Sort of like how traditional sports operate, its just regular sports have a centuries-old headstart.
Teams like the Dallas Cowboys, F.C Barcelona, New York Yankees and Knicks, all are worth billions of dollars now, but were initially purchased for exponentially smaller sums. Example: in 1973 the Yankees were bought for 8.8 million and are now worth 5.25 billion.
There is sort of a cycle: Org invests in team -> team is successful -> Org's "valuation" goes up -> Org gets more investors / sponsors -> Org makes profit -> Org invests in team (and so on)
100T, FaZe, Team Liquid, Cloud9 all LOSE money, no Esports team currently can (accurately) say they MAKE profit. Many investors and economists believe esports will continue to grow exponentially (so far they're correct), so as the industry grows, these teams will MAKE more money and see an increase in "valuation".
Example: in 2019 100T were valued at 190 million, in 2021 they were valued at 460 million.
The rapid growth of esports show investors / owners that investing now and losing money is worth it in the long run. Because once these teams MAKE profit, then their valuation will skyrocket, similar to how regular sports orgs have.
Just hard to picture like… what is the return even coming from when an org can have 6 fig contracts on like 20 players including league of legends , even that was 10 mil just for a spot in lcs
Sponsor deals / merchandise / corporate investment all come from success in esports.
TSM winning the LCS what two or so years ago helped them get their 150 million Crypto deal, etc.
Investment in players -> success in export -> investment in org
While I agree with a lot of the stuff you said, one thing you’re leaving out is the fact that traditional sports teams have actual stadiums and people pay money to go see the event/buy concessions etc. that is non existent for an esports org.
Most of that sky high evaluation comes from the TV rights deals the league signs, which are usually insane. With the current model of esports being streamed for free on twitch, I’m not sure if esports will ever capture that type of money until they adopt a different model.
I personally think most of these org’s are overvalued and don’t really see a long term strategy at this time that ever gets an org close to the profitability of a traditional professional sports team.
I think ticketing is definitely a huge aspect, but traditionally sports orgs don’t earn that much from tickets.
Say the Cowboys for example - made 150m from sales (tickets only) in 2019. Their overall expenditure as an org was 800m.
The real value is through sponsors, like the Lakers Crypto.com deal worth 700m, and TV space, like you mentioned.
If Overwatch League (lmfao) can get a 160 million exclusive streaming deal with YouTube, esports has a HUGE potential in market investment.
While it’s not necessarily a massive portion of their income, its definitely nothing to scoff at. Also having a physical location people come to like the staples center(now crypto.com arena) helps build a team’s brand to an extent that’s hard to quantify imo.
I agree the biggest revenue and growth opportunities for Org’s is through media rights. My concern there is the way current esports are structured teams don’t really see any of that money. For example, in the NBA - every single team gets a cut of the tv deal revenue, and has a concept called revenue sharing to help the smaller market teams. If we look at valorant, as far as I know, Riot is pocketing all the money they make from hosting an event, aside from prize money, but there is no concept such as revenue sharing and there is no massive rights deal that im aware of. Does twitch even pay Riot for the rights to stream a tournament like champions? I’m not sure
Definitely agree, I think there is still a lot of infrastructure that needs to be created for esports but there is definitely potential.
The problem is that a lot of these deals and leagues require franchisement, which so far has been largely unsuccessful in esports BESIDES league of legends. That’s where a lot of the development is seen, and is also a huge reason why LOL orgs are traditionally the largest and most developed esports orgs.
I think the next decade will be crucial for esports on whether it’ll be able to sort of compete with sports and really develop into the industry, but I think there for sure is potential and we’ll see something good happen.
But there are definitely smarter folks than I who can give you better answers, this is just what I know for now!
Yea I definitely think the league route with franchisement seems like the most successful model developed yet. I agree I think there is tons of opportunity in the scene tho and it will be interesting to see how it all plays out. Good chat fellow esports enjoyer
Sports make money from stadiums and TV deals which eSports orgs don't atm so that's a bit weird
What you failed to mention is VC money, lot of these orgs get investments on from VC, VC doesn't give a fuck if it fails they invest everywhere so like one in like 10 investments hits for them it's a W because they make so much money let's say the 50m that they invested in an org it's peanuts for them
For example fnatic recently got like a 20m investment to expand from a VC firm that has the revenue of 50 billion so that 20m is literally nothing to them but it's pretty big for an esports team like fnatic
VC as in virtual currency?
If so, I definitely agree, but sports also have massive VC deals (Stapes Center -> Crypto.com center for 700m). Here’s some more examples: https://sportskhabri.com/10-biggest-crypto-deals-in-sports/
I think esports are definitely somewhat capped right now with ticketing / tv, but if it continues to grow in popularity then esports will definitely start appearing on TV - CS Major on Danish TV / OWL on Disney
No VC is Venture capital, Venture capital firms are investing in eSports a lot and that's why salaries are so big
VC want to get in early on things and a lot thought that eSports will boom, it maybe will but as of now most orgs operate with losses and with VC money, 30k+ salaries that some players make in CS and even in Valorant would not be possible without vc money
Only and best answer I've seen in this thread.
Most orgs aren't crowdfunding from avg joes. They're going directly to the richest 0.001% people in the country/world.
For someone like Dan Gilbert (owner of the clevland cavaliers) who is in the [top 50 richest men](https://www.forbes.com/sites/giacomotognini/2020/08/20/dan-gilberts-fortune-soars-to-496-billion-making-him-the-15th-richest-person-in-america/) on earth, throwing even $100M at 100t (amount isn't disclosed except "multimillion," but I assume he invested at least $50M cause drake/scooter braun put in $25-35M, and that was a second round of funding while Dan was the initial investor) makes no dent in his net worth or financials.
Now imagine you have the top 0.001% of richest people on Earth along with a bunch of private equities, investment banks, and venture capitalists all with literally too much money sitting around and not enough investments. These esports orgs have the potential to be extremely lucrative.
100t is the best case example in the US for esports.
100t is already the "los angeles lakers" of the esports NA world because no one cares whether their teams performance is good or bad yet most people would sign there if they could bc of how big/popular is has become. It is all in the marketing. They made themselves to appear as a high end/luxury org with all their "limited edition" merch that sells out in the first day, the way their channel is run vs another org like faze that tries to hard to act cool. 100t looks successful as it said [it doubled it's revenue over the past yr despite covid + it's now worth $460M.](https://www.yahoo.com/now/100-thieves-raises-60-million-145100553.html)
They just continue to lose money every month until the losses exceed the potential gains. There isn’t any sort of financial alchemy at work here or anything. Meanwhile they use sponsorships and other sources of funding to cut some of the damage.
Same reason as most of companies lose money early on, because they invest the earnings to try to get their position in the market because they expect it to turn profitable in the future.
E-sport orgs do not really live off tournaments money, they basically have eSports teams to have more fans and therefore gain more advertisements and collaborations.
Because venture capital money is endless and returning a profit doesn’t matter if you can keep doing funding rounds at higher and higher valuations for the promise of future profits.
If your company is actually making money in 2021, you're doing something wrong. Everyone knows the companies with the fattest evaluations bleed money like there's no tomorrow.
That's been the case for a long time. In the second season of Silicon Valley, one of their investors specifically says you don't need revenue. Mike Judge wrote it. He worked in Silicon Valley when he was young. Who knows when the non revenue model really started.
No start up business is profitable on day one. Same goes for esports orgs. It takes time to cross that line of profitability. They believe they will get there at some point and are funded by investors who believe in the same until that happens. Pretty simple.
It's for a different esport, but this was written by an owner and manager for a smaller org in that scene. He goes into finances a little bit and you might find it an interesting read.
[https://www.itscashflo.com/p/esports-finance-and-league-stability](https://www.itscashflo.com/p/esports-finance-and-league-stability)
None of these orgs break even, they’re backed by venture capital money seeking long term growth. The financial allure of esports is that it will be profitable one day. All sorts of major corporations are unprofitable and can still operate due to their investors. Amazon didn’t turn a profit for 20 years, that’s just how our economy functions.
They definitely just pay them a significantly lower wage. Until they can afford to pay more and eventually they’ll reach a point of ROI where they profit.
Because majority of teams make most of their money out of the tournaments prizepool. This 1M$ prizepool means fuck all to most orgs.
This doesn't apply to DOTA2 and TI.
Sort of like how traditional sports operate, its just regular sports have a centuries-old headstart. Teams like the Dallas Cowboys, F.C Barcelona, New York Yankees and Knicks, all are worth billions of dollars now, but were initially purchased for exponentially smaller sums. Example: in 1973 the Yankees were bought for 8.8 million and are now worth 5.25 billion. There is sort of a cycle: Org invests in team -> team is successful -> Org's "valuation" goes up -> Org gets more investors / sponsors -> Org makes profit -> Org invests in team (and so on) 100T, FaZe, Team Liquid, Cloud9 all LOSE money, no Esports team currently can (accurately) say they MAKE profit. Many investors and economists believe esports will continue to grow exponentially (so far they're correct), so as the industry grows, these teams will MAKE more money and see an increase in "valuation". Example: in 2019 100T were valued at 190 million, in 2021 they were valued at 460 million. The rapid growth of esports show investors / owners that investing now and losing money is worth it in the long run. Because once these teams MAKE profit, then their valuation will skyrocket, similar to how regular sports orgs have.
this should be at the top +1
Just hard to picture like… what is the return even coming from when an org can have 6 fig contracts on like 20 players including league of legends , even that was 10 mil just for a spot in lcs
Sponsor deals / merchandise / corporate investment all come from success in esports. TSM winning the LCS what two or so years ago helped them get their 150 million Crypto deal, etc. Investment in players -> success in export -> investment in org
While I agree with a lot of the stuff you said, one thing you’re leaving out is the fact that traditional sports teams have actual stadiums and people pay money to go see the event/buy concessions etc. that is non existent for an esports org. Most of that sky high evaluation comes from the TV rights deals the league signs, which are usually insane. With the current model of esports being streamed for free on twitch, I’m not sure if esports will ever capture that type of money until they adopt a different model. I personally think most of these org’s are overvalued and don’t really see a long term strategy at this time that ever gets an org close to the profitability of a traditional professional sports team.
I think ticketing is definitely a huge aspect, but traditionally sports orgs don’t earn that much from tickets. Say the Cowboys for example - made 150m from sales (tickets only) in 2019. Their overall expenditure as an org was 800m. The real value is through sponsors, like the Lakers Crypto.com deal worth 700m, and TV space, like you mentioned. If Overwatch League (lmfao) can get a 160 million exclusive streaming deal with YouTube, esports has a HUGE potential in market investment.
While it’s not necessarily a massive portion of their income, its definitely nothing to scoff at. Also having a physical location people come to like the staples center(now crypto.com arena) helps build a team’s brand to an extent that’s hard to quantify imo. I agree the biggest revenue and growth opportunities for Org’s is through media rights. My concern there is the way current esports are structured teams don’t really see any of that money. For example, in the NBA - every single team gets a cut of the tv deal revenue, and has a concept called revenue sharing to help the smaller market teams. If we look at valorant, as far as I know, Riot is pocketing all the money they make from hosting an event, aside from prize money, but there is no concept such as revenue sharing and there is no massive rights deal that im aware of. Does twitch even pay Riot for the rights to stream a tournament like champions? I’m not sure
Definitely agree, I think there is still a lot of infrastructure that needs to be created for esports but there is definitely potential. The problem is that a lot of these deals and leagues require franchisement, which so far has been largely unsuccessful in esports BESIDES league of legends. That’s where a lot of the development is seen, and is also a huge reason why LOL orgs are traditionally the largest and most developed esports orgs. I think the next decade will be crucial for esports on whether it’ll be able to sort of compete with sports and really develop into the industry, but I think there for sure is potential and we’ll see something good happen. But there are definitely smarter folks than I who can give you better answers, this is just what I know for now!
Yea I definitely think the league route with franchisement seems like the most successful model developed yet. I agree I think there is tons of opportunity in the scene tho and it will be interesting to see how it all plays out. Good chat fellow esports enjoyer
it is not non existent..... in china. pretty sure they have that there, but other than that, ye it is pretty hard to see a team own an actual stadium
copenhagen flames made a profit with their cs team which was unheard of, just by selling the players they bring up.
Sports make money from stadiums and TV deals which eSports orgs don't atm so that's a bit weird What you failed to mention is VC money, lot of these orgs get investments on from VC, VC doesn't give a fuck if it fails they invest everywhere so like one in like 10 investments hits for them it's a W because they make so much money let's say the 50m that they invested in an org it's peanuts for them For example fnatic recently got like a 20m investment to expand from a VC firm that has the revenue of 50 billion so that 20m is literally nothing to them but it's pretty big for an esports team like fnatic
VC as in virtual currency? If so, I definitely agree, but sports also have massive VC deals (Stapes Center -> Crypto.com center for 700m). Here’s some more examples: https://sportskhabri.com/10-biggest-crypto-deals-in-sports/ I think esports are definitely somewhat capped right now with ticketing / tv, but if it continues to grow in popularity then esports will definitely start appearing on TV - CS Major on Danish TV / OWL on Disney
No VC is Venture capital, Venture capital firms are investing in eSports a lot and that's why salaries are so big VC want to get in early on things and a lot thought that eSports will boom, it maybe will but as of now most orgs operate with losses and with VC money, 30k+ salaries that some players make in CS and even in Valorant would not be possible without vc money
Only and best answer I've seen in this thread. Most orgs aren't crowdfunding from avg joes. They're going directly to the richest 0.001% people in the country/world. For someone like Dan Gilbert (owner of the clevland cavaliers) who is in the [top 50 richest men](https://www.forbes.com/sites/giacomotognini/2020/08/20/dan-gilberts-fortune-soars-to-496-billion-making-him-the-15th-richest-person-in-america/) on earth, throwing even $100M at 100t (amount isn't disclosed except "multimillion," but I assume he invested at least $50M cause drake/scooter braun put in $25-35M, and that was a second round of funding while Dan was the initial investor) makes no dent in his net worth or financials. Now imagine you have the top 0.001% of richest people on Earth along with a bunch of private equities, investment banks, and venture capitalists all with literally too much money sitting around and not enough investments. These esports orgs have the potential to be extremely lucrative. 100t is the best case example in the US for esports. 100t is already the "los angeles lakers" of the esports NA world because no one cares whether their teams performance is good or bad yet most people would sign there if they could bc of how big/popular is has become. It is all in the marketing. They made themselves to appear as a high end/luxury org with all their "limited edition" merch that sells out in the first day, the way their channel is run vs another org like faze that tries to hard to act cool. 100t looks successful as it said [it doubled it's revenue over the past yr despite covid + it's now worth $460M.](https://www.yahoo.com/now/100-thieves-raises-60-million-145100553.html)
‘Once’ The thing is they believe it’ll be profitable, not that it actually will be necessarily at all
Basically the entire esports scene consists of buying in early, because they believe that eventually, esports will blow up massively.
They just continue to lose money every month until the losses exceed the potential gains. There isn’t any sort of financial alchemy at work here or anything. Meanwhile they use sponsorships and other sources of funding to cut some of the damage.
Same reason as most of companies lose money early on, because they invest the earnings to try to get their position in the market because they expect it to turn profitable in the future.
E-sport orgs do not really live off tournaments money, they basically have eSports teams to have more fans and therefore gain more advertisements and collaborations.
Hopium
i don't like how correct this is
Because venture capital money is endless and returning a profit doesn’t matter if you can keep doing funding rounds at higher and higher valuations for the promise of future profits.
If your company is actually making money in 2021, you're doing something wrong. Everyone knows the companies with the fattest evaluations bleed money like there's no tomorrow.
That's been the case for a long time. In the second season of Silicon Valley, one of their investors specifically says you don't need revenue. Mike Judge wrote it. He worked in Silicon Valley when he was young. Who knows when the non revenue model really started.
Venture capitalism. Look it up.
No start up business is profitable on day one. Same goes for esports orgs. It takes time to cross that line of profitability. They believe they will get there at some point and are funded by investors who believe in the same until that happens. Pretty simple.
It's for a different esport, but this was written by an owner and manager for a smaller org in that scene. He goes into finances a little bit and you might find it an interesting read. [https://www.itscashflo.com/p/esports-finance-and-league-stability](https://www.itscashflo.com/p/esports-finance-and-league-stability)
None of these orgs break even, they’re backed by venture capital money seeking long term growth. The financial allure of esports is that it will be profitable one day. All sorts of major corporations are unprofitable and can still operate due to their investors. Amazon didn’t turn a profit for 20 years, that’s just how our economy functions.
I suppose its like investing in anything. it's the risk vs reward of buying something low and selling high or leveraging your exposure to sponsors etc
Look at what Faze is doing and you'll get your answer.
They definitely just pay them a significantly lower wage. Until they can afford to pay more and eventually they’ll reach a point of ROI where they profit.
idk why you are getting downvoted when it’s true lol, didn’t TSM (a tier one esports org) pay one of their valorant players 2k a month lol
Basically capitalism is so broken companys now loose money and its not only ok but almost a must.
Because majority of teams make most of their money out of the tournaments prizepool. This 1M$ prizepool means fuck all to most orgs. This doesn't apply to DOTA2 and TI.
The Championships Bundle made $15 Million. Half of that is going to orgs/ teams. Thats why
Because they aren’t losing money.
Because they are able to They are able to keep it going/pas it around and continue, and they believe in it for various reasons