Sport Business
Esports began as, and still remains in large part, a marketing tool for the publishers of computer games. The more time a publisher can get an audience to spend with its game, the more potential revenue opportunities it can generate. These opportunities include in-game purchases, purchases of the game via retail or digital download, and in-game sponsorship by brands.
Direct consumer revenue from esports is not yet meaningful for most publishers, according to analysts including Newzoo and SuperData. According to SuperData, Valve is the only company to successfully monetise esports, through in-game purchases in its Dota2 title. Newzoo reports that publishers collectively pumped about $125m into esports in 2015, and recouped “maybe two thirds” of that amount. “They will earn back some through sponsorship, but a significant chunk is chalked up as an investment in marketing,” says Newzoo CEO Peter Warman. Newzoo says publishers' investments can be broadly split in two: (i) fees towards event organisers, such as ESL, who they pay to create and host competitions and live events for their game, or (ii) investments to organise competitions and live events themselves.
This lack of profitability is expected to change as the market grows and more sponsors and media platforms get involved. If the growth path continues, publishers are expected to directly monetise esports viewers by selling video content to viewers or channels, and seeking advertisers. Live event revenues and merchandise should also become bigger revenue streams.
Publishers' models
More and more publishers have started to push their games as esports titles, having seen the possibilities to engage a player base and create communities around products.
Publishers operate different revenue models for different game titles. Some, like Electronic Arts, operate a franchise-based business which looks to esports primarily as a way to promote physical or digital sales of its PC and console games like the Fifa football series and Madden American football series.
Activision Blizzard also operates a traditional model, where consumers pay $40 to $60 for a game like Call of Duty or Overwatch. It organises tournaments for these games itself and owns a league (MLG) to better cultivate the fanbase and control the way its games are promoted.
Some publishers make their games free to play. Riot does this with League of Legends, and Valve's Dota2 is another example. Revenue is primarily generated from in-game purchases, and esports tournaments are part of the marketing driving fans to play and pay.
Some games, notably Blizzard's World of Warcraft, require a monthly subscription, although this is a legacy business model from the period prior to the title gaining popularity as an esport.
Esports teams, leagues and players are always somewhat dependent on the decisions made by publishers, who own the entire IP – meaning every asset and character, narrative and setting – related to the games. But in turn publishers have to keep investing in a game's development – updating the game and adding new features and editions – to attract fans and retain popularity. The most popular esports today could very quickly fade away.
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