Matcherino leads the way in promoting esports tournament monetization by creating a crowdfunding platform for players, organizers, fans & sponsors. In the second episode of our podcast, Esports & Beyond, Viktoria Oushatova talks about the company’s solution, business model and future challenges with Grant Farwell, Founder & Chairman of Matcherino.
Tournament monetization: from manual to automated
Competitive gaming tournaments have been an integral part of the esports industry since the era of arcade games in the 1970s and video games in the 1980s. Yet it wasn’t until the 1990s when the world wide web enabled players across the globe to compete amongst each other, that we observed an acceleration in competitive gaming. This was further facilitated by the emergence of streaming platforms in the 21st century, which established esports as a mainstream form of entertainment.
Until recently, competitive gaming tournament monetization was manual, decentralized and lacking the right infrastructure. As Grant recollects, “Initially, what happened was, two players are going to play against each other and fans are coming in on the forum saying, ‘Hey! I’ll donate $10, I’ll donate $20’”. Then one of the admins would come on the forum and say, ‘Hey guys, here’s my PayPal email, everyone pay me the money and then I’ll send it to the winner after the tournament’.
This is how the idea for Matcherino was born. The initial idea was to address the need of an infrastructure to support this kind of transactions and bring some much-needed credibility to the sport. In the beginning, Matcherino built “a kind of an easy-to-use escrow system, where fans could donate directly into it and then distribute it to the winners”, says Grant.
It is important to note that from the very beginning, the product was built to enable players and fans to organize the events themselves and in such a way, automate the content. Yet, the team quickly realized that content automation is very hard and moved on to creating tools for the tournament organizers, who are in charge of making their own events and creating their content and community. This approach introduced some form of automation and centralization of tournament monetization.
Advertising and sponsorship as the main monetization methods
Historically, the main monetization methods in any form of sports have been advertising and sponsorships, while entry fees for tournaments are the first step in creating a prize pool. Due to the online nature of esports tournaments, the prize pool is the main attraction in driving interest in the sport, but teams and players often participate in these tournaments for their love of the game and not for full-time employment.
This is why Grant believes that monetization in esports will truly be in effect in less than 20 years: “While it has taken about 100 years for the other sports to have optimally monetized, esports would probably take just a third of that time”.
Advertising & sponsorships by brands account for c60% of esports revenues, while other major contributors include — media rights for live streaming, live event ticket sales, and custom merchandise sales.
Fan engagement is key to unlock monetization
Fans are the key to tournament monetization. Publishers & streamers create different forms of fan engagement in order to enable monetization. Fans can donate directly to the prize pool, bet on the outcome of tournaments and buy things from the sponsors with an in-built e-commerce component.
Matcherino has created a new monetization strategy via crowdfunding, leveraging on different tournament organizing tools to keep fans engaged. As Grant shares with us on the podcast, “A big piece of donations made by fans is the recognition. So as a fan, when you donate and support, you want your recognition. And so we have things like a donation leaderboard and we also have what we call overlays. This means on-screen in real-time, if you donate or you engage with the tournament, it’ll show you just donated twenty dollars and then the announcers will call you out. So the recognition piece is huge.”
Additional fan engagement tools include customer trivia events, stretch goals and e-commerce tools. Fans can engage directly with brands via social media, visiting their landing/conversion page or downloading an app. Any of these actions create a micro sponsorship, that goes directly into the prize pool and the organizer. This way fans support for free on behalf of brands.
The tournament landscape: key players and stakeholders
Below we summarize the key stakeholders in the esports tournament ecosystem and their importance for monetization.
Tournament organizers are a centerpiece in the ecosystem as they bring together different parties such as players, fans and sponsors.
“This is basically the heart of where all the activity comes from. They want to grow their prize pool because it attracts more players and that attracts more viewers and then that attracts more sponsors.”, says Grant highlighting the importance of these organizers in the esports ecosystem.
While organizers like ESL, Riot Games & Blizzard Entertainment are some of the biggest players in the market, there are also individual organizers who create much smaller events with some handful of players and smaller prize pools that are driving the audience engagement in the sector, especially among casual gamers.
Game Developers & Publishers
Game developers & publishers are an integral part of the esports ecosystem. The main form of revenue generation for developers is Downloadable Content (DLC) and in-game advertisement or promotions for publishers.
“The publisher and their community, they are kind of power players. But, they are in a symbiotic relationship. They spend a lot buying DLC in the game which in turn expands the longevity of the game. If you look at games like CS:GO, LoL, they would not have lasted 10 plus years without an esports ecosystem.”, says Grant.
The use of cryptocurrency on these platforms is also fast catching on and this trend accords to an unpredictable turn for monetization efforts in esports, in the near future.
During the digital era, the emergence of streaming platforms has proved to be a catalyst in making esports popular among Gen Z & Millennials. Exclusive deals for the streaming rights of popular esports titles have been sought after by streaming platforms. Sports Business Daily reports that Twitch paid over $90 million for the streaming rights of the first two seasons of Activision Blizzard’s Overwatch League. In 2020, YouTube struck a deal with Activision Blizzard for the exclusive right to stream Overwatch League, Call of Duty League, and Hearthstone events, for a total sum of $160 million. Fox Sports also has a media rights deal for FIFA’s World Cup through 2026.
Live streaming, restreaming, ticketing sales from live events, sponsorships & advertisements are common ways streaming platforms generate revenue with the big league games.
These platforms also enable players to become streamers and earn money in the process, which attracts more users to sign up on the platforms.
Brands and Sponsors
As competitive esports events become mainstream and attract more fans, the value proposition of access to young and digital audiences increases for brands and sponsors. Hence, sponsorship is the main contributor to the monetization of the esports sector. Both endemic and non-endemic brands such as Coca-Cola, Audi, Intel, Mercedes Benz, VISA and many other Fortune 500 companies sponsor esports events. There are multiple sponsorship opportunities such as leagues and tournaments, professional esports teams, individual players, streamers, gaming arenas as well as affiliate marketing.
Players and Teams
Players, franchises and teams have played an important role in transforming esports into a professional sport. Like any other sport, what draws the audience’s attention to esports is the skill and talent of the performers. Everyone who engages professionally in the gaming sector, from individual, small streamers to sponsor-backed professional teams competing in the big leagues, could monetize via prize pools, streaming and advertising. There is a clear trend towards monetization of small, casual players and streamers, which is growing the value creation for the whole sector.
Fans and Viewers
Fans are at the very core of the sector’s monetization strategy. 63% of the total Esports’ audience are young males, from 21–35 yrs age group, women represent 31% and are most likely from the same age group. These Gen Z and Millennials, spend a material part of their time online and this is precisely why esports is the perfect channel for brands to reach and engage with this target group.
Other than sponsorship and advertising, there are many different ways to monetize fans. Fans donate to prize pools in support of their favorite teams and players, buy tickets to live events and streams of gaming tournaments, bet on the outcome of gaming leagues and purchase customized merchandise. Currently, esports’ fans are severely under-monetized compared to fans of traditional sports, but this trend will slowly change going forward.
Technology as the main driver of monetization going forward
The transformation of esports tournaments from manual to automated and the digitization of the sector with tournaments moving online are a few examples of how technology is driving the monetization of the sector. We expect this trend to accelerate going forward with esports monetization reaching the monetization level of traditional sports. Esports tournament is only one of the different pillars of the esports ecosystem.
Subscribe to our podcast, Esports & Beyond, to learn more about the different stakeholders in the sector.