How Sustainable is the ESport Ecosystem in the Long Run? Challenges and Obstacles
Five years ago if I told a stranger on the street that I am a professional competitor in eSport he or she would laugh and think I was joking, except I wasn’t. Fast forward to the present day, ESport is predicted to be a 700 million dollar industry and soon to be 1.1 billion by 2019. In this article we will examine the rapid growth and sustainability of eSport, and the cash flow within the industry.
To better understand the way eSport operates, we first need to take a look at how eSport came to be and its evolution in the past 10 years. The highlight of the beginning of eSport was noticed world-wide in South Korea around 2008. Under the title of Starcraft: Brood War, the world had its first taste in the grand scale of what is already an established eSport scene in South Korea. The majority of the teams around this time were directly sponsored by local companies notably Samsung, SK Telecom, CJ Entus, and KT Rolster.
In the early days of the eSport ecosystem, corporations, private investments, and televised advertisement dominated the eSport scene in South Korea. The array of advertisements used then (ranging from hair products to branded drinks to car sales) were quite different from the modern eSport ads we see today; these advertisements were broadcast on national television. The audience in South Korea perceived eSport more as a mainstream entertainment compared to what is now, a heavily niche market for young male audiences.
For eSport, the explosive world-wide start began in 2011 with three titles — DOTA2, League of Legends, and Starcraft II: Wings of Liberty. It was around this time that the eSport ecosystem began to diversify. Non-corporation teams and competitive leagues started to adopt a different form of brand affiliation, sponsorship. Exactly like it sounds, companies are now paying players and event organizers alike to represent the company product. Instead of owning the logistics of both teams and competitive leagues, companies can now slap the company logo and names onto both team jerseys and eSport television — Twitch streams. (example below)
The idea behind sponsoring players and teams is that companies are gambling on players to perform well in competitive leagues. In return, these companies will gain a tremendous amount of exposure to their products and typically the more views, the more product is sold. It is also around this time where we began to see more and more gaming-related sponsorship in the industry. Competitor companies such as Razer, Steelseries, Redbull, Monster Energy, AMD, and Intel began to monopolize teams and competitive events.
ESport is an expensive business nowadays. Publishers such as Riot has been losing money since the beginning their eSport scene due to the nature of production cost, prize pool, and talent-pool salary. To combat this problem, Riot mimicked a compendium model employed by Valve, known for DOTA2 and Counter-Strike. Under this model, gamers could purchase in-game items with the funds being donated towards a specific competitions prize pool. In 2016, The International had a whopping prize pool of $20 million. This model is the closest form of online “pay-to-view” in comparison to the pay-per-view events.
So where does all of this money go?
To put it simply, eSport competitions and competitors are paid by sponsors and viewers. These viewers will then directly and indirectly purchase additional products from the sponsors. In return, the competitions will be filled with more epic-ness, more prizepool, and fiercer competitors. Let’s examine the current norms of eSport by the numbers.
- Major eSport competitions sponsorship cost on average of $200,000 per sponsor
- Major teams sponsorship are at least $50,000 per month, not including revenue sharing
- Average salary paid to League of Legends players is currently at $100,000 per year
- Peak Concurrent viewership of 14.7 Million during League of Legends Finals
- A major tournament prize pool needs at least $1 million to be considered a Major for all Counter-Strike competitions
The current eSport ecosystem can only sustain itself for so long before the viewers stop caring about the size of the prizepool or the amount of people watching. As eSport gets closer to officially being categorized as a sport, people are starting care more about good competition, rather than knowing about trivial things such as how much a team has won in the NFL Super Bowl. It is imperative to note that there is growth in eSport. However, keep in mind that the cost of eSport is quickly outpacing the investment and the growth of the community. I believe that unless there is a drastic structural change such as the invention of ELEAGUE, shifting away from prize money, eSport will likely implode from within and remain as a “joke” sport.