If you’ve seen a breakdown of the esports industry’s revenue sources, you may have noticed “Game Publisher Fees” or “Publisher Fees” as a fairly insignificant yet relevant source. Unlike all other self-explanatory revenue streams, this one leaves you wondering what are game publisher fees?
Game publisher fees are payments made from tournament organizers to game publishers to gain rights to use their intellectual property, the game, for an event, tournament or league. According to Newzoo, game publisher fees have generated $116.3 million in revenue but have seen a 0% YoY growth in 2020. Game publisher fees have remained the slowest growing revenue stream for the esports industry.
With that, you may wonder how does game publisher fees function in the overall industry, why this is even a thing and if you as a tournament organizer have to pay it. Continue reading as I will be tackling each of those topics in this article.
How Game Publisher Fees Function
Game publisher fees have some depth to them in terms of their function. You’d think that a tournament organizer can pay a small fee and gain rights to host a tournament whenever, but that simply isn’t true.
Game Publishers’ Control
Unlike normal sports, esports game titles are owned by other companies. These companies, by law, have full control over how the games are utilized from a monetary standpoint.
That is, of course, assuming they aren’t under contract (depending on the termination clause) or a contract has yet to expire.
This is a very scary thing for tournament organizers, especially smaller ones. The game publisher can theoretically have a monopoly for tournaments, streams and videos to only allow those who they want to be engaged in those activities for their game/s.
Not to mention that grassroots events don’t make a lot, if not any, money or create real prestige (besides in niche communities like the FGC). That said, they can easily cause random tournament organizers to cancel or postpone their events when it gets in their way or they view it as negative to their brand.
The Problem with Game Publisher Control
A good example of the problem with this control for tournament hosting services is with Riot Games’ League of Legends and the High School Esports League.
The High School Esports League (HSEL) has dominated the high school scene in the US for several years due to the sheer lack of well-coordinated competition. That’s when PlayVS came in.
PlayVS, upon entering the scene had a lot of strong financial backing and strong software. They struck up a partnership with Riot Games in 2020 to be the exclusive tournament hosting service for League of Legends high school esports.
Just like that, the HSEL just lost a big title that many students looked forwards to and what brought HSEL a lot of players/interested schools. Thankfully they were at a point in their business where they diversified to enough games that it’s not as detrimental as it could have been, but imagine smaller organizers who spent the time, money and effort to cultivate the scene only for it to be snatched away by the game publisher when the fruits are ripened for the picking, sort of speak.
Regardless of the reasoning, the HSEL put the heavy lifting in helping high schools across the US build-out their esports scenes and having them involved in ways we never expected so early in America’s esports scene, only for Riot Games and PlayVS to take control of the game’s high school scene and cutting the HSEL out (likely affecting their projections and truly is an uncontrollable risk).
With that, as a tournament organizer, not only are you building the community for someone else’s game (providing marketing and typically paying a fee for licencing), but they can also desert you after doing so.
The reality is that money talks and game publishers listen. But, is that truly wrong? Can you blame them for doing so? Although this section talks about the risks for tournament organizers that publisher rights create, later in this article I play devil’s advocate to share why what the publishers do align with logical and our society’s principles.
Where Publisher Fees Come In
Publisher fees are pushed on those game organizers which the game publisher decides (usually in the form of licences), although they usually have the jurisdiction to do this to all tournaments. They tend to only push these on larger tournaments that generate at least a decent amount of revenue from their tournament.
The cost to the tournament organizer can be a percentage based on the revenue grossed/netted or based on the time their game is played (which is usually reserved for gaming arenas). So they may take 10% of your gross (which is a fairly big loss for the TO given operational costs) for example, but the possibility for a fixed amount of cost is always on the table, especially with longer-term licencing deals.
Above is an image of Newzoo’s 2020 Esports Revenue report showcasing the overall revenue from publisher fees
Regardless, these dues only cover you for the duration agreed upon. For most smaller organizations that don’t have a voice, this is an event-by-event basis. However, you can also acquire a year-long or multi-year contract depending on your influence and current financial power.
As a result of these agreements, the publisher is in a win-win-win situation while the tournament organizer is left with the short end of the stick.
That said, in the end it is the game publisher’s intellectual property and they have full authority to reward from others using their work. Let’s talk more about that.
Why are Game Publisher Fees a Thing?
Up to this point, I have just been bashing game publishers on this practice’s harmful effects on tournament hosting services, but I never dove into why they even do this.
When broken down, it makes complete logical sense and you have to give credit to the game publishers for finding themselves the opportunity to make significantly more success and money which wasn’t present in prior years.
In the Defense of the Game Publishers
The short answer to this question is because the game publisher, as a business in a capitalist society own the fruits of their labour, and it is the tournament organizers that are leveraging what the game publisher invested capital into for their own monetary benefits.
When looked at that way, it makes complete sense and seems very fair, not to mention that less profitable tournaments and events are usually left alone by game publishers as it still only benefits the publisher’s game.
In addition to this, what we are seeing is more and more game publishers leading the charge of their own tier 1 tournaments. This puts all the burden of costs on them, but they take home all the net in addition to it acting as a marketing effort.
Although this gives game publishers the control of their esports scene which is important as they need to operate with their best interest in mind for both the longevity of the game and the business. Therefore, they should have control in the initiatives that their property is involved in to ensure this longevity through a controlled and calculated strategy.
When compared to sports, no one owns or cultivated the sports. No individual or company spent the time and money to make a sport, hired graphic designers, programmers and a sales team to develop and distribute the sport. Sure the concept had to start from somewhere, but the development and growth came from others over the span of decades.
Game publishers, however, did spend the human resources and the money. The only reason why games have the potential for being an esports title in the first place is because of the effort of the game publisher to make it not only esports-friendly but also to build a base of players to make competitions and tournaments a realistic thing.
The only issue is, as a result, many small grassroots tournament organizing services suffer as a result. But in the business world, you know by what rules you are playing by and it’s your choice to enter that business landscape or not.
Does You Need to Pay Publisher to Run Your Tournaments?
As a tournament hosting organization or group, you may be wondering if you have to pay the game developers or publishers for hosting your tournaments. Can you host your tournament without talking to the game publishers or possibly bypass paying a fee to the game intellectual property owners?
Many tournaments don’t pay the game publishers for the use of the game to generate revenue. Although almost every game requires permission to be granted before generating revenue with their games, the game publishers have a lot to gain beyond monetary value from community-run tournaments. They typically won’t take legal action unless they have a reason to do so.
But organizations typically will not go out of their way to harm your brand or take legal action against you if you are just running smaller local tournaments. It’s only as you grow that problems may arise.
The publishers do have full authority to send you a cease and desist letter if such a desire was to arise, but without good reason that usually hurts their overall brand image.
It shows that not only do the game publishers not care for that local community, it also sends a message that no one should be hosting tournaments with their game (given the cease and desist letter came without warning/reason), resulting in not only bad PR but also a loss of free marketing for streamers, tournament organizers and content creators.
Unless the tournament organizer is harming the brand or disobeying a game publisher after directly being requested to stop what they are doing, it will only hurt a game publisher to take legal action against you.
So worry not, unless you are making a substantial amount of money or publicity, the game publishers and developers will give you and your organization a blind eye (with some exceptions such as you are a hinderance or in the way of their own strategy or you are negatively harming their game or their brand).
That said, don’t start building a business model around their game without initiating conversations with them first.