The Esports Economy

Posted on December 11, 2018 in News

A couple of weeks ago I attended the Lagardère Sports esports Rising conference in L.A. to continue to learn the nuances of this evolving segment of the industry and understand how InProduction can be a resource to tournament organizers.

Esports is a global phenomenon. But unlike traditional sports, it was built from the top down. There are leagues, tournaments, teams, athletes, and millions of fans worldwide. The elements are all there, but it has grown so big and so fast that leaders in the industry are still working through some structural issues.

To realize the power and influence of esports, look no further than the traditional sports leagues that have gotten involved. The NFL, NBA, NHL, MLS, NASCAR, and FIFA have all recognized the importance of esports in their own strategy, and have invested significantly for the future. And if that is not enough, a large percentage of professional athletes are gaming too. Now the challenge that many are trying to figure out is how to localize or regionalize it for the sake of activation and engagement at the community

Despite the millions that are being poured into the space, few are making much money … yet. I have heard it compared to the internet boom of the early ’90s. Right now, everyone is still in start-up mode and making capex investments. Over the next two years, there is going to be a shakeout. Some will survive, while others will not. The ones who do will have built the necessary infrastructure and likely figured out a sustainable business model. 

So what is that sustainable business model? The game publishers are making money selling the games, and in-game purchases. But it is the ecosystem around the games, including the leagues, tournaments, teams, and athletes that are still defining revenue streams that can sustain them. Sponsorship. Ticketing. Merchandising. Food and beverage sales. Some have looked to traditional sports marketing for a road map. But the same principles that sustain traditional sports properties may not work in this case. Many stakeholders want to make sure that the culture and inclusiveness that has built esports is not compromised by high prices that limit attendance and participation. Finding the right mix and maximizing revenue from each bucket, without alienating the fanbase, is critical.

Sponsorship has the potential to be one of the biggest sources of revenue. The endemic brands, like Intel, HP, and NVIDIA, have supported esports for a long time, and continue to do so. But now, some of the non-endemic brands, including Visa, Nike, Pringles, and BMW are beginning to explore partnerships. For some of them, associating their brand with something that is still so new and unknown — and in some cases, containing violence — can be a delicate balance. But the flip side is that there is an opportunity to get in early and take significant ownership of the space before everyone else jumps in. And it is hard to ignore the highly attractive presence of the 18–24 demographic that most brands want to reach.

Ticketing carries a lot of potential as well. The key is creating a range of experiences and opportunities at different price points. That way, there is something for everyone, and each attendee can decide what experience he or she wants and can afford. Other traditional sports venues are going through the same challenge. Event attendees are shifting toward unique experiences, and venues are having to create new packages to satisfy that demand.

The next couple of years are going to be fascinating, and I am looking forward to having a view from the grandstand!