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Esports Game Makers Many Profit Centers

Retail and Consumer
0 min read

Image: Overwatch (Blizzard Entertainment)

Understanding Esports’ Many Income Streams

 

Gaming is the largest and fastest-growing entertainment vertical in the world. Esports / e-sports / eSports / esports is a high-growth sector of the industry with more ways to generate income than there are alternatives to spell its name. What are they? As with other media outlets, some revenue streams are “straight-line” obvious, like subscriptions. Others, like the value of an audience’s viewing habits, are not as direct. Although each company is different, revenue streams are often from game sales, advertising, audience subscriptions, data and analytics, licensing, and media rights.

There is a great deal of overlap in categorizing these revenue streams. As you’ll discover shortly, game sales may be made through ad sales that offset the product cost, and that data analysis may have a part in all revenue success. A well-run esports/gaming company integrates them all to maximizes all that it has at its disposal.

Data & Analytics

As with other media outlets, knowing who your audience is allows a better marketing effort to bring in advertising dollars. Esports entertainment businesses all do this on one level or another. The more data collected and categorized, the better they’re able to discern viewing habits, categorize popularity changes, determine who tomorrow’s “influencers” will be, maximize partnership opportunities, and capture trends early. 

The data itself also has value and can be sold to others that mine it for their own purposes, this includes for discovery of when and how to reach highly refined marketing demographics.

Advertisement Sales

As mentioned above, advertisement sales is a staple revenue stream for companies that provide online games. With audience insights related to sentiment, viewership, demographics, and traffic, esports companies are in an enviable position in that their advertising sales efforts and what the advertiser can expect are more clearly defined than trying to reach the consumer group through other outlets.

Game Sales

It wasn’t long ago that direct game sales to customers were the primary means for any game maker to generate revenue. This still exists, although the trip to GameStop (GME) is no longer necessary as you can go to a website like Steam and buy and download games. The game maker then gives the website a cut and keeps what might be 80% or more of the sale price.

Another variation of “selling” a game is when it’s being subsidized by an ad the purchaser will encounter after the download. This new but common revenue source works like this: The consumer downloads a game from a store (with or without cost to the consumer), the consumer then encounters ads as a result of the download. This concept has become common throughout the online world, specific to gaming; what companies are now doing is developing games whereby watching an ad they collect tools to help score more points playing the game.  When implemented correctly, this can be a lucrative part of how a game maker adds to their bottom line.

Ticket Sales

As part of the business of esports, as with other spectator sports, there are tickets sales for live audience participants and entry or subscription fees for viewing online. Stadiums with the capacity to seat 50 to 90 thousand have become filled in the past. As these sports events are of interest globally, online audiences approaching 100 million at world championships is normal. Although there are many businesses involved in organizing, promoting, broadcasting, merchandising, and overall production, the game makers are part of the action and perhaps receive small increments from the value of each spectator. But, with near 100 million spectators to some events, this can add up.

Merchandising

Although much of the merchandising in esports is for teams and leagues, game makers also can benefit from purchasable skins. The term “skin” refers to the way your in-game character looks. Some games have added purchasable skins to make characters look like members of professional esports teams. These in-game sales can add up. In 2017 in-game purchases accounted for more than half of Activision-Blizzard’s revenue, adding up to about $4 billion.

Games like Overwatch, League of Legends, Halo 5, Gears
of War 4, and Call of Duty: Modern Warfare
all have this feature allowing people to purchase character and weapon skins. These in-game purchases not only provide a revenue source for game developers, but esports teams themselves can receive a cut of each purchase. This can even help the decision as to which games the teams may become involved competing in. Additionally, if fans want to support a specific streamer, they can use the streamer’s content creator code while purchasing the in-game skins. This process provides that streamer a small cut of the purchase.

Vertical
Integration

As the esports segment grows, those companies most horizontally and vertically integrated have the most control over the synergies of the various revenue streams. Well-run esports companies often have multiple gaming businesses, while also able to capitalize on being a media entity with all of the insights and marketing solutions that can provide.

In a just-released C-Suite interview, the Executive Chairman and the CEO of Engine Media (GAME) were interviewed by the Senior Media Equity Analyst at Noble Capital Markets, Mike Kupinski.  Engine Media generates revenue through a combination of direct-to-consumer and subscription fees; streaming technology and data SaaS-based offerings; programmatic advertising, and sponsorships. In response to a question, Executive Chairman Tom Rogers summed up various parts of the industry well as he discussed his own company. Mr. Rogers talked about the many company pieces, which in the case of GAME are in-part data, analytics, advertising, marketing, and IP to support player experiences. It also sells some of the intel as a service, and profits from the easier to understand growth of the gaming business.

The interview provides a clear picture of the potential for this company and others involved in esports.

What Does the Future Hold?

Think of the changes that major league baseball has gone through in your lifetime, now soccer – unlike traditional sports, esports games, outlets, tools and support will need to constantly evolve. Consumers, whether they are gamers or spectators, are the main product, paying attention to their needs is critical. Also, expanding the sport to appeal to as many different demographics as possible will increase the size of the revenue pie from which companies will try to score a larger slice.

 

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C-Suite Interview / Engine Media Holdings (September 2021)



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Sources:

https://enginemediainc.com/#about

https://www.youtube.com/watch?v=oCiKVXQXkKA

https://www.aikenhouse.com/post/how-do-esports-organizations-make-money

https://newzoo.com/insights/articles/newzoo-games-market-numbers-revenues-and-audience-2020-2023/

http://thesportdigest.com/2019/11/esports-or-esports-or-e-sports-or-esports-words-matter-for-more-reasons-than-you-think/#:~:text=The%20AP%20indicated%20for%20the,the%20beginning%20of%20a%20sentence

https://www.insiderintelligence.com/insights/esports-ecosystem-market-report/

https://www.pwc.com/gx/en/industries/technology/publications/monetising-esports.html

https://www.videogames.org.au/skin-betting/

 

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