ESPORTS and traditional sports share a lot of things in common: from the competitiveness of the scene to the long and grueling training hours. Even the business model shares resemblances, as explained by Riot Games and Wild Rift operations manager, Ban "ChisinX" Chee, in a Twitter thread.
"I dare say 90-99% tier 1 esports is loss-making. Why? Esports business model is very similar to sports. In fact, when negotiating sponsorship deal, trad sports are often referenced," he said.
While there are many similarities between the two industries, there is one major revenue source that esports tournaments struggle to deal with: broadcasting rights.
In fact, ChisinX referenced the English Premier League, one of the biggest sporting leagues in the world.
"However, most esports misses out on one of the biggest revenue source in trad sports - broadcast rights. An example would be the Premier League, it made £10B in 2022 paid by broadcasters internationally and domestically," said the Riot Games employee.
He added: "In comparison, Premier League’s lead partner, EA (yes - the gaming company) pay reportedly $85M for 3 years of partnership with the league alone. Broadcast right deals dwarves these sponsorship deals, massively."
Riot Games manager explains behavior of traditional sports fans and esports fans
One of the key reasons why broadcasting deals are very common in traditional sports is because fans are willing to spend money on cable TV or streaming platforms, something that ChisinX wanted to highlight.
"The reason: trad sports fans would subscribe to cable TV or streaming platform to consume Premier League content. This viewing behavior is highly lucrative for broadcasters as they themselves would sell ad spots on their own platform/cable."
The Premier League for example can be viewed on Sky Sports, BT Sport, BBC Sport both on television and online streaming platforms.
Esports fans, meanwhile, prefer free to watch streaming platforms like Facebook, YouTube, and Twitch.
He further explained: "You can’t change fans viewing behavior. Changing the free-to-watch model to a subscription model = exodus of viewer, fans backlash[.] You can’t force them to watch a game that they genuinely have no interest in."
The esports bubble
The financial pressures may mean that a hyped up game may suddenly experience a massive budget cut.
"[I]f an esports trends downward in viewership consistently for a period of 3-5 years + not being profitable. The chances are the esports will sunset itself rather quickly or scale down its budget, sometimes to the extremes of 80-90% budget cut. The bubble burst," he reiterated.
So who is at fault for the bubble, and its subsequent deflation? According to Chee, "No one's fault in particular!"
Given the unpredictable nature of esports, Chee emphasized the importance of managing expectations, and finding the "right size esports for a game."
"Some game dev simply don’t want to have a fully fleshed out esports for their game and most of the time, its the right decision," he explained.
He added: "Everyone want their esports to be Premier League level but in reality, they might be better suited like less popular pro sports such as badminton which I'd consider mid to low tier from a global popularity point of view."
Then he ended by giving tips to esports organizers.
"By setting the right expectation at the start and grow organically, the risk of a bubble bursting is significantly lower. Reevaluate the expectation if there’s growth, sustain if no major trend, sunset if nobody gives a sh*t."
He added: "It’s not doom and gloom btw. Esports is a great career (and enjoyable) path. It brings joy to thousands of people on a weekly basis. The business side of it is a complex one and I might be oversimplifying it without providing any obvious solution at this point of time."
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