In the last couple of years we have been observing a ridiculous surge in esport earnings. The International Dota 2 tournament prize pool grew from $1,600 000 in 2012 to more than $20 000 000 in 2016, and this year we are expecting even greater winnings. Same things although on lower scale have been happening with League of Legends, Counter-Strike: Global Offensive and other esport games.
Growth of TI prize pool since 2011. The 2017 bar may be slightly different.
$20 million isn’t huge money in traditional sports, for example, FIFA World Cup 2018 total prize money nets more than $700 million. Nevertheless, growth from $1,6 mil to over $20 mil in 5 years is extremely high.
In traditional sports to earn from a tournament a company needs to keep sponsors happy and saturate all available space as well as air time with ads. Can you imagine a boxing event without commercials between matches, and logos of partners all over the stadium? Budgets of such tournaments depend on the amount of products that will get sold as a result of commercials and exposure of a brand.
Ads at a boxing ring
In esports, the cause and effect of prize pool growth works in different ways. The game itself is the source of revenue for tournament hosts because the more people watch a tournament, the more people play the game. Ultimately it results in higher sales of games and additional content.
Let’s use The International as an example and break down how the tournament works. In 2017 Valve allocated $1,6 million to prize pool and created Battle Pass system, allowing users to spend money to get perks like unique skins, player cards, Arcana vote, and so on. Each time someone spends $10 (or more), 25% get allocated back to the prize pool.
Battle pass perks
Now that TI prize pool has gone beyond the $20 million milestone we can arrive at conclusion that the company has raised more than $80 000 from Battle Pass sales.
That means that Valve can easily host The International, pay the prizemoney as well as vast expanses of holding a LAN, and it will still be in net profit without additional sponsors. Throw in an energy drink commercial and a gaming gear logo on players’ monitors and you get a sweet bonus.
According to a report from Newzoo, among US citizens aged between 21 and 35 esport is at least as popular as baseball and ice hockey. 15% of all US citizens aged between 21 and 35 watch esport events once a month. This means that eSports audience is mature enough to fund the events they want to watch, given incentives like unique skins and certain privileges.
Extract from report of Newzoo
New esport games, such as Heroes of the Storm and Overwatch from Blizzard are only building their scenes and esport systems, but they are already leaning on the same system — watch the event, play the game, buy the skins. Rinse and repeat.
It is safe to say that esport has considerable advantages when compared to traditional sports, because game publishers will always be willing to boost prize pools. In this new age of sports using a tournament to market a product from a third company could be just a secondary task.