Esports: A New Path to Monetisation

Sebastian Quinn, Founder of Web3 esports engagement platform Yesports, writes for Esports Insider to discuss monetisation opportunities in esports in light of current market difficulties.

Esports is practically taking over the world. Everywhere you look, there’s a tournament happening. Fans are pouring in by the millions. And brands are lining up to get a piece of the action.

But here comes the puzzling part: for all the attention and excitement, the revenue generated per esports fan is surprisingly low. In 2023, each fan is estimated to contribute, on average, a little over 2 dollars. With such immense popularity and engagement, why isn’t the financial gain for teams echoing this fan enthusiasm?

Remember when everyone was glued to Twitch streams, and it felt like esports teams had hit the jackpot? Those were simpler times. Fast forward to now, and the game’s changed.

With the economy taking a wild ride, brands are tightening their belts. That means less ad spending and a mad scramble among teams fighting for the same slice of the sponsorship pie. The result? A cutthroat environment where everyone’s juggling between keeping the lights on and staying competitive.

A significant revenue stream for many esports organisations has been sponsorships, but relying solely on them has proven unsustainable. Traditional sports teams have long-standing revenue streams and established relationships with corporate sponsors, which most esports organisations lack.

To compound issues further, tournament prizes that once served as a magnet for new players are no longer what they used to be.

Many gamers from the early days are quitting early because the money they made from playing wasn’t worth the time they put in. With websites like Twitch becoming popular, many of these players decided to stream their gameplay instead. They can make more money and have more control over their revenue generation.

The bottom line? Playing games professionally takes a lot of time, and if the prize money isn’t great, it might not be worth it. The gaming world needs to think about this if they want to keep their best players around.

Things are even more dire for esports teams. They’re putting a lot of money into top-notch training facilities, hiring the best coaches, spending heavily on finding new talent, making game strategies, promoting their team, and travelling worldwide for big international tournaments. But with sponsorships few and as prize money and investments dry up, it’s hard to see a good return on all that spending. This penchant for excessive spending has even drawn criticism in the past, and some have even lost their jobs because of it. 

Another elephant in the room is heavy reliance on streaming platforms and game publishers. They’re the ones calling the shots, holding the keys to monetization in ways like merch sales.

For teams, this means they’re limited in how they can earn money. They depend on what these game-making companies (publishers) decide. That’s a shaky ground to be on; it stifles innovation and makes it challenging for esports to soar to the heights it’s capable of.

For example, Riot Games earned over $32 million from selling special in-game items (skins) for a big Valorant tournament. They shared half of that with the teams that competed. From this pool alone, each team received an estimated $1 million, demonstrating that when game publishers allocate more to teams, it can significantly bolster their financial stability. 

Meanwhile, investments in esports, which once seemed rock-solid, are now teetering on a cliff-edge. Case in point: Madison Square Garden Company. They were all-in on esports but reportedly sold off their star team last year. And they weren’t the only ones feeling the pinch. Teams across the board are grappling with these financial curveballs. For instance, the once high-flying FaZe Clan saw its valuation plunge from a peak of $1.4 billion to being acquired in an all stock-deal worth just $17 million by GameSquare — a stark reminder of the industry’s volatility. 

Amid such uncertainty, some are even parting ways with their star players or disbanding their teams altogether, all in a bid to stay afloat. Team SoloMid and 100 Thieves cut several positions last year. Riot Games has pulled back on backing esports outside of Asia. This crunch isn’t just felt by the teams but by the entire esports ecosystem, from tournament organisers to players.

A key reason is the shifting investment landscape. Investors who once poured money into the industry are now being more cautious. This leaves us all wondering: What’s next for this industry we’ve come to love?

Web3, specifically Non-Fungible Tokens, or NFTs, may be one breakthrough esports has been waiting for. Namely allowing teams to better productize and monetize their intellectual property. 

At their core, NFTs represent unique digital assets. In the context of esports, this translates to anything from exclusive in-game items to digital player memorabilia. The genuine appeal lies in their exclusivity. Teams can mint and sell these digital collectibles directly to fans, opening a new and direct revenue channel.

Beyond offering a new route for productising team IP, NFTs offer an avenue for enriched fan engagement. Picture owning an NFT that grants exclusive access to behind-the-scenes content or even a virtual interaction with top players. This isn’t just monetization; it’s an enhanced fan experience.

Metaverse takes this concept even further. Instead of merely being spectators, fans could immerse themselves in virtual arenas, experiencing matches with a depth and interactivity previously unimagined. This virtual realm offers avenues for ticket sales, VR training sessions, and more interactive experiences.

Moreover, the inherent nature of blockchain facilitates a more democratic esports ecosystem. Consider a scenario where teams mull over new strategies, player acquisitions, or merch designs. With token-based voting, fans can now have a tangible say in these decisions, deepening their investment and connection to their favourite teams.

Several esports firms are already leveraging Web3 technology to bolster their bottom line while boosting fan engagement. Teams like Talon, Renegades, and BOOM Esports have embraced NFT memberships offered by Yesports, a prominent Web3 platform for esports and gaming engagement.

This enables fans to engage with their favourite teams, express their support through team NFT acquisitions, shop for merchandise on team marketplaces, and partake in various other interactions.

Similarly, the collaborative effort like Nike and EA integrate .Swoosh collectibles into video games, potentially opening up new avenues for esports monetisation and allowing Nike’s virtual footwear and apparel to appear in games. This represents a major step towards mainstream esport adoption for crypto.

Yesports is also venturing into the metaverse with strategic team partnerships to build virtual stadiums and immersive experiences. This amplifies fan engagement and paves the way for new monetization opportunities within the esports ecosystem.

Amid current challenges, the future of esports holds great promise. With Web3 technologies at the forefront, we might be on the brink of an industry transformation, redefining both the fan experience and the financial dynamics.

Supported by Yesports