What is an Esports Business (With Examples)

Esports businesses in North America really started to accelerate around 2015 before building the ecosystem we have today. But for many, the term “esports business” or “esports ecosystem” is obtuse and seems to constitute no value. I mean, what really is an esports business?

An esports business is a company or organization that operates in the esports ecosystem and its primary source of revenue constitutes as esports revenue. The main esports businesses are esports teams and esports tournament organizers.

In this article, we will speak more on what is an esports business, provide examples and speak about businesses that are reliant on esports.

Esports Businesses

Esports businesses are organizations or businesses that typically need to fill in 2 criteria. These criteras are as follows:

  • The business operates in the overall esports ecosystem.
  • The business’ main source of revenue contributes to the esports’ revenue pool.

Let’s break these down further. First, the first criteria state that the business must operate in the esports ecosystem. That means the business in itself needs to be involved with other organizations and stakeholders to facilitate what esports does, which is competitive gaming.

We will talk more about what makes up the esports ecosystem, but a good overview is the image below:

The 2017 eSports Ecosystem Explained In One Chart | by Harry Alford |  humble words | Medium

With this first criteria, game publishers, esports teams and streaming platforms all would fit. Businesses like shoe stores, for example, that aren’t associated with this ecosystem wouldn’t be an esports business.

Second, the business’ main source of revenue should contribute to the esports revenue pool. In this article, I won’t be providing a full breakdown of revenue sources, but click here for an in-depth breakdown of revenue sources for tournaments in esports.

Since we know sponsor brands like Coca-Cola’s main source of revenue doesn’t contribute to esports, they wouldn’t constitute an esports business.

There is a bit of discussion between what is an esports business or organization, and what business simply relies on esports but isn’t associated with the industry. But running through these 2 criteria, it becomes very clear. Let’s walk through the main 2 types of esports businesses.

Esports Teams

Esports teams fit both criteria mentioned above and are actually esports’ largest revenue-generating sources. Let’s run esports teams through the test.

The business operates in the overall esports ecosystem.

Esports teams participate in esports tournaments and they have esports fans buying merchandise from them. They also pay and represent the players that participate in the tournaments. It is very clear that esports teams are heavily amused in the esports industry on every angle.

The business’ main source of revenue contributes to the esports’ revenue pool.

What is the main revenue source for esports teams? Esports teams on average make 60% to 80% of their revenue from sponsorships. Supplemental income sources include merchandise sales, streaming revenue and project-based payments. Almost all these revenue sources constitute revenue that contributes directly to esports, especially their main source of revenue.

It’s very evident that esports teams fill both criteria. Therefore, businesses that are esports teams are esports businesses. It’s not a crazy science, that is for this type of business. The organizations I’ll be listing in the “Esports-Reliant” section are a bit more complex.

Esports Tournament Organizing Services

When we apply the same criteria to esports tournament organizing services, such as ESL, Dream Hacks, LCS and other tournament organizers, they pass through both. Let’s run through them to provide further understanding.

The business operates in the overall esports ecosystem.

Tournament organizers are the ones that, you guessed it, organizer the tournaments. It goes without saying, but tournaments are the life of esports. Esports is simply just competitive gaming, and there’s no real competition without the tournaments themselves. These tournaments have a major exchange of money between the players and the service providers.

The business’ main source of revenue contributes to the esports’ revenue pool.

All revenue generated by tournament organizers is revenue included in esports. The only exception to this rule is if the business for whatever reason is also facilitating other services beyond the tournament organizing. For example, convention events like Dream Hacks are likely generating revenue from different sales which may constitute other revenue.

Like if they were for whatever reason creating Dream Hacks food services. I would believe that the food vendors they may actually have on-site would still be revenue for esports but I could be wrong there. Regardless, what we do know is that sponsorships are also a tournament’s largest revenue source, and as a result, they fit the 2nd criteria.

With both those criteria checked off, we can conclude that tournaments organizing businesses are esports businesses.

Esports-Reliant Businesses

Now for the debatable items, what I’m calling the esports-reliant businesses. These businesses are reliant on the success and prosperity of esports, they contribute to the ecosystem in some way, but they aren’t a main part of the industry (with some exceptions) and their revenue typically isn’t counted as esports revenue.

Let’s run through them and let me explain why I placed these businesses here.

Streaming Platforms

Streaming platforms such as Twitch, Facebook Gaming and YouTube Gaming are uniquely esports-reliant businesses. They aren’t exceptionally reliant on esports, but rather gain a massive amount of traction through the games and the competitive gaming scene itself.

Streaming platforms do play a role in the overall growth of esports, they are how esports have such a large viewing base, but their revenue doesn’t count as revenue within esports.

With that in mind, I’d exclude streaming platforms from calling them an esports business, instead, I’d place them as more reliant on esports if anything, Although a strong argument can be made that streaming platforms aren’t reliant on esports itself (they are beneficial to them) but to the game publishers themselves.

Esports Consultancies

Esport How at the time of this writing is legally a consultancy and our main source of income comes from consulting. That said, I wouldn’t call Esport How an esports business. The reason being that we do contribute to the ecosystem by helping other companies enter the scene, but our revenue itself wouldn’t fall within the esports industry.

We ourselves play no critical role in the industry, but we support it in smaller ways. With the exclusion of consultancies, the esports industry would function fine.

Esports Journalism

Esports journalism is very evidently esports reliant and easily not part of the esports industry or constitutes as an esports business. Simply put, without esports, there would be no esports journalism. With the decline of esports as an industry comes the decline of esports journalism.

But their revenue is just copywriting revenue. They are external to the esports industry.

Other Esports-Specific Platforms

The same can be said about any esports-specific platform. They provide services to support esports, but they themselves aren’t esports businesses.

Now you know the 2 criteria to determine if a business is truly an esports business.