The Rundown on How Do Esports Teams Make Money

“How do esports teams make money?” you've probably wondered. Well, esports has come far from the days of basement LAN tourneys in the early 2000s. What started out as passion projects has now turned into a behemoth of a billion-dollar industry, with esports teams valued at hundreds of millions. Read on to find out more!

Esports Is a Billion-Dollar Industry

In the past decade, esports has seen tremendous growth, with games like Dota, League of Legends, and Counter-Strike leading the industry. Now, it sees franchise leagues with player salaries going past $100,000, tournaments with millions of dollars at stake, and brand sponsorships that can be compared to traditional sports leagues like the NBA.

According to a 2022 report by Newzoo, esports is now truly a billion-dollar industry valued at $1.384 billion dollars.

The #esports audience will pass half a billion in 2022! More stakeholders are investing in esports as it gains popularity globally. 🎮📈

👉 Check out who's involved in our latest esports ecosystem infographic: https://t.co/AUzhZYmAhA@EA @TencentGlobal @riotgames @EpicGames pic.twitter.com/YJuw7ULkK2

— Newzoo (@NewzooHQ) September 11, 2022

When compared to 2022, the industry has had a revenue growth of 39% in just three years, and is expected to exceed $1.86 billion by 2025. And with an audience of around half a billion tuning in from countries across the world, esports is not going anywhere anytime soon.

But How Exactly Do Esports Teams Make Money?

After seeing all the money that gets into the pockets of your favorite teams, you might be wondering how they make that much. Esports teams such as Team Liquid, OG, and TSM FTX are no longer just rag-tag squads of rookies competing to be the best in the world. They have grown alongside the industry to become full-fledged organisations that have become more businesslike in nature.

Just like traditional businesses, they need a constant stream of revenue to keep operating and reach their goals. Today, teams need to pay their players’ salaries, hire competent support staff, provide adequate infrastructure, promote their branding, and so much more! Whether it’s lifting the Aegis, the Summoner’s Cup, or simply being the most recognisable esports team in the world, each team must find ways to keep itself afloat amidst the growing costs of running an esports organisation.

So, let's take a look at the key revenue streams that teams have been using to turn a profit in the past few years.

1. Winning

First and foremost, teams make money through competing and winning in esports tournaments. Yearly, esports titles all the way from League of Legends to Rocket League host seasonal tournaments with prize pools ranging from hundreds of thousands to millions of dollars up for the taking. Last year, The International 2021 had $40 million in prizing, with $18.2 million going to tournament underdog Team Spirit.

Although all this money can be a good source of revenue, even the best teams in the world can’t always guarantee a win on the biggest of stages. Also, it takes quite an investment to build a championship team: finding the right players, surrounding them with the right coaching, and even providing for their day-to-day needs. Plus, it can take a while before an organisation can start winning in the highest level of play, which is where the money is.

Therefore, although it can be lucrative winning tournaments left and right, it’s not financially feasible to rely on winning for an organization’s source of income. Therefore, esports teams must look towards diversifying their modes of income to survive in the competitive industry.

2. Revenue Sharing

Once teams start winning and can finally step into the top tournaments, they can earn money by taking a cut in media rights, sponsorships, and live event tickets through revenue sharing. As partners of a competitive league, teams bring in the audience that allows a game’s esport to thrive. Thus, game publishers like Riot Games and Activision Blizzard owe it to these organisations to pay them a part of what they earn through these leagues.

For example, in China last year, streaming platform Huya signed a 5-year $310 million media rights deal to exclusively stream League of Legends esports. This means that viewers can only watch the LPL and its amateur leagues exclusively on that platform. Then, part of this deal will be going to the pockets of the teams that make up the LPL.

Furthermore, teams take a cut of the revenue earned by their signed streamers. These streamers (such as Sentinels’ newly recruited Tarik “tarik” Celik) partner with organisations to help them grow their channels. In return, teams get a percentage of their earnings (sponsorship deals, subscriptions, and the like) as stipulated in their contracts.

3. Taking in Sponsorships

Another worthwhile way teams can earn money is by partnering with nonendemic and endemic brands through sponsorships. Since esports is watched by millions of viewers across the globe, brands will fight tooth and nail to get their name all over a team’s jersey. By associating themselves with well-known and respected teams, loyal fans of these organisations will, in turn, remember them kindly and be more inclined to support their brand.

Endemic brands such as Razer, Logitech, and Corsair will pay pro players, teams, and streamers alike to use their gaming equipment. Meanwhile, nonendemic brands, like BMW, Mastercard, and Red Bull, will pay to be the partnered car, payment provider, or drink of tournaments. Consciously or not, this influences casual gamers and esports viewers alike to lean towards these products when that’s all you see in every stream. Case in point, VALORANT pro Kim “stax” Gu-taek built up hype for the Razer DeathAdder V3 Pro after a standout performance at Champions.

Let me introduce my new partner@Razer @TeamRazer death adder v3 pro pic.twitter.com/wxkUTw8xzH

— stax (@staxVLRT) September 9, 2022

Teams can then either earn through commissions or have set figure deals to support their brand. But again, this only becomes possible when an organisation has reached a level of recognition from winning titles. The name of the game is engagement. When a team has hundreds of thousands supporting their banner, they get much-wanted attention that brands would gladly pay for. So much so that it’s estimated that 60.5% of the industry’s revenue comes from sponsorships alone.

4. Selling Merchandise

Lastly, organisations can sell their own line of merchandise to keep a steady flow of revenue that is independently their own. From the classic jerseys to entire lines of clothing, engaged audiences will want to support their favorite teams by repping their uniforms. One good example of a team that successfully sells out their merch is Cloud9, having partnered up with Puma to release their own clothing.

Teams like 100 Thieves have been pioneering the space of selling their own limited-edition merch in the past few years. Their apparel line “Foundations” sold $2.5 million in the first month of its release, thanks to the steep investment the organisation put into painting itself as not just a gaming team, but more of a lifestyle brand. In 2021, 100 Thieves even acquired gaming peripherals company Higround, which shows that esports organisations are finding newer ways to expand their businesses out of the traditional forms of revenue generation.

The Future of Revenue in Esports

As we mentioned, the esports industry is growing rapidly. And in our ever-increasingly digital world, it will continue to turn heads on an even larger scale. At present, teams and organisations are finding all-new ways of earning revenue by means of revenue diversification. One such example is the use of blockchain technology through NFTs to possibly sell in-game content.

Meanwhile, you have teams like Team SoloMid partnering with FTX, a cryptocurrency exchange, to officially change their name to TSM FTX as part of a 10-year $210 million deal. TSM had already been diversifying its means of generating revenue through esports analytics app Blitz, and its deal with FTX is further proof of that. All of this has helped contribute TSM’s valuation being the most valuable esports organisation in 2022 at $540 million.

There are even teams that have listed themselves publicly or raised capital privately through outside investment. For example, MAD Lions (OverActive Media), Guild Esports, and Astralis are all publicly listed, which means their stock can be freely traded on the market. No matter the form of revenue generation, teams are scrambling to make money as they continue to invest in an industry that has yet to show its returns.

Is There an Esports Bubble?

That being said, esports in general has yet to be profitable. Although there are teams like TSM and Team Liquid that have been making a pretty penny, the rest of the industry has yet to catch up. In 2021, Riot Games reported that League of Legends, one of the biggest esports in the world, still hadn’t made a profit. But the reason that everyone’s okay with being unprofitable for now is that the industry is a marketing investment.

However, being a rapidly growing industry, everyone wants a piece of the pie. While the scene is still young, stakeholders and investors want in so that they make their money back exponentially later on. And if you look at the numbers, you’ll realise that esports still has much to grow as the games live streaming audience is projected to increase to a staggering 1.41 billion viewers by 2025.

This is a whopping 53.3% increase from today’s 921.2 million viewers – of which, esports has 532 million occasional viewers and hardcore esports enthusiasts alike tuning into the scene in 2022. There’s a growing demographic that esports will have exclusive access to in the coming decades and with that, comes engagement, loyalty, and money. And where the money flows, everyone follows.

Most Valuable Esports Organisations in 2022

In 2022, top organisations are starting to move away from relying on traditional sources of revenue. If this were just about tournament earnings, it would be a completely different list as we’ve established that big money can be made outside of winning tournaments. Teams like TSM FTX have dabbled into esports analytics with Blitz. Then, you have teams like 100 Thieves, who have risen above the rankings thanks to their hold on hypebeast culture in gaming.

But aside from these sources of revenue, these teams succeed because of their foothold in the esports industry. There are teams that have gone on to win championships from every esport imaginable, which has given them the ability to build a brand that millions of fans can rally behind.

Below is the definitive list of the most valuable esports companies in 2022, as reported by Forbes:

1. TSM ($540M)
2. 100 Thieves ($460M)
3. Team Liquid ($440M)
4. FaZe Clan ($400M)
5. Cloud9 ($380M)
6. G2 Esports ($340M)
7. Fnatic ($260M)
8. Gen.G ($250M)
9. NRG ($240M)
10. T1 ($220M)

Highest Earning Esports Teams in 2022

Biggest Sponsorship Deals in Esports History

Now that you’ve heard of the scale that sponsors and investors are willing to put into the scene, you might be wondering which companies have been making major moves in the past few years. In particular, the following brands have gone out of their way to make themselves known to the growing audience in gaming and esports.

TSM FTX

With the rise of cryptocurrency in the past year, Hong Kong-based cryptocurrency exchange FTX felt that it was time for them to enter esports in a meaningful way. And enter they did with their naming rights deal with Team SoloMid to be named TSM FTX. While it is true that FTX is not the only team to do so (think Fnatic and its $15 million 5-year deal with Crypto.com), TSM will be paid out $210 million over 10 years – record-breaking in the history of esports sponsorships!

BMW

With the undeniable rise of esports, BMW knew that it had to start making a name for itself in the industry. Its campaign “United in Rivalry” spanned across the globe, with partnerships with five competitive League of Legends teams: T1, G2 Esports, Cloud9, Fnatic, and FunPlus Phoenix. This was ground-breaking back in 2020 as it was one of the partnerships that kickstarted the wave of luxury brands to partner with esports teams (such as Ralph Lauren, Gucci, etc.).

Intel

Lastly, Intel has been such a crucial partner in the development of esports in the past two decades. One main partnership that has been influential to the industry’s growth is its relationship with ESL Gaming. The countless Intel Extreme Masters tournaments held in the past have been key in the longevity of esports titles like CS:GO, and continue to be pivotal to their success today. Intel’s renewal of its partnership with ESL Gaming from 2022-2025, which was valued at $100 million, is going to be another reason that esports will continue to thrive.

In Conclusion

As a billion-dollar industry, there’s much money to be made in the still-growing field of esports. Traditionally, esports teams used to solely make money through sponsorships, esports earnings, and merchandise. But now, esports has become much more accessible, which allows teams to look towards all manners of revenue generation. However, what remains is that engagement is still king; Teams need to make a name for themselves before they can reach the likes of TSM, 100 Thieves, and Team Liquid.

Capturing the hearts of players across the world is truly the essence of esports. You watch your favorite players and teams out of a sense of awe and respect for what they do, and once you’ve got that, the money will be sure to follow.