Esports Tournaments: Monetization Challenges and Hidden Opportunities

Introduction

The esports industry has experienced explosive growth over the past decade, captivating a global audience and generating billions in revenue. In 2023 alone, esports viewership reached a staggering 2.76 billion hours watched, demonstrating a 75% increase since 2020​. Despite impressive reach and popularity, esports tournaments face significant monetization challenges that must be addressed to ensure sustainable growth.

Vadims Merenkovs, an avid esports fan and the Business Development Manager at 1D3 DIGITECH, offers insights into the current state of esports tournaments, the challenges they face, and the potential opportunities for monetization.

Development of Esports Tournaments

Initially dominated by centralized leagues run by large enterprises like ESL, ESEA, and WESG, the esports tournament landscape is evolving. Today, there is a shift towards a more decentralized structure, with numerous new tournament organizers entering the industry.

This shift opens up the market, allowing for innovation and diversity in how tournaments are conducted and monetized. But if your company wants to start earning on esports, what should you prepare for? Understanding the challenges and opportunities is key to navigating this dynamic landscape.

Challenges Esports Tournaments Face

1. Global Audience: Esports' international nature means that tournament organizers must cater to a wide range of languages, cultural preferences, and local payment methods. This complexity can hinder seamless monetization. Platforms must support various currencies and payment methods and comply with regional Sales Tax (VAT/GST/CT) regulations​.

2. Diverse Platforms and Titles: Esports fans consume content across multiple platforms like Twitch, YouTube, and niche streaming services, following different games such as League of Legends, Dota 2, and Counter-Strike: Global Offensive. This fragmentation makes it challenging to create unified marketing strategies and monetize effectively. 

3. Real Money Prizes and Payouts: Offering real money prizes is crucial for attracting top-tier talent and maintaining player engagement. Tournaments like The International for Dota 2, with prize pools exceeding $40 million, highlight the importance of substantial rewards​. Efficient and secure payouts are essential for maintaining player trust and satisfaction.

Scaling Opportunities

Despite these challenges, there are numerous opportunities for scaling within the esports tournament industry. Beyond the obvious monetization methods like sponsorships and advertising, there are several less obvious avenues to explore:

1. Esports Coaching Lessons: Providing coaching lessons helps players improve their skills and strategies. This service not only engages players but also creates an additional revenue stream. Customized coaching programs can cater to different skill levels and game preferences, offering one-on-one or group sessions.

2. Players' Challenges in Selected Games: Organizing challenges in specific games encourages ongoing participation. These challenges can be tailored to different skill levels, ensuring all players can compete and enjoy the experience. Regularly updated challenges keep the community engaged and motivated.

3. Leaderboards with Prizes: Leaderboards add a competitive edge to tournaments and challenges. By offering prizes, platforms can motivate players to perform better and stay engaged longer. Leaderboards can be segmented by region, game, or skill level to create multiple opportunities for recognition and reward.

4. Marketing Activities for Teams and Players: Organizing marketing activities for teams and players, such as sponsorship deals, branded content, and community events, drives greater visibility and engagement. Engaging content and collaborations with popular influencers can enhance fan engagement and attract new audiences.

5. Additional Services: Integrating services like merchandise sales, in-game items, and premium membership models can significantly boost profitability. These services provide additional touchpoints for monetization and enhance the overall player experience.

Merchant of Record (MoR)

Merchant of Record (MoR) services can address the challenges and leverage the scaling opportunities in esports tournaments. MoR services offer centralized payment systems that handle transactions from multiple regions, ensuring compliance with local tax regulations. This eliminates the hassle of dealing with numerous payment service providers and tax authorities. By using MoR services, tournament organizers can focus on delivering an excellent experience, attracting a dedicated community of loyal members, and ultimately achieving sustainable monetization.

Conclusion

The esports industry is brimming with opportunities for digital businesses that can navigate its complexities. Merchant of Record services are crucial in unlocking these opportunities by simplifying payments, ensuring compliance, and enabling effective marketing strategies. By leveraging MoR services, esports tournaments can attract a dedicated community of loyal members, enhance player engagement, and ultimately achieve sustainable monetization. Embracing MoR services will be essential for staying competitive and capitalizing on the growing global audience.