Ari Evans, the founder and CEO of e-sports broadcasting firm Maestro, made some interesting comments in a lengthy piece by GamesIndustry.biz. He stated that the reason so many live-streamers and e-sports players are wrapped up in the current electronic gaming gambling business is because there isn’t a lot of revenue being generated organically from the e-sports sector.
“Despite how big [eSports] seems, it’s also tiny in terms of revenue – very small,” […] “A lot of companies and startups in this space are kinda having trouble figuring out how to monetise it. Most eSports leagues run at a loss.
“They’re not a profit centre. They’re a loss leader as a marketing tactic, to push the other main revenue streams of these titles – primarily in-game transactions.”
What Evans is saying is true. Sponsorships and advertisements isn’t how e-sports is sustained (or maintained). Purses are usually generated through DLC sales throughout the season. That’s how NetherRealm manages the winnings for major ESL and EVO tournaments featuring Mortal Kombat X. Capcom recently started doing the same thing for Street Fighter V… selling DLC and using the earnings to bolster the pot for the winner.
According to Evans, some teams partner up with the unregulated, unsanctioned and unlicensed gambling rings for games like Counter-Strike: Global Offensive, because it helps balance out what isn’t paid through competition…
“I think a lot of eSports teams own skin gambling sites and therefore funnel that money to pay their players, increasing average salary across the industry. Unless you can match that with your own revenue, or maybe VC money, then your team is done.
“That source of revenue is going to be cut off, and therefore we’ll see team salaries go lower… Maybe players will create a union, and organise around that.”
Evans mentioning that the “revenue is going to be cut off” relates to Valve’s recent crackdown on the gambling circuit for Counter-Strike: Global Offensive. They recently issued cease and desist letters to various gambling rings selling and trading and betting skins that use the OpenID API that Valve provides for easily integrating Steam user IDs into a website or service.
After the FTC was made aware of the gambling dens following an expose by Honor the Call and H3H3 Productions on a lack of disclosure by major Twitch streamers and YouTubers Trevor “TmarTn” Martin and Tom “ProSyndicate” Cassell, the entire Counter-Strike: Global Offensive gambling ring has crumbled.
However, this does tie back into what Evans was saying in regards to finding new revenue streams. While e-sports is trying to find its way into broadcast television with channels like ESPN 2 picking up key MOBA events and just recently EVO 2016, it’s possible that advertising revenue could become a viable option for supporting the e-sports market.
However, we still don’t know if ESPN will commit to e-sports or if some of their toe-dipping is simply one-off events to test the waters. We also don’t know if larger corporate entities will invest any further into e-sports other than the occasional team or player sponsorship here or there. In the meantime, with the gambling sites being shutdown, it will be quite telling what some e-sports competitors turn to in order to balance the income.