June 25, 2021

The Partnership Landscape of eSports

The current eSports revenue model is completely dominated by partnership dollars. At $636.9 million, sponsorship revenue contributes more to the eSports ecosystem than media rights, ticket sales, publisher fees, streaming revenue, and other digital income sources combined. This puts a tremendous strain on eSports organizations to develop partnerships and activate them in ways that will keep brands in eSports in the long term. However, with a unique blend of loyal sponsors and digital assets, eSports is in a great position to offer partners an alternative to working with traditional sports organizations.

The eSports partnership market can be split up into two main categories: endemic partnerships and non-endemic partnerships. Endemic brands are those that offer products or services that complement or are used in the production or playing of eSports. This can range from large peripheral companies such as HyperX or Logitech to energy drink companies like Monster or Red Bull. eSports organizations have built up incredible loyalty with endemic partners as these brands look to use eSports, which had roughly 500 million viewers in 2020, to reach the larger gaming audience of around 2.69 billion people worldwide. However, a case can be made that eSports is over-reliant on endemic sponsors. Of the top 20 eSports teams in the world by prize money won and the 19 largest eSports events by viewership and sponsorship money, 88% of all team partnerships and 65% of event partnerships are with endemic brands. HyperX alone is partnered with over 20 organizations and is the principal sponsor of the Intel Extreme Masters (IEM) and Dreamhack tournaments. With the money spread so thinly across what is a heavily fragmented eSports market, there need to be other sources of sponsorship revenue coming in — there are only so many keyboards and mice that these companies can sell, after all. This is where non-endemic brands come into the picture.

Non-endemic brands are those that sell products and services that are not integral to eSports and gaming in general. A great example of a non-endemic partnership deal occurred in 2019 when Team Liquid collaborated with Marvel Entertainment. The partnership, which was primarily activated through apparel lines that mimicked Marvel superheroes like Iron Man and Captain America, was so successful that it was renewed until 2022. Both organizations have benefited from the natural crossover between gaming enthusiasts and comic book fans, but it took great creative vision to properly activate the partnership. eSports companies will need to continue to find and develop relationships with non-endemic partners like Marvel if the current revenue model of the industry stays in place going forward. If not, these organizations run the risk of seeing their growth stagnate as they wait for the media rights and fan monetization revenue streams to reach the level of current sponsorship revenue amounts.

The partnership landscapes of the sport and eSports industries share many similarities but have several key differences that separate the two markets. Common partnership categories that are shared by both industries include jersey patches, in-stadium ad spaces, and naming rights. There are also individual player sponsorships and affiliate marketing deals with streamers that are similar to what is seen in the sports industry. It is not uncommon for eSports brands and sports teams to share the same partners as well. For example, the cryptocurrency platform FTX recently inked a $210 million naming rights deal with Esports organization Team SoloMid (TSM) as part of a global expansion and talent development strategy. FTX then followed that up with another partnership — this time with the MLB to become a professional American sports league’s first cryptocurrency partner. Collaborating with brands that also operate within traditional sports markets is a fantastic tactic that eSports organizations can employ as they seek to grow their non-endemic partnership revenue streams. With many similar partnership categories, selling asset packages to these brands should run smoothly due to the familiarity they already have from their experience in traditional sports.

The partnership landscapes of the sport and eSports industries share many similarities but have several key differences that separate the two markets. Common partnership categories that are shared by both industries include jersey patches, in-stadium ad spaces, and naming rights. There are also individual player sponsorships and affiliate marketing deals with streamers that are similar to what is seen in the sports industry. It is not uncommon for eSports brands and sports teams to share the same partners as well. For example, the cryptocurrency platform FTX recently inked a $210 million naming rights deal with Esports organization Team SoloMid (TSM) as part of a global expansion and talent development strategy. FTX then followed that up with another partnership — this time with the MLB to become a professional American sports league’s first cryptocurrency partner. Collaborating with brands that also operate within traditional sports markets is a fantastic tactic that eSports organizations can employ as they seek to grow their non-endemic partnership revenue streams. With many similar partnership categories, selling asset packages to these brands should run smoothly due to the familiarity they already have from their experience in traditional sports.

The most significant differences between sports and eSports partnerships can be found within digital and broadcast ad spaces. For almost the entire history of eSports, the primary method for viewing content was through streaming platforms like Twitch or YouTube. Television networks will occasionally pick up the odd eSports tournament or finals, but even then, the bulk of the audience will view from streaming platforms. Tournament organizers capitalize on this by selling against overlay and banner ad spaces to go along with traditional commercial breaks in between matches. Unlike traditional sports, there is a primary broadcaster that holds a virtual monopoly over content distribution: Twitch. With almost 92% of the eSports viewership market share, Twitch is able to set the price they are willing to pay tournament organizers which significantly drives the cost down. This contributes to the eSports industry’s reliance on partnership revenue. On the other side, traditional sports organizers are only just starting to broadcast their games on streaming platforms. Deals have been brokered between the likes of Amazon and the NFL as well as YouTube and the NBA, but it remains to be seen whether streaming can become as dominant in traditional sports as it has been in eSports. For now, it appears that the television media rights and the partnership categories that spawn from them will continue to dominate the revenue model of traditional sports.

Sources:

  1. https://newzoo.com/insights/articles/newzoo-esports-sponsorship-alone-will-generate-revenues-of-more-than-600-million-this-year/
  2. https://esportsinsider.com/2020/10/team-liquid-renews-partnership-with-marvel-entertainment/
  3. https://www.mlb.com/news/mlb-ftx-cryptocurrency-exchange-partnership
  4. https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/e-sports-and-the-next-frontier-of-brand-sponsorships
  5. https://www.roundhillinvestments.com/research/esports/esports-viewership-vs-sports
  6. https://sponsorship.org/endemics-vs-non-endemics-esports-expanding-its-sponsorship-horizons/

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