Remind people that profit is the difference between revenue and expense. This makes you look smart.Scott Adams
Revenue is the income generated from selling products or providing services. The entire eSports supply chain, from the producer to the consumer, has many sources of income. The more diverse their portfolio is, the more income stability, opportunity to grow, flexibility and financial security they have. There are several revenue streams in eSports.
As we know, there are many kinds of revenue streams. And it’s a possibility in eSports to witness the birth of several others in the near future because of how young the industry is. We will however, focus on the most conventional types of revenue across the eSports genre. Types of conventional revenue in eSports include the following.
Merchandising in eSports refers to creating, promoting, and selling branded products associated with a particular team, player, or organisation. These products may include clothing, accessories (hats, wristbands, stubby holders), collectibles, and more.
Merchandising usually involves the feature of team logos, player names and other branding elements that can make your product desirable amongst the fans.
Merchandising plays a crucial role in building fan engagement and generating revenue. The channel used for the sale of merchandising products may include but is not limited to:
- online store: teams or brands webpage
- marketplace platforms: Amazon, eBay, Etsy, etc.
- social media
- in person events
- brick and mortar retailers: partnerships with retails stores
- third party retail websites: partnerships with online retailers or physical retailers that are only targeting your audience
- event venues
- mobile apps
- affiliate marketing: partner with influencers or affiliates who can promote and sell your product
- partnerships and collaborations.
Ticket sales refer to the process of selling admission or entry passes to events, venues or experiences. This can be physical or virtual depending on the event. Assigned seating depending on the zone or the value that you get is reflected on the price tag of the ticket sale.
The following table illustrates the various types of ticket sale options.
| Ticket sale options | Description |
|---|---|
| Early bird/ presale | This is an amazing way to sell tickets fast. Presales/ early bird tickets are usually available to members of a particular ticketing company. (This membership alone can help with revenue) The presale/ early bird alone can have quick capital for the elaboration of the event before its even created. |
| General admissions | Only grants the minimal experience and entrance to the venue or event and seating is usually quite far from the stage. |
| VIP | An expensive ticket that gives more value to the customer at a higher price. |
| Family or group tickets | This is a sales promotion to sell tickets fast for a discount. It is usually used to fill events when the demand hasn’t been high. |
| Season tickets | Very common in the sporting industry season tickets are usually purchased by diehard fans. Businesses entice their client/fans by offering an attractive discount for purchasing season tickets for their favourite team. The fans will go to the games more often and the league will benefit from the attendance and a safe revenue stream. Fans who purchase season tickets usually attend the games at their team's home ground. |
Knowledge Check Activity
In regular sports and eSports advertising involves promoting products, services or brands within the industry to engage with the gaming audience. There are three basic concepts in advertising to understand where the revenue comes from. These include the following.
- Reach. Reach refers to the total number of individuals (possible clients) exposed to the advertising.
- Frequency. It is the average, approximate or exact number of times an individual has been exposed to the advertising.
- Impact. It measures how quickly an individual gets the message. It is basically how interesting and clear the message inside the advertising was.
The following are the formulas that are simple and easy to follow to determine the revenue.
Reach = Total number of unique viewers per ad campaign.
Frequency = Number of times the add is shown to individuals.
Impact = Number of people that watched your ad campaign/Number of people that clicked in your ad campaign.
Effective advertising = Reach x Frequency x Impacts.
Once we understand these concepts, we can optimise our advertising strategies instead of just releasing more advertising campaigns.
Most game publishers, team organisations, players, and content creators have a constant revenue stream from viewership. This is why oftentimes, they choose to be present on several social media platforms.
Here are a few examples of social media revenue.
Click on each of the following headings:
TikTok payments aren’t set in stone. Rather, they come from the TikTok Creator Fund, which will soon merge into the TikTok Creativity Program. It’s estimated that you can pull in between 2 and 4 cents for every 1,000 TikTok views once signed up to the Creator Fund. The payments on TikTok are significantly lower than on other platforms, as it’s a much more bite-sized, viral beast.
Recommended strategy: Dropshipping
Drop shipping is a retail fulfilment method where a store doesn’t keep the products it sells in stock. It purchases the item from a third party and has it shipped directly to the consumer.
Once a video is monetised, established YouTubers can expect to receive around $0.018 per ad view. That means you’ll bank about $18 for every 1,000 ad views on your video, which averages around $3 to $5 for 1,000 video views on YouTube.
Strategy recommended: Sponsored content or sell merchandising
Sponsored Content is promoting someone else products or services with a link for your audience to follow and acquiree these products or services. It involves a contract that both the company sponsoring, and the content creator had agreed upon.
Sell merchandising is creating products that have your own brand as a organisation or individual so you can sell them while your audience engages with your content.
You don’t get paid per view on Instagram but can make money by enabling ads on your videos. If you choose to do this, you’ll net 55% of all ad revenue paid out monthly.
Strategy Recommended: Promote products from other brands or Affiliate Marketing.
Affiliate Marketing is selling products or services through your content. The revenue isn't based on a salary or contract, it is based on the number or products you sell through the links in your content.
Facebook’s payments per 1,000 views aren’t cut-and-dry, either. Some folks have reported receiving as little as $1 for 1,000 views and as much as $10 on the other end of the spectrum.
Strategy recommended: Build an exclusive database of clients that have purchase power.
Building a Database is a strategy based on the identification or real clients for different brands.
In game purchase is the acquisition of a digital asset inside video games. Here, we can find most microtransactions, event passes, DLC’s, etc. A few of these include:
- cosmetic items
- virtual currency
- loot boxes
- season passes or battle passes
- power-ups or boosts
- DLC’s
- subscription services
- consumable items
- unlockable content
- advertising removal.
It is important to note that not all games incorporate in game purchases, and the extent they are used varies widely. The popularity of in game purchases has led to debate about their impact on gameplay, fairness, and the problem with game spending or its default addiction to spending.
Broadcasting rights to a contract sign between the game publisher and the third party that want to transmit their broadcast in exchange for money. You can observe this all over eSports scene because it regulates how content is distributed and who benefits financially from the dissemination. A great example of it is the LPL studios in Auckland.
Here are a few ways of revenue inside of the Broadcasting rights revenue stream:
- Licensing Fees: Whether traditional TV networks or online platforms, Broadcasting companies pay licensing fees to acquire the rights to broadcast or stream content.
- Subscription Models: Some broadcasting services operate on a subscription basis, where viewers pay a monthly or annual fee to access exclusive content.
- Pay-per-View: For special events, like boxing matches or MMA fights, viewers may be required to pay a one-time fee.
- Mobile Apps and Games: Broadcasting rights can extend to mobile apps or games based on the content, which can include in app purchases or advertising.
The broadcasting side of eSports is still in its ‘early days’, it has yet gone away from where most events are streamed on Twitch, YouTube or another similar site for everyone. to enjoy, for free. We have not yet seen a shift to the models above, and we may never will, but keep an eye out, it could be something we see in the future.
Watch: Olympic Broadcasting Rights - Behind the News (3:47 minutes)
The following video, while about the Olympics, provides you with all you need to know about how broadcasting rights work.
How do Broadcasting rights work in New Zealand?
In June 2023, New Zealand has opened a public consultation on the safety in online services and media platforms. So far, only broadcasting media like: TV, films, video, publications or Radio are currently regulated. This is because of the Broadcasting Act 1989. If you are interested in knowing more about it click here on the link down below: Broadcasting Act 1989 No 25 (as at 12 April 2022), Public Act – New Zealand Legislation
Subscription Services
Subscription services are a business model where customers pay a recurring fee at regular intervals, such as monthly or annually, to access a specific product or service. These services have become increasingly popular in various industries, including entertainment, software, e-commerce, and more.
Customers typically sign up for subscription services to gain continuous access to content, features, or benefits. Examples of subscription services include streaming platforms like Netflix, music streaming services like Spotify, software subscriptions like Microsoft 365, and subscription boxes that deliver products like meal kits, beauty products, or books regularly. This model offers convenience and often allows companies to maintain an ongoing relationship with their customers while generating predictable revenue streams.
How much money are companies making with users? The following infographic shows the total number of users and the revenue that each social network makes to reveal the Average Revenue per User (ARPU).
| Social Network | Revenue | No. of Active Users |
|---|---|---|
| TikTok | $34.3B | 732M |
| $86B | 2.8B | |
| $8B | 310M | |
| Twitter/X | $3.7B | 396M |
| YouTube | $19.8B | 2.3B |
| $6.8B | 1.3B | |
| $1.7B | 459M | |
| $5.5B | 2B | |
| Snapchat | $911M | 528M |
| $212M | 430M |
Knowledge Check Activity
The word sponsor comes from the Latin “Sponsus”. It basically means to give assurance or to promise solemnly. A sponsorship involves two parties: the sponsor and the sponsored. It is an agreement by writing or word, stating that the first party will give value in exchange for something in return.
In sports, these deals usually include the brand paying most (sometimes all) of the cost of a project in return for exposure to their target audience. But why would a company pay for a project just for exposure? Sponsorship relationships and agreements can be long-term, short term or for a one-off event.
Different types of sponsorships occur in all types of industries and organisations. Sponsorship can occur at all levels, from local community clubs to elite sports.
The following table illustrates the types of sponsorships and their meanings.
| Sponsorship | |
|---|---|
| Type | Meaning |
| Financial Sponsor | The sponsor offers money to an event organiser in exchange for promotions or other benefits outlined in their sponsorship agreement. Give money directly to an organisation and campaign leaders to fund their events. |
| Media Sponsor | Financial sponsors that secure advertising for an event. Purchasing advertising or publishing content about the event on their own channels. |
| In-Kind Sponsor | The arrangement where the sponsoring business provides goods or services instead of direct financial support. Services instead of physical currency. |
| Promotional Partner | individual figures rather than companies and media outlets. A promotional partner advertises the event or causes to his network. Individual people who have a large following on social media. They can promote your organisation's event to their fan base. |
Sponsorship versus partnership
Sometimes the word partnership is used interchangeably but there is a difference. Partners have an interest and shared responsibility with your organisation. This relationship might be limited to a specific program, event, or initiative but at the end of the day, a partnership often shares both the responsibilities and risks of your joint ventures.
(Jones, A 2022)
Sponsorship of Individuals
As discussed, sponsors may support a sports team, club or event but they also sponsor individual athletes.
Examples of Sponsorships and Partnerships
Red Bull in eSports
Red Bull has consistently invested significantly in eSports and sports. Their list of accomplishments includes supporting a variety of StarCraft 2 and Dota 2 tournaments and well-known teams, including G2, OG, and Tempo Storm. Additionally, Red Bull frequently hosts its own esports competitions, such as the RedBull SoloQ and RedBull Wololo.
Red Bull has increased its involvement in esports even as it continues to support more conventional sports. They are the real engine of the sector.
(Ashely J, 2023) Red Bull Kumite is an annual Street Fighter tournament held in multiple cities around the world. Red Bull is the primary sponsor of the event which spans over an entire weekend. With the number of viewers expected on twitch.tv/ Red Bull is projecting the number of eyes is worth sponsoring the tournament. AOC is also in the bottom right-hand corner, a company that builds gaming monitors. As a sponsor their logo will be plastered on stream and around the event, all games will be played using AOC monitors.
Partnership
Due to their collaborative work's sheer scope and depth, Riot Games and Mastercard's extensive cooperation represents this. Mastercard will continue to serve as an official sponsor of the Mid-Season Invitational (MSI), the League of Legends World Championship, and the All-Star event as part of the multi-year agreement. The agreement also includes sponsorship of the opening ceremonies for the events.
(Nordland J, 2022)
Choosing a sponsor
An organisation or athlete has much to consider when deciding who to enter into a sponsorship agreement or partnership with. For example, what is the company’s values, visions, goals (do these align), reputation, partners, core business and networks? Are they compatible?
What is their size, demographic, and marketing reach? What they will bring to the table, what they are like to work with, do you have any shared relationships or networks, how long the relationship is, what do you and they want from the relationship expectations, how your existing supporters will feel about the relationship they a good fit.
You will need to research into who else they sponsor who their competitors are. A good place to start is:
- company website
- Google search, including Google Alerts
- LinkedIn and social media profiles
- word of mouth
- news reports
- company revenue.
The following website will enable you to search any company that offers sponsorship along with their revenue. Roic AI · your first step in analyzing a company.
Sponsorship Investigation Case Study
The XYZ eSports Championship is a biannual event that has gained immense popularity and growth as teams of Unity College students compete for the coveted title of Ultimate Gaming Squad. This event features a series of both mental and physical activities, providing an engaging platform for students to showcase their skills and camaraderie. The primary objective of the XYZ eSports Championship is to promote holistic health and well-being through physical activity, offering participants, fans, and supporters a thrilling and entertaining experience. With a loyal fan base that actively follows teams' progress on social media and tunes in to live streams or in-person attendance, the event has achieved a remarkable physical and digital audience reach.
Event Details
- Event Frequency: Biannual
- Winning Prize: Trophy + $500 voucher for new equipment
- Second Place Prize: $250 equipment voucher
- Spot Prizes: 5 Games T-shirts, 5 Games water bottles
- Audience: Estimated 200 in-person + up to 500 digital viewers
- Venue: Large recreation centre
- Offerings: Healthy food, beverages, official game merchandise
Budget:
- Venue Rental and Setup: $5,000
- Prizes (1st, 2nd, Spot Prizes): $1,500
- Live Streaming Production: $2,500
- Event Promotion and Marketing: $2,000
- Staff and Operations: $3,000
- Healthy Food and Beverages: $1,000
- Miscellaneous Expenses: $1,000
- Total Budget: $16,000
Potential Sponsors
- Sportswear Brands: A sportswear company could sponsor the event by providing branded uniforms or clothing for participants, contributing to the professional appearance of the event.
- Energy Drink Companies: An energy drink company could offer beverages to energise participants and attendees throughout the event.
- Fitness Equipment Suppliers: Companies that sell fitness equipment could provide prizes or in-kind sponsorship by supplying equipment for training or as prizes.
- Technology Companies: Tech companies could contribute by providing live streaming equipment, enhancing the viewing experience for the digital audience.
- Healthy Food and Beverage Brands: Brands focused on health and wellness could supply nutritious snacks and drinks for sale during the event.
- Local Businesses: Local businesses could offer in-kind donations such as vouchers, products, or services that align with the event's values.
Forum Activity: Sponsorship letter
After reading the case study, you are tasked with drafting a sponsorship letter to attract potential sponsors for the XYZ eSports Championship. Your letter should effectively communicate the value of the event and the benefits sponsors will gain from their involvement. Consider the following points when drafting your letter:- Introduction: Introduce yourself and provide background on the event.
- Event Overview: Describe the XYZ eSports Championship, its objectives, and its growing audience.
- Sponsorship Benefits: Clearly outline the benefits sponsors will receive, such as brand exposure, audience reach, and alignment with a health-focused event.
- Sponsorship Levels: If applicable, detail different sponsorship tiers with corresponding benefits.
- Call to Action: Encourage potential sponsors to take action, whether that's scheduling a meeting, discussing opportunities, or providing contact details.
- Gratitude: Express gratitude for their time and consideration.
An endorsement is much more personal – rather than a company or organisation paying for a project, a project is endorsed by an influencer. The influencer will promote the product or service to their audience. For example, hip hop artist Travis Scott has signed an endorsement deal with McDonalds®, teaming up to launch the “Travis Scott Meal.” Similarly, Snoop Dogg has an endorsement deal with Corona Cerveza®, LeBron James has one with Nike®.
Endorsement is an influencer promoting goods or services; a sponsorship is a company paying for a project in return for visual exposure.
The following video explains endorsement and how it is used.
Watch: Endorsement advertising
Advertising is yet another method that can be used to gain revenue from a business. Advertising requires careful planning and consideration. Advertising costs money; the aim is to avoid advertising costing more than what you will rake in.
Advertising is a world on its own and is comprised of various elements. Let’s look at advertising.
Have you ever felt thirsty while watching a soda drink advertisement or wanted to buy a chicken katsu just because you saw some advertisement while walking around town – that is the power of advertising.
Red Bull Kumite is an annual Street Fighter tournament held in multiple cities worldwide. Red Bull is the primary sponsor of the event, which spans over an entire weekend. With the number of viewers expected on Twitch.tv/ Red Bull is projecting the number of eyes is worth sponsoring the tournament. In the bottom right-hand corner is also AOC, a company that builds gaming monitors. As a sponsor, their logo will be plastered on the stream and around the event, all games will be played using AOC monitors.
Knowledge Check Activity
