Adam Fitch: The future of esports organizations isn’t competition
Esports is the widely-accepted name for video game tournaments but as the gaming industry expands and matures, the lines between casual and competition continue to blur.
I’m not rallying for the term ‘esports’ to include more than competitive gaming by any means, quite the opposite in fact, but organizations that comprise the industry are doing much more than simply competing against each other these days.
In an effort to become profitable — these orgs are businesses at the end of the day — team brands are having to look elsewhere to generate revenue. Housing competitive players is not a cheap endeavour when you consider salaries, travel, accommodation, bonuses, and all other subsequent expenses that are agreed upon.
It’s tough to monetize this side of gaming considering events, disregarding Valve’s annual The International for Dota 2, don’t dish out enough prize money to provide a return on investment. You can sell spots on jerseys and make your players promote products on social media, but it’s simply still not enough — especially with salaries growing disproportionate to the return said players provide.
The future of esports organizations?
Forbes released their annual esports organization valuations earlier this month, which were met with scepticism by many, but they do have some use regardless of their accuracy. Not only does the report include the magazine’s valuations for the top 10 teams, it provides estimated annual revenue and how much of it came from esports.
Now, these are to be taken with a pinch of salt for plenty of reasons, but they do provide some level of insight into where the money is coming from at many of the leading organizations in the industry. By looking at the portion of income that’s relevant to esports, with the context of their estimated overall revenue, we can build a picture of where these organizations are placing their bets for the future.
North American org TSM came in at the top spot in Forbes’ list with a speculative valuation of $410 million. Their estimated revenue for the year is $45 million, with 50% of it coming from esports. Swift Media, the parent company of the team, also operate AI-driven gaming coach app Blitz, they house plenty of popular gaming influencers, and earlier this week launched talent agency ICON.
TSM compete in titles such as League of Legends, Fortnite, Apex Legends, Valorant, and Rainbow Six Siege, but it’s very clear that they’re trying to be more than simply a competitive organization when you look at their entire structure. They’re signing influencers to spread awareness of the TSM brand, managing them through their now-public talent agency, and competing in titles as a loss leader that serves a large fan base.
They’re monetizing their overall audience — which is a hybrid of gaming and esports fans — while maintaining an application that’s presented as an entirely-separate product. Esports is effectively a marketing tool, allowing them to foster new supporters and remain in conversations across the entire industry, without actively trying to monetize their followers through esports itself. TSM can sell their audience to brands through content and even cross-promote with the thriving Blitz app.
Other companies like ReKTGlobal are also building out an in-house infrastructure that surrounds their esports properties with supporting ventures that are where the real money is made. ReKTGlobal owns and operates Rogue, Call of Duty League franchise London Royal Ravens, and a bevvy of supplementary brands: talent management firm TXG, content agency Greenlit, fan loyalty specialists Fullcube, and marketing firm Fearless.
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They’re building audiences through esports, but that’s seemingly not where they’re looking to generate profits.
Media companies or esports organizations
A couple of other organizations in the list are worth pointing out too, namely FaZe Clan and 100 Thieves. Both brands are firmly mixing esports with larger entertainment and merchandise; the former are even further along in fleshing out their portfolio through an investment in meal supplement brand CTRL and their own production studio.
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Both organizations have roots purely in gaming, with FaZe Clan making names for themselves in Call of Duty and 100 Thieves being founded by former professional player Nadeshot, but they’re not married to the idea that this is where they must remain. While keeping gaming integrated into everything they do, they’ve invested heavily in steaming and content creation — areas that are undeniably more fruitful when it comes to finances as of now.
100 Thieves have an audience for their competitive initiatives, an audience for their content, and an audience for their incredibly-hyped apparel line. Now, if they do their job correctly, they will manage to achieve a healthy amount of crossover between these audiences.
This allows them to keep their name relevant and capture new followers by competing, monetise their audience by selling sponsorships off of the impressive numbers their creators achieve, and also sell their merchandise. No wonder their estimated esports revenue for 2020 was only 35%.
There’s a very similar approach here for FaZe Clan too, who are doing what 100 Thieves do at a larger scale — but understandably so considering they’ve been around for a decade longer. Their revenue share from esports is even smaller at only 20%, though they’re estimated to have raked in around $40 million in total.
More than competition
I believe that each organization, at least those that will be successful long-term, will have their own take on how to go about monetizing their esports efforts through external methods, but each of them will attempt it. When you consider the amount of money that can be lost in competing (especially when there are million-dollar salaries for single players being dished out more and more these days) it makes complete sense for companies to look for alternative ways to keep the lights on.
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They likely love esports and believe it will become more financially-beneficial in the future through increased viewership, better deals with tournament organizers, and the blossoming of media rights, but they need to generate cash. Raising money from venture capital firms is not a revenue stream by any means.
The essence of esports will always be competing but the intersection of competitive gaming, content creation, internet personalities, and lifestyle initiatives is only going to grow. This is the area in which I believe the successful organizations of the future will occupy.