E-sports is a growing industry these days, if you don’t know what E-sports is, I refer you to my article explaining this sector: What is E-Sport ?
Many big brands sponsor E-sports events, and big teams. We also saw actors of the sport to introduce themselves in the E-sport like the PSG or the Schalke 04. If so many players are entering this sector, it’s not insignificant, it’s an opportunity to conquer a new and growing market, but is it profitable for all that? This is what we are going to see by analysing the economic model of the E-sports teams.
On a purely economic level, the teams are paid with the results of the team, the “cash-prices” of each competition, i.e. the rewards attributed to the performance of a team in the competition. Obviously, the bigger the competition, the bigger the reward. To give you an idea, the winning team of the League of Legends World Championships in 2021 received almost 500 000 USD. Other sources of revenue are, as in sports, the competition ticketing which is often shared between the organizer and the teams, sponsorship which represents the biggest revenue for the teams, and the audience mainly on the streaming platform Twitch which concludes a partnership with the organizer who pays a part of the shares to the teams. Not forgetting the advertising which generates a large part of the revenue for the teams. This graph below shows the different sources of revenue.
In terms of expenses, depending on the game, teams must pay a price to perform certain events. For example, to enter the European League of Legends you must pay around 10 million Euros. In addition to this, the entire team staff and players must be paid. On top of that you must cover the costs of the structure (gaming house) and the premises. Finally, teams must pay huge amounts of money to acquire players. Like on CS GO where a player was bought for 600,000 euros.
We can therefore conclude that yes, E-sports is viable, but it requires a large amount of start-up capital to build the team and enter certain competitions, which is why when you want to get into E-sports you need to have a long-term vision.