How do eSports teams make money? All the facts and details

How do eSports teams make money? This question delves into the dynamic financial landscape of the competitive gaming world. With a myriad of revenue streams, these teams blend skills in digital arenas with savvy business strategies to monetise their operations.

From lucrative tournament wins to strategic sponsorships and content creation, the ways in which these squads generate income are as varied as the games they play. These ways help companies turn gaming skills into profits.

The eSports business model

It is reportedly a 1.3 billion dollar industry, with thousands of squads competing across dozens of games in the space. The primary income sources include sponsorships, tournament winnings, broadcasting rights, and merchandising.

Patrik Sättermon (Fnatic's Chief Gaming Officer) states, "It is estimated that around 95% of the money generated by our eSports comes directly from sponsorship deals." The financial success of these squads hinges on a delicate balance between these revenue streams, each contributing to the overall profitability of the organisation.

How do eSports teams work?

The inner workings of an eSports team are akin to a well-oiled machine, where players, coaches, analysts, and support staff come together to achieve competitive excellence. This synergy is not just about winning games; it is about creating a brand and a legacy in the eSports universe.

How do eSports teams make money?

The question of how squads and owners make money can be answered by looking at the various revenue streams they tap into. Sponsorship deals are often the most lucrative, providing squads with funding in exchange for brand exposure. Merchandise sales, including branded apparel and accessories, also contribute significantly.

Furthermore, streaming platforms and content creation open additional avenues for revenue generation. Here are all the ways explained:

Tournament prizes

Squads earn from tournament winnings, but this varies greatly. Smaller squads might profit directly from these winnings, while larger teams often rely on payments from tournaments, leagues, and developers, with players' contracts dictating earnings distribution.

Streaming

Initially, squads earned significantly from streaming on platforms like Twitch, but current rates on streaming services have decreased. Now, the main financial benefit of streaming lies in sponsorships, with direct streaming revenue playing a less substantial role.

Sponsorship

Sponsorships are crucial for squads, providing substantial funding in exchange for brand exposure. This involves agreements with various brands, including both endemic gaming sponsors and non-endemic ones, like BMW and Red Bull, but these sponsorships can be fragile and subject to change.

Merchandising

Teams generate revenue through merchandise sales, either by handling production and distribution in-house for higher profits or partnering with merchandise sellers for reduced risk and investment. Merchandise sales are more secure but typically yield lower revenue compared to other streams.

Investment

Investments from sports squads and large firms are a major revenue source for esports teams. These investments are aimed at tapping into the esports market's growth, with squads using esports as a way to expand their brand reach.

Developers and leagues

Squads earn money from developers and leagues through payments for participation in tournaments and revenue-sharing agreements. These deals often include media rights and digital goods, providing a steady income source.

Secondary businesses

Some smaller esports teams supplement their income through secondary businesses like PC and gaming cafes. This diversification helps mitigate the financial risks associated with running an esports team.

Crypto and NFTs

Between 2020 and 2022, esports squads explored revenue generation through cryptocurrencies and NFTs. However, this trend has seen a decline due to market instability and the backlash from fans and the community.

How much do eSports teams make?

The earnings of squads can vary widely, depending on their success in tournaments, the strength of their fanbase, and the effectiveness of their marketing strategies. The potential for high earnings is there, but it requires a blend of competitive success and savvy business acumen.

Reflecting the diverse earnings landscape in eSports, Team Liquid from Europe exemplifies the upper echelon with an impressive $44.08 million in prize winnings as of May 2023. This showcases the high-earning potential of teams with consistent tournament success and a strong global fanbase.

On the other end, FaZe Clan from the United States, while also prominent, accumulated a relatively lower but still notable $16.15 million, indicating how earnings can vary significantly even among top-tier squads. This disparity underscores the impact of factors like tournament performance, fanbase strength, and marketing effectiveness in determining the financial success of squads.

Do eSports teams make money?

While the potential to earn in eSports is significant, the reality is that profitability varies greatly among teams. Not all teams achieve the level of success necessary to attract big sponsorships or win major tournaments.

Take, for instance, the aftermath of the FTX bankruptcy, where TSM declared itself "stable and profitable." However, the necessity for such an announcement subtly indicates a more troubling reality - the lack of profitability among many esports teams. This was further illustrated when, back in 2021, a report disclosed that 100 Thieves had not reached profitability, though they aspired to achieve it eventually.

Achieving profitability in esports is challenging, with even large organisations struggling. Teams often rely on careful planning and execution, with an emphasis on marketing and brand growth, rather than expecting immediate, substantial profits.

How do team owners make money?

Owners make money through the team's earnings from various revenue streams, but they also stand to gain from the increasing value of their eSports franchise. As the industry grows, so does the value of successful teams, making ownership a potentially lucrative long-term investment.

How do eSports players make money?

Esports players earn through salaries paid by their squads, a share of the prize money from tournament wins, and personal sponsorships. Many also generate income through individual streaming contracts and social media engagements.

For example, Luminosity Gaming features the globally renowned eSports player Tyler Blevins (Ninja), who in 2019 earned $500,000 monthly from over 160,000 Twitch subscribers. High-profile players like Ninja enhance a team's visibility, attracting more followers and subscribers.

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E-sports

Understanding how esports teams make money reveals a complex interplay of competitive success and astute marketing strategies. This blend of in-game prowess and commercial savvy is key to the financial sustainability and growth of these digital sports teams.

Sports Brief published an article about who owns EA Sports. Netizens have been curious to discover the brains behind some of the most successful EA games, including Need For Speed, FIFA, and Apex Legends.

Today, the entertainment company has over 13,000 employees and numerous game studios under it, including EA Sports. Click on the above link to read more!