£109m), but “none of this money is included as esports revenues,“ according to the ISFE report.

A myriad of other sectors enjoys the economic spillover of esports, from telecommunications — essential for playing and broadcasting games — to PC hardware. Esports Insider spoke to hardware manufacturer ASUS about the effects of competitive gaming on the company. 

Daniel Kawano, Product and Marketing Manager at ASUS ROG Brazil, said the company is increasingly working with publishers, organisations and players in the development of its products. He highlighted that the mobile competitive scene even stimulated ASUS to invest in specific products for this market, resulting in a phone carrying its gaming-focused brand ‘Republic of Gamers’ (ROG). 

“Undoubtedly, this relationship we have with esports, combined with the development of specific events and the fact that we speak the same language as the players, has been beneficial for the results achieved,” said Kawano.

Esports also generates business for other professions including architects, designers, and builders. Care for pro players also involves professionals from the health sector like psychologists and physiotherapists, while law firms are also an essential component of the sector’s modern structure. ISFE’s Guide to Esports mentions that the Madrid Bar Association, in Spain, even felt the need to assemble a dedicated esports division.

Nicholas Bocchi, Director at the Bocchi Advogados Associados law firm based in Brazil, told Esports Insider that the wider gaming/influencer industry is still far more valuable, a reminder that esports is but a fraction of the gaming industry: “Demands relating to the entertainment business, such as contracts with influencers, broadcast platforms, and so on, are more numerous and already relevant, as opposed to demands related to esports, such as player contracts, teams, etc.”

The lawyer explained his affirmation by mentioning that, for now, “most players seek advice only when they want to undo a contract or when there is a problem, such as having been placed on the bench or disconnected from the team. As for organisations, today [the ones that hire law firms] are those that value contract strategy.” 

Bocchi expects to be ‘well-positioned’ for further developments, as he considers that there is still room for professionalisation in the sector. However, despite still professionalising, esports is already producing plenty of economic benefits for other sectors of the economy. For example, when a city hosts a competition, it receives the economic benefits of hosting players, staff members, tournament organiser workers, and fans.

Additionally, many bars and restaurants feature competitive gaming, from themed spaces to places to watch competition broadcasts to even providing customers with equipment for matches and tournaments to be hosted.

In Barcelona, the Afterlife Bar features, since 2015, an esports-themed environment. Esports Insider spoke to Co-founder Teresa Armelles about the initiative of investing in such a venue. “Here in Spain, there is a lot of sports bar culture.” Armelles said.

“Many people meet at the bar with friends and share their passion for teams and chat about the plays. If it works [for other social activities], why would it not work with League of Legends or StarCraft?”

“[Esports] move a large number of fans that want to gather and share their hobby, and bars and restaurants can fill that need. We specialized in esports to give a custom experience to video game fans, so they can feel comfortable and meet their friends in real life,” said Armelles.

Even if they are not esports-focused venues, many bars and restaurants, along with hotels and other businesses in a city, benefit from esports events.

In some cases, entire cities feel the direct economic impacts of esports events. The most notable of them is the Polish municipality of Katowice: a post-industrial city, Katowice was revitalised by frequently hosting one of the biggest esports tournaments in the world, the Intel Extreme Masters Katowice, since 2013.

ISFE guide to esports superliga
Image credit: Kirill Bashkirov/LVP – Liga de Videojuegos Profesional

For holding up to this legacy, today the city is known for being a kind of ‘capital of esports’, with a whole local structure of hotels and restaurants benefitting from it.

Another, more subtle, example is Raleigh, a city in North Carolina, U.S. Hosting the international Rainbow Six Siege tournament ‘Six Major Raleigh’ had a net economic impact of $1.45m (~£1.16m) on the city, according to ISFE’s ‘Guide to Esports’. It even led to local stakeholders creating the Greater Raleigh Esports Local Organising Committee (GRELOC), which aims to promote the city to receive new events.

As municipalities around the world begin to compete for the opportunity of hosting major events, it is safe to say that esports has a powerful effect on driving revenue beyond the confines of what is currently considered ‘esports revenue’. 

It’s not just publishers that win. The existence of the competitive scene drives value — both economic and social — for a much larger spectrum. 

A wider report on the distinct spillover effects of esports was published by ISFE in its free Guide to Esports.

Supported by Interactive Software Federation of Europe

Victor Frascarelli, Journalist
Victor Frascarelli is a Brazilian esports business journalist focused on the LATAM market. Previously at The Esports Observer for two years, Victor enjoys all things competitive, from League of Legends to football to chess to CS:GO.