The top priority for the esports industry in 2023 will be diversifying its revenue streams to reduce its reliance on sponsorships. Writing for SBC, Warren Tristram, Head of Gaming, Lottery and Esports at Nuvei, asks what role sports betting can play in monetising the esports audience.
The esports industry has a problem to solve in the next 12 months. For too long it has relied on sponsorships for revenue; despite growing a sizable audience, other revenue streams simply haven’t materialised. In fact, according to new research we commissioned earlier this year the majority of the esports industry isn’t profitable.
To find out more about how esports teams, publishers, and tournament organisers plan to diversify their revenue streams, we asked over 100 businesses from the industry about their hopes and concerns for the next 12 months.
The time to monetise the audience is now
The overriding issue the industry is facing today is how to monetise its audience. Esports teams and brands have successfully grown significant followings as the sport has become more popular, but the cost of fan share and success, notably player salaries, is spiralling in a way that cannot be met through winning more prize pools alone.
Traditionally, esports businesses have turned to sponsorship deals in search of additional revenue. According to our research, 89% of the industry earns part or all its revenue from sponsorship deals, and on average an esports business has 8.6 sponsorship deals running at any time. 77% of esports businesses told us they expect their revenue from sponsorships to increase in the next 12 months, but with only 45% of the esports businesses surveyed actually reporting being profitable at the moment, sponsorships alone aren’t going to cover the shortfall.
So it is of little surprise that monetising its growing audiences is top of mind for the esports industry. But this is easier said than done. Almost half (48%) of esports companies already sell tickets or merchandise. There is little to no appetite to charge fans to view the esports content they have become accustomed to accessing for free, for fear of losing the majority of the hard-won audience. So another solution must be found.
This is why monetisation is the most cited issue for esports businesses currently; two thirds (65%) of the industry say the difficulty in monetising the audience is a top concern when considering the future of the industry.
The esports industry is ready to embrace sports betting
At the same time as the esports industry is finding its way to understand new revenue streams, it may also be about to redefine its relationship with sports betting.
The majority of esports businesses (53%) already believe that sports betting is important to the future of the industry. That’s compared to less than a quarter (23%) that don’t think sports betting has a role to play in its future. Attitudes to sports betting in esports also appear to be changing; today only 30% of the industry is concerned about the impact of sports betting on esports, far fewer (43%) than those that are not concerned at all. This is a shift away from a previously held belief that the age of the core audience, lack of global governing bodies, and susceptibility to match fixing made esports and sports betting a bad fit.
There are still blockers to sports betting becoming ubiquitous across esports. Currently 74% of esports businesses are involved in games or leagues that restrict sports betting sponsorship (the highest percentage of all verticals where sponsorship is restricted). And two thirds (67%) of businesses believe these restrictions from leagues and games publishers is one of the top three blockers to esports betting growth. Over half (53%) of the industry say this is the single main blocker to growth, ahead of regulations (12%), maintaining the integrity of esports (10%), and the age of the esports audience (6%).
Monetising the audience through sports betting
Today, only 15% of esports businesses say that sports betting currently plays any role in their revenues. So there is huge headroom for growth if the esports industry were to embrace sports betting more fully. Not only would this open the door to a new pool of sponsorships options, but other revenue avenues such as affiliate marketing/revenue share. New sports betting related content could also provide a new revenue stream.
Successful monetisation will also include optimising payments to tackle many of the issues the industry is seeing today. This includes better management of international payments, finding a better balance between convenience and security in their checkouts, and adding more payment methods to meet customers’ expectations. By overhauling the payments process, and embracing sports betting, the future will be even brighter for esports.
For more information about the future of the esports industry, download Payments and the Monetisation of Esports White Paper now.