(Editor’s Note: The following is republished from Esports and then Law (ESL), a periodical that is available for complimentary subscriptions at the ESL website.)
By Ellen Zavian, Esq., Editor-in-Chief of ESL
Everyone talks about the value of esports but I often hear that only the publishers are making money. This means, the team owners, event operators, leagues, coders, gamers, are just making it or can handle a current loss for the hope of a future gain. Since the publishers own the intellectual property to the game, it would only make sense they reap the financial benefits of their R&D first, before all other stakeholders.
However, according to Peter Warman, Co-Founder and CEO of NewZoo, a games and esports data company, “Esports is the shiny object and will take some time to be profitable.” In fact, Warman stated that NewZoo “did not get into esports for the money, initially, because we knew it would take a while for the market to mature.” The time to mature may still not yield profitability, as Warman believes “esports, for game publishers, is not a profitable business and probably will never be… but this might change if betting is integrated.” Despite this belief, NewZoo reported that esports is currently a $1B dollar industry.
If not the publishers, then perhaps the team owners. After-all, many of the team owners own teams in other professional sports, like the NBA. Ted Leonsis, founder, majority owner, chairman and CEO of Monumental Sports & Entertainment, owns the NHL’s Washington Capitals, NBA’s Washington Wizards, NBA G League’s Capital City Go-Go, WNBA’s Washington Mystics, and formerly the AFL’s Washington Valor and Baltimore Brigade. As his connection to esports, Leonsis is a member of the investment group, aXiomatic, which owns Team Liquid, a competitive eSports Team. Monumental Sports additionally owns the Capital One Arena in Washington, D.C. and manages the MedStar Capitals Iceplex and George Mason University’s EagleBank Arena.
Since aXiomatic is a privately held investment group (NBA Michael Jordan is also part of) no one knows if Team Liquid has turned a profit, just yet, but the wealthy owners often invest now for the future potential growth.
If the publishers and team owners are not yet profitable, perhaps the leagues and event operators, like WESA and ESL, are seeking a profit. Back in 2016, ESL (formerly known as Electronic Sports League), an esports organizer and production company (that launched in 2000), announced the creation of the World Esports Association (WESA), a federation that would work on regulating the competitive scene. Although the profitability of WESA remains unknown, ESL believes their event side of the business has already delivered a profit in some jurisdictions they are involved in.
Aleksander Szlachetko, Managing Director at ESL Gaming Polska was adamant about the positive impact that the Intel Extreme Masters competition, which is held every year in Spokek in Katowice, Poland, has had on the city and the overall esports industry. “Hosting one of the largest esports competitions in the world has already converted the Polish coal mining city of Katowice to an industrial haven,” stated Szlachetko. In its inaugural year, 2013, the small city attracted 50,000 fans over two days and in 2019 over 174,000 gamer enthusiasts flocked to what is now a five-day event. “By hosting one of the largest esports competitions, the city has been able to rebrand itself into a modern city,” according to Szlachetko. Although a study on the exact growth was not provided, Szlachetko has seen more companies setting up shop within city limits, to help support the event. “This has happened over the last 5 to 7 years … but real numbers in growth, jobs being created, taxes being collected is something you need to ask the city.”
Although the city of Katowice was not able to provide us with an economic impact study to back up Szlachetko’s statements, we did learn that Katowice recently signed a letter of intent to convert a local non-operating mine into a new tech hub for the community. “Katowice has inspired many businesses to grow over the past few years and we know esports has been the catalyst,” according to Szlachetko.
So, where does this leave the gamers? The folks that are playing the game. While a few standouts make a great deal money, if you listen to the team owners, they are paying out money to gamers that is outpacing their revenue. If you listen to the gamers, they see tons of sponsorship money coming in, but it is not trickling down to them.
In my opinion, until we get some independent economic impact studies, unions, and transparency regulations, everyone is going to continue to claim they are the poor person in the esports’ house.
