Esports Companies: A Financial Perspective on a Growing Industry

Esports has evolved from small tournaments hosted by enthusiasts with a few dozen attendants and spectators, where the prize usually consisted of a couple of pizzas and a few hundred dollars into a multi-billion dollar industry. The most anticipated esports events draw millions in viewership every year, hosted at sold-out stadiums and with massive production crews keeping everything running. In tune with this growth, the money flowing into esports has also increased exponentially and some of the best players in the world can be paid similar numbers to athletes in more traditional sports. Join us as we take a deep dive into the world of esports and its remarkable growth in recent years.

• The growth of esports: How the industry was born and what the early years of competitive gaming looked like.

• Increasing viewership: How esports managed to grow its viewership.

• The companies making it happen: An overview of some of the most important players in the industry.

• Multi-billion dollar industry: How prize pools have increased from next to nothing to multi-million sums.

Playing video games competitively can be traced back to the early days of video games in the 1970s and 1980s. The first recognized esports event took place in 1980 with Atari's Space Invaders Championship, which drew over 10,000 participants. In the years leading up to the turn of the millennium, enthusiasts continued to play video games competitively but without viewership or any substantial commercial interest to speak of. However, this would begin to change in the early 2000s with the establishment of tournaments in structured formats. Regardless of the fact that tournaments were beginning to become more structured, the financial side of operations continued to be an issue as viewership was limited. When games specifically developed to excel in a competitive environment were combined with the rise of modern streaming platforms, organized tournaments, and interest from viewers the growth started in earnest.

The last decade has witnessed a remarkable surge in the financial scale of esports, primarily due to the fact that viewership has increased exponentially. Gaming as a whole has been increasing in popularity, and interest in watching the best players in the world compete against each other has reached levels previously considered inconceivable. One of the main contributing factors to this growth is the increasing reach of streaming platforms such as Twitch (acquired by Amazon in 2014), and YouTube (acquired by Alphabet in 2006). These platforms have made esports accessible to a global audience, ushering in the transition from a niche hobby to mainstream entertainment.

Game developers and publishers play a crucial role in the esports ecosystem. Companies like Riot Games (acquired by Tencent in 2011), and privately held Valve, as well as Activision-Blizzard (acquired by Microsoft in 2023), have invested heavily in developing their games as spectator sports. These investments include the creation of professional leagues, tournament sponsorships, and prize pools that rival traditional sports. One example of this is the professional circuit hosted by Riot Games, where the best teams in the world compete against each other during the year. The teams with the best results go all the way to the world championships where they compete with massive prize pools in front of sold-out stadiums and productions more akin to large sporting events than anything else.

As of Today, esports is a multi-billion-dollar industry, with a complex ecosystem that includes game developers, players, teams, sponsors, advertisers, and media platforms. The industry's revenue streams are diverse, encompassing media rights, advertising, sponsorships, merchandise sales, and ticket sales for live events. However, all of this has been made possible due to the simple fact that the interest from the general public is sky-high. As viewership continued to grow, primarily amongst a young demographic, sponsorship and media deals grew with it. One clear example of how serious money has been flowing into the industry is SK Telecom T1, a League of Legends team that has a historical track record of stellar tournament performances.

This is also something that has impacted the players themselves. Whereas competitive gaming used to be a hobby where enthusiasts competed for bragging rights and pocket money, the best players in the world now command high salaries and can take home huge winnings at tournaments. This is in addition to sponsorship deals that top players can sign with hardware companies such as Razer and Logitech, further adding to potential income.

As the industry as a whole has grown, so have the esports organizations competing events evolved and flourished. Some of these organizations have also filed for IPOs, and are today public companies with some examples being FaZe Clan and Astralis. But it’s not just dedicated esports organizations that compete in events today. Large and traditional sports teams such as Paris Saint-Germain and FC Bayern operate teams across various games.

The involvement of major game developers, the emergence of professional leagues, and the integration of streaming platforms have been pivotal in transforming esports into a mainstream phenomenon. Moreover, the financial prosperity of the industry is not just confined to the game publishers and event organizers; it extends to the players and teams, who are now recognized as professional athletes and influential brands in their own right.

While the industry can be hard to come to grips with for some, esports is here to stay. The growth that has been showcased in the last decade or so has been a testament to the fact that the interest from the general public is there and is something likely to continue to remain at high levels.