It’s almost 2023 and we’re closing in on another year in esports. Almost 12 years to be exact for me. I’m going to talk about a bit of a heavier topic for today with esports and revenue problems in esports and publisher control. Esports has seen a steady rise and growth recently from an external perspecctive. The reality is though that multiple companies are facing cash crunches in this tough macro environment. Overall, it has faced several challenges when it comes to generating and maintaining revenue.
One of the main challenges faced by the esports industry is the lack of any real money generating business. Many esports organizations rely on sponsorships and advertising to generate revenue, but these sources of income can be unpredictable and depend on the success of individual teams or players. This lack of stability makes it difficult for esports organizations to plan for the long-term and invest in infrastructure and talent. In addition, generating sponsors in exchange for monetary funds is always a challenge. When you’re starting out, 9/10 you’re going to get a hardware deal and after a few times and consistent events you’ll get some money. Guess what, budgets can be slashed, contacts move on and sometimes you downright get ghosted. Esports business development is hard work!
Revenue declaration is another problem. For example, a lot of companies on a balance sheet would do the following. Player A wins a tournament for $100 but this is paid first to the team (assuming they have one). They then pay the player their respective cut of prize money (depending on cut). Let’s assume this to be $100. The revenue realized by the esports team is now $100 but it infact more than likely lost money with this transaction factoring in bank fees etc. The team isn’t profitable but is still valued at a 10-20x valuation.. This lead to some outrageous valuations and reverse takeovers in public markets. Valuations have come down but now teams must worry about free cash flow in order to survive. Raising in a tough macro environment is not great for the team or the overall organization. It’ll be interesting to see what orgs do when the time comes.
Another challenge is the lack of clear ownership and control over the intellectual property rights of esports leagues and tournaments. This can lead to disputes over the distribution of revenue and the control of teams and players. These issues have resulted in the formation of multiple competing leagues and tournaments, which can fragment the esports ecosystem and make it harder for organizations to generate consistent revenue.
In addition, the esports industry is still relatively new and is subject to rapid changes in technology and consumer behavior. This can make it difficult for organizations to keep up with the latest trends and adapt to new business models. In plain English, as a tournament organizer it is hard to make bets on certain games when you’re unsure if the game is going to exist in a year or if the publisher is going to continue supporting the game.
Publisher control is a significant issue in the esports industry, as it determines the level of influence that game publishers have over the competitive scene of their games. This issue is important because it can have a major impact on the viability and sustainability of esports leagues and tournaments.
Game publishers are responsible for creating and maintaining the games that are played in esports competitions. They also often have a significant financial stake in the success of these competitions, as they generate revenue from the sale of the games and related merchandise. As a result, game publishers often exert a significant level of control over the competitive scene of their games.
There are several ways in which game publishers can exert control in esports. They can dictate the rules and regulations of competitions, determine the format and structure of leagues and tournaments, and decide which organizations and players are eligible to participate. They can also have significant influence over the distribution of prize money and sponsorship deals. For example, you just signed a fat sponsorship with a company. Guess what, publisher XYZ says “piss off bud, we have our own sponsor here” and they don’t allow your sponsor.
The level of control exercised by game publishers can vary significantly. Some publishers take a hands-off approach, allowing the esports community to self-organize and regulate itself. Others may be more actively involved in shaping the competitive scene of their games.
There are pros and cons to both approaches. On the one hand, a hands-off approach can allow for more innovation and creativity within the esports community. On the other hand, it can also lead to confusion and inconsistency, as there is no central authority to enforce rules and regulations. Organizers, players and talent are often left confused and needing clarification on a ton of aspects. A more active approach by game publishers can provide more structure and stability to the esports ecosystem, but it can also stifle innovation and limit the autonomy of organizations and players.
Ultimately, the level of publisher control in esports is a complex issue with no easy answers. It is important for game publishers to strike a balance between fostering a healthy and sustainable esports ecosystem while also protecting their own interests. It is also important for organizations and players to have a voice in the decision-making process and to ensure that their concerns are taken into account.
Despite these challenges, I’m still interested in the esports industry. I’ve taken a step back but am still involved in events but moreso in the web3 space and behind the scenes. Here’s to another dozen years in esports.
Feel free to add more comments on other issues with esports and its revenue down below. I’ll reply with my thoughts.