Despite what conventional wisdom might tell you, gaming is not all bad. Far from it, there are now 3.2 billion active video game users around the world who might have something to say about that. Esports, short for electronic sports, turn online gaming into a spectator sport. Mimicking the experience of watching a professional sporting event.
Whether you’re playing the latest triple AAA blockbuster title on your next generation console or candy crush on your commute home. You’re an active participant in what is one of the fastest growing parts of the media and entertainment industry today.
Projected to grow as an industry from $1.44 billion in 2022 to $5.48 billion in 2029 , business is booming. With an entire ecosystem of broadcasters, tournaments, leagues, professional players, teams and streamers helping to propel esports into the mainstream. Indeed, over the course of 2023, 1 in every 7 internet users will watch esports at some point.
The success of survival-based games like Fortnite, has resulted in growing prize pools for esports tournaments. Additionally, the rise of live-streaming and improving infrastructure for pro leagues have all paved the way for an explosion in the popularity of esports. And with it, the question of its monetisation.
Below gives you an indication of the key relationships and revenue streams amongst the actors in the esports ecosystem today.
Undoubtedly there have been some big winners in the constantly evolving direction of esports monetisation. With the main streaming platform Twitch seeing its revenues climb to $2.6 billion in 2021. Overall most companies have been slow off the mark, with many only just exploring ways to start taking advantage of the unique attributes of this growing and passionate audience:
At Manifesto, we believe there are 4 key revenue ingredients that membership organisations need to get right to generate sustainable growth. Esports teams are nailing all 4, with subscriptions and transactions (direct revenue); as well as advertising and affiliate income (indirect revenue).
Firstly, many esports athletes have been able to benefit financially from streaming their gameplay. With streaming platform Twitch paying athletes $2.50 for every subscriber. For example Tyler “Ninja” Blevins, who rose to fame as a professional player of the popular game Fortnite is estimated to take home over $500,000 a month in subscription income alone.
Secondly, aside from donations from fans another key revenue stream for athletes is transactional income. One of the most successful examples is gaming team 100 thieves. In October 2021 announced over $50m in (2020) merchandise revenue alone. With $35m worth of investment to ramp up production further announced in 2022.
Traditionally the backbone of industry revenue, teams and athletes are increasingly getting snapped up for lucrative sponsorship agreements. For instance in 2020, FaZe Clan, one of the most successful esports teams in the world, announced a sponsorship deal with Nissan. The partnership involved a range of content and activations. Including appearances in FaZe Clan videos and live streams. As well as a wrap in the game Rocket League. With FaZe Clan receiving north of $4m p/a, and Nissan exposure to target younger audiences, who are increasingly turning to esports for entertainment and engagement.
Likewise, affiliate income is way that esports teams can monetise their brand and social media following. Through promoting products or services and receiving a commission for each sale made through their unique referral link. One of the most successful is Michael “Shroud” Grzesiek who is known for playing a variety of games. Including first-person shooters like Valorant and Escape from Tarkov. Michael Grzesiek currently has affiliate partnerships with Logitech, HyperX, PUBG corporation, Ubisoft, J!NX, G Fuel. For this reason, he is one of the very best at monetising his devoted community of followers across Youtube, Twitch and wider social media.
Gone are the days where esports (and gaming more generally) was laughed at as a nerdy sideshow. What started as passionate fans trying to make money from their hobbies, has now morphed into a large commercial opportunity.
How the industry evolves over the next few years will largely be determined by the money that flows through, and the ways in which participants in the ecosystem aim to establish sustainable business models. Which is still far from certain. As long as esport teams and athletes continue to abide by the principles of sound membership economics, they should be just fine.
At Manifesto, we are experts in building great customer experiences and deeper engagement with consumers, having been recognised by the FT Management Consulting Awards as a leader in Innovation, Growth and New Business Models for 5 years in a row.
You can find out more about our thinking in our ‘Membership Economics’ report here.
© 2023 Manifesto Growth Architects Manifesto Growth Limited, is a company registered in England and Wales with a registered office at 9 Castellain Road, London, England, W9 1EY.
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