Monetising esports via multiple revenue streams
From a relatively niche global market worth US$194m in 2014, esports saw its total revenues leap five-fold, to US$980m in 2019. Spending on esports is projected to surge at a compound annual rate of 18.3% between 2018 and 2023 to reach almost US$1.8bn. Revenue streams are generated through franchising, media rights, fan payment models, sponsorships and advertising, and betting. 
Media rights

Just as is the case for traditional sports, media rights are a natural — and potentially substantial — source of revenues for esports. Our Outlook projections show media rights will be the fastest-growing source of esports revenues between 2018 and 2023, rising at a compound annual growth rate (CAGR) of 25.0% to reach US$506m.

Although this projection is encouraging for esports organisations, physical sports’ varying experiences with media rights may present some valuable lessons. After 2006, when live coverage of England’s home cricket test matches moved from free-to-air television to pay-TV satellite channel Sky, the number of viewers declined significantly.

More positively, English Premiership football’s move to Sky — and the sale of the US rights to NBC — has been seen as a resounding success on all counts, making the product even better while also boosting its global profile and profitability. Given the right approach, the same can happen in esports, triggering a virtuous circle of rising revenues and an improving product. New access and monetisation models could also emerge: By way of example, Sky’s no-contract Now TV streaming service now offers a “day pass” for live football. Going forward, there’s the clear potential for one or more of the FAANG global tech platforms (Facebook, Amazon, Apple, Netflix, Google) to pick up esports and take it to a global mainstream audience.

Fan payment models

Consumers are a relatively small but expanding source of revenues for esports. According to the Outlook, the consumer contribution to esports will rise at a CAGR of 14.4% through 2023, reaching US$254m, while esports ticket sales will rise at a 17.3% CAGR to US$129m. Together, these consumer revenue streams will be bigger than streaming advertising but less than media rights.

How will esports realise this consumer opportunity? Charging for top-tier events makes commercial sense, even if the fee is just a token amount: a fan may well be prepared to pay US$20 a year to watch NBA or La Liga their favorite esports league. But questions remain, even in long-established sports, about who they pay this money to and whether they feel they’re getting the value for it. That said, some fans may regard additional content such as behind-the-scenes access and stories as more valuable than the main live event. In the spring of 2019, Riot Games introduced the US$15 Pro View pass for fans of League of Legends (LOL) esports, which enables viewing of multiple streams and creation of personalised fan experiences. Revenues from the pass are split between regional LOL leagues and teams.

What’s clear is that if esports can identify the right consumer payments models and implement them correctly, fans will stay on board. There’s a useful precedent in the way video gaming revenue has boomed with in-game purchase models. Gamers are happy to pay for features that enhance their experience and allow them to customise it.

Sponsorships and advertising

Sponsorship is currently the single biggest source of revenues for esports, and the Outlook forecasts that it will retain that position over the coming five years, growing at a CAGR of 16.3% to US$598m in 2023. Rather than grabbing the first sponsorship deal that comes along, companies are increasingly looking for additional value — value that might include access to other markets or hard-to-reach consumers, access to other companies that the investor has invested in, or access to infrastructure.

This added value flows both ways — to sponsors and to esports businesses. Toyota’s partnership with Blizzard Entertainment’s Overwatch League included a documentary-style video series called “Access Granted” featuring Toyota vehicles. For a traditional sports club, an esports sponsorship could present an ideal entry point for getting into a new market such as China.