Changing dynamics in eSports monetization and production

The pandemic brought about huge changes in eSports, with virtual competitions being hosted through specialized streaming platforms that connected competitors and production teams across distances. Though often competing over large areas (such as Europe, the US, or China), platforms were able to maintain low latency at 200 milliseconds or less. While not as fast, this is comparable to single location events.  

Moving away from an in-person competition model proved hugely popular, and the keys to that success were the advanced production technologies and facilities that enabled the delivery of a high-quality eSports viewing experience.

To get an idea of the scale involved, a single eSports game of Fortnite might need up to 300 camera feeds, all of which would need to be monitored and produced to give viewers a single stream of the most important action. By comparison, the Super Bowl, probably the biggest annual production undertaking in traditional sports, uses between 70-90 cameras.

Localization of international eSports

New technology, including the cloud orchestration of streaming production, now enables real-time feed tracking and camera input from the action points that will be most interesting to the viewer. This also opens up eSports monetization avenues for fans who may want to choose particular viewpoints. Even when single-venue events return to their previous scale and frequency, the strategy shift by eSports publishers will most likely see a hybrid approach featuring a mix of virtual and live events.

Interestingly, industry watchers believe that the pandemic-related shift to regional competitions “could well become a fixture” of the future eSports, and subsequently eSports monetization, model. This is also related to the rise of local and national amateur leagues, which develop a clear funnel and climbing path for players to ascend to the elite levels of professional play, in line with how traditional sports are built on tiered systems. 

Publishers are increasingly following in the footsteps of Riot Games, which have actively developed and promoted their North American League Championship Series, and Activision Blizzard, which introduced the Overwatch sports league. The success of those ventures has encouraged others to leverage their franchises’ popularity through localized teams and competitions, all of which feed into the professional and international tier.

Crossover with traditional sports broadcasting

The lockdown also drove considerable crossover between traditional sports and their eSports equivalents. With the cancellation of pro sports events, top professional athletes moved into the virtual realm to compete against each other. This happened in NASCAR and Formula 1, with the eNascar iRacing Pro Invitational Series and Virtual Grand Prix, respectively, hosting dedicated video gaming events. 

The NBA and NFL got involved, too, with their NBA 2K20 and Madden NFL20 competitions. Big names in the respective sports battled against each other in highly popular matches that only boosted the popularity of eSports franchises and created synergies between traditional sports fans and eSports.

The rise in viewership and crossover with traditional sports has also led to major TV sports networks carrying coverage of eSports. With the cancellation or postponement of traditional sports, there was plenty of space in their schedules for eSports crossovers. 

While this represents a major shift in the profile of eSports, TV coverage is something that has been building in some regions for at least two decades. First introduced in South Korea, major networks in the United States, Europe, and Asia have expanded into covering virtual gaming. In Germany, the dedicated sports broadcaster Sport1 launched eSportsOne in 2020. It’s not yet clear how coverage will continue once traditional sports are back in full flow, but for what was once a niche field, eSports have gained acceptance from big media as a major sporting category.

The changing face of eSports monetization

The many changes that have occurred in publisher and broadcaster strategy have also caused shifts in eSports monetization. Though it seems like the previous status quo will remain, with sponsorship and media rights making up the largest source of revenue, other income avenues have emerged.

Out of the five major eSports monetization and revenue categories, experts predict that subscription fees and advertising will be the major drivers of eSports overall growth between  2021-2025. Total growth is predicted to be over 10% CAGR in that same period. Though advertising and subscription fees currently only make up less than 30% of eSports revenue, this revenue is also expected to grow, as charging fees represents a relatively new trend for the industry. 

With the advances in production technology and streaming capabilities, publishers are starting to look for a return on their investments in platforms, namely through subscription fees. This is likely to find success among gamers, as gamer-viewers are already well-accustomed to paying to support publishers or access better services. In fact, as Deloitte found, more millennials have gaming subscriptions (53%) than pay-TV subscriptions (51%). 

OTT and eSports: Comparing revenue models

The revenue models of traditional OTT services and eSports are difficult to compare directly, as there are factors at play that don’t exist for OTT streamers. Many of the biggest MMOs (massively multiplayer online game), for example, provide their games for free online but earn revenue through in-game sales of skins, weapons, and other game-related features.

There are also varying elements to consider in regards to game streaming platforms, such as Amazon’s Twitch. The platform provides a lot of eSports content for free, but subscriptions may be required by individual streamers to access all or part of their content. The model Twitch uses to share revenue from subscriptions and advertising with members of its partner programs can be followed by others. 

Under the Twitch model, streamers get half of viewer subscription fees, which have three tiers and can be bought in multiples and donated to others. Viewers are very supportive of both individual streamers and the micro-communities they create, which leads to a healthy content revenue stream for Twitch.  Professional streamers at the top end of viewership may earn $3,000 – $5,000 a month from subscriptions, which they earn by putting in full work weeks playing games and interacting with their community. With their share of ad revenue, they also make $250 for every 100 subscribers they have.

For subscribers, not only are they supporting the work of their favorite content producers, but they can also benefit from extra services for their subscription fees. Though it’s not necessary to pay to access Twitch itself, it is possible to upgrade to a Twitch Turbo account, which provides mostly ad-free viewing across its entire platform.

A multi-pronged pricing strategy

As subscription fees are introduced across the field, this multi-pronged pricing strategy is likely to become the standard model for eSports monetization by content producers and game publishers. For example, Riot Games created a Pro View pass for its events, which helps provide a more immersive user experience. Users with passes can access unique camera feeds of specific players, have greater control over where the camera goes, and can follow exactly the action they want. The pass also comes with exclusive content that deepens the experience, such as being able to read players’ in-game messages. 

Riot Games’ strategy demonstrates how publisher-managed platforms can leverage technologies and features to improve eSports monetization and impose greater control of the eSports ecosystem. If you want to read more about how eSports monetization and production is changing and the unique challenges the industry faces, download our whitepaper.