eSports Industry Growth: When Pixels Become Profits

The evolution of video games is a phenomenon many of us – still sprightly and youthful! – have had the chance to witness firsthand. Today, it might seem unbelievable, but not so long ago, you played without the ability to save your progress, and you only had three lives to complete the entire game. Let me tell you, newbies stood no chance. You really had to up your skills!

Back in those pre-internet days, everyone was skilling up – programmers included. I remember reading about the next big games in paper magazines, marveling at the graphics and the mind-blowing capabilities of the ’90s. If someone had suggested back then that gaming would evolve into sports competitions with teenagers bagging millions, we’d have probably laughed it off in disbelief. Yet here we are! Esports has exploded over the last few years and slotted right into the expectations of today’s audience, setting new trends in professional gaming, teamwork, and the way we experience these thrilling competitions. Still, many say this money-inflated bubble is bound to burst. Will it?

Key Takeaways

•  The eSports industry has evolved from a niche hobby to a billion-dollar industry, with global revenue reaching $1.35 billion in 2022 and projected to exceed $1.86 billion by 2025.
  
• In 2023, eSports saw a shift towards more conservative spending, leading to smaller prize pools in tournaments. The International 2023 had a prize pool of $3.3 million USD, a significant drop from the record-setting $40 million at The International 2021.
  
• Dota 2 leads in eSports prize money, with tournaments offering a total of $30.8 million. Following Dota 2 are PUBG Mobile and Fortnite, with $21.2 million and $19.7 million.
  
• The global eSports audience is rapidly expanding, with 261 million dedicated fans in 2022, a number expected to grow significantly to over 318 million by 2025. Twitch is a vital platform for eSports, with 40% of its U.S. users watching eSports streams.
  
• USA has become one of the largest markets for eSports betting in the world, with a projected market volume of approximately $721 million in 2024.
  
• The eSports industry faces significant challenges, including the risk of a financial bubble and an overreliance on sponsorships. In 2022, eSports generated $837 million from sponsorships and advertising, a dominant revenue source expected to grow to $1.2 billion by 2028.

Esports Billion-Dollar Revenue

What started as a hobby for many young gamers is now a colossal industry swirling around more than a billion. According to Newzoo, global eSports revenue jumped over 39% in two years to $1.35 billion in 2022. Projections suggest it’ll climb another 35% to over $1.86 billion by 2025. Back in 2021, China led with revenues of $360 million, followed by the USA at $243 million, and Western Europe at $206 million. However, in just two years, the tables turned with the USA seeing a staggering 358% increase to $871 million. China’s growth, though impressive at 124%, still puts them nearly $426 million behind the USA.

But how does it stack up against other sports? Esports is relatively new compared to traditional sports leagues in the USA like the NFL, MLB, NHL, and NBA, which boast decades, even a century of tradition and development. In 2023, the NFL raked in $18.7 billion, making it the most profitable sports league worldwide. The NBA and MLB also pulled in hefty revenues of $10.6 billion and $10.3 billion, respectively. Compared to these figures, eSports’ $1.4 billion might seem paltry, but remember, eSports is still the new kid on the block.

Admittedly, these numbers are insane, and the growth forecasts for eSports are wildly promising. Market.us predicts that by 2032, the eSports market will hit nearly $11 billion, with an average annual growth rate of 21%. Compared to traditional sports, this rate of growth suggests eSports could significantly close the gap in the coming years.

Prestigious Sport Means Big Wins

In the last decade, displaying multi-million-dollar prize pools at eSports tournaments has become a key way to boost the industry’s credibility. Just a few years back, those jaw-dropping prize amounts were hot topics in the eSports world, but as the industry matured, focus has shifted toward diverse revenue streams like sponsorships and streaming. Still, the size of the prize pool remains a primary indicator of a tournament’s scale and continues to be a crucial element in gauging an event’s prestige. That’s just how it rolls in the sports world – the bigger the prize, the higher the prestige.

In 2023, there was a trend toward more conservative spending in the eSports industry, meaning prize pools in tournaments didn’t grow as rapidly as in previous years. The prize pool at The International 2023 was $3.3 million USD. For comparison, just a few years earlier, prize amounts at the biggest tournaments were on a totally different level – the record-setting $40 million at The International 2021 stands out. It’s worth noting the clever organization behind this event.

“The International” was initially conceived as a promotional event for the game Dota 2. The first International took place in 2011 and has been held annually ever since, with the prize pool continually growing. Notably, the prize pool was primarily funded through crowd-sourcing! What does this mean? Players had the opportunity to purchase a battle pass known as “Compendium,” which offered additional in-game content. And everyone knows how much gamers love add-ons. Just think about the Sims expansions… The Sims 4 has had 16 expansions since 2015. And so, 25% of the revenue generated from Compendium sales directly contributed to the prize pool. A pretty clever marketing plan, right?

Saudi Arabia Won’t Skimp on Prizes

Despite a shift towards more conservative funding of eSports tournaments in 2023, some events still stood out for their financial scale. For instance, the Gamers8 festival, which included the Riyadh Masters Dota 2 tournament, offered a $15 million prize pool, making it the most lucrative eSports event of the year. Other significant tournaments, such as the Honor of Kings International Championship with a $10 million pool and the FNCS Global Championship with $4 million, also showcased the financial strength of eSports on the global stage.

In the context of the overall trend in the industry, which aims to reduce over-investment and achieve financial stability, Saudi Arabia’s actions in financing Gamers8 raise eyebrows. Already announced for 2024, the prize pool for Gamers8 is planned to be $45 million. Saudi Arabia, contrary to other entities, is pumping large sums of money into eSports, artificially inflating the market’s value and leading to further inflating the financial bubble. This approach is also seen in other sports disciplines, sparking controversy.

The creation of the new LIV Golf series, where prize pools surpass the prestigious PGA Tour to attract top players, caused a scandal. Offering outrageously high prizes, far above the industry average, is an approach that Saudi Arabia also demonstrates in football and boxing. In other words – they’re doing whatever they want.

Still Less Than F1

Although eSports is rapidly growing, its prize pools are still smaller compared to some of the biggest sporting events worldwide. For example, the prize money for the 2023 Formula 1 season was a whopping $2.2 billion, and the UEFA Champions League in the 2022/23 season was $2 billion. Other significant sports events, such as the 2022 FIFA World Cup ($440 million) and LIV Golf ($405 million), also show that traditional sports still have a financial edge. Even tennis tournaments like the US Open ($60 million) and Wimbledon ($49.55 million) offer much larger prizes than most esports tournaments.

In some cases, however, eSports can confidently compete with or even surpass the prizes offered in smaller traditional sporting events. For example, the FNCS Global Championship in Fortnite with a $4 million prize pool surpasses the 2022 World Snooker Championship, where the prize pool was £2.4 million (about $3.3 million USD). Although it’s one of the most prestigious awards in the world of snooker, it’s less than many major eSports tournaments. Similarly, the Tour de France, despite being one of the most prestigious sporting events in the world, has a much lower total prize pool. In 2023, the Tour de France prize pool was about €2.3 million, which is equivalent to around $2.5 million USD.

Most Profitable Games in eSports

I’ve talked about tournaments, but many profitable and prestigious tournaments involve competitions within a single game. If we sum up the highest prize amounts by individual games, we see the dominance of Dota 2 with a total of $30.8 million. The next spots are occupied by PUBG Mobile ($21.2 million) and Fortnite ($19.7 million). It’s also worth mentioning games like Counter-Strike: Global Offensive ($15.2 million) and Valorant ($8.9 million), which are also among the top in terms of prize money. So, if you’re still wondering what to get a teenager for Christmas, consider one of these games. It might turn out to be more profitable than buying an advanced microscope and encouraging them to aim for a Nobel Prize, which only offers a measly million dollars. Just saying!

USA and Their Big Slice of the eSports Pie

The United States plays a pivotal role on the global eSports scene, both in terms of the number of players and prize money won. In 2023, according to eSports Earnings, the USA came in second worldwide in terms of winnings from eSports tournaments, with a total of $28.7 million. Only China outpaced them, with $37.8 million, highlighting the fierce competition between these two countries. Following the USA were Russia ($14.5 million) and South Korea ($11.7 million), reflecting the global reach and diversity of eSports.

However, it’s in the United States where top players really stand out, having also secured significant sums of money in 2023. Leading the list is Quinn Callahan, known as Quinn, who earned $655 thousand. Other top players include Cooper Smith (Cooper) with $565 thousand and Philip Dosen (ImperialHal) with $374 thousand. 

These players are symbols of the success of the American eSports scene and show how much the industry has changed over recent years. After all, Quinn, Cooper, and Imperial Hal are now cultural icons in the USA. Their successes are widely covered in American media, which only serves as a catalyst for further industry development, where storytelling is key. We – as observers – care to know the personal stories behind the players’ nicknames. It makes us root for a specific person with a story, making their victories matter more to us. It’s similar to what we see in traditional sports.

Popularity of eSports in the USA

It’s undeniable that eSports is attracting more and more global attention, underscoring its growing significance on the international stage, particularly in countries like the United States, which remains one of the leaders of this rapidly developing industry. According to a Morning Consult report, 25% of Americans claim they actively follow eSports events. Based on the USA’s population, which was about 333 million in 2022, 9% being avid fans means about 30 million people, and 17% being casual fans translates to over 56 million. These impressive numbers show that eSports already holds a strong position in the entertainment market, with its popularity continuing to rise.

When we look at the demographics of eSports fans in the USA, it’s clear that men are significantly more interested in this form of entertainment. Among them, 17% are avid fans, and 22% are casual fans. In comparison, only 2% of women identify as avid fans, and 12% as casual fans. It’s probably those girls who accompany the ardent male fans in watching the major tournaments. Given a choice between watching soccer matches (insert favorite male sport) and eSports competitions, I’d still choose games.

Translating this to the population, we have about 65 million men and 23 million women in the USA who are interested in eSports to some extent. This shows the huge potential for growth in this industry, especially in terms of attracting more women into the world of eSports. There isn’t a huge disproportion from the start.

eSports for the Wealthier

Continuing with the demographics, according to the Elevent report, eSports is particularly popular among people with higher incomes. According to 2022 data, 32% of eSports fans in the USA come from households with an annual income between $100,000 and $149,999. This means that over 10 million eSports fans are financially stable, making this market segment particularly attractive to sponsors and advertisers.

Globally, the number of eSports enthusiasts is growing rapidly. In 2022, there were 261 million dedicated eSports fans worldwide, and Newzoo forecasts that this number will rise to over 318 million by 2025. During the same period, the number of occasional viewers is expected to grow from 271 million to 323 million. This shows that eSports not only maintains its growth momentum but also increasingly captures the attention of a broad audience. Show me another sport with such growth statistics in popularity. Seriously, I looked.

Why is eSports So Popular?

The popularity of eSports can also be explained by psychological factors. For many people, watching someone play a game is a form of escapism – a way to escape daily stress and negative emotions. eSports offers not only entertainment but also the opportunity to learn and improve one’s skills. Viewers can pick up new tactics and play styles that they can use in their own games. Additionally, eSports creates an opportunity to build social connections, which is particularly important for younger generations who increasingly seek online communities with which they can identify.

Esports in the USA and worldwide is gaining popularity in a way that’s hard to ignore. With an increasing number of fans, both domestically and globally, eSports is becoming an increasingly integral part of contemporary entertainment culture. All indications suggest that eSports will continue to thrive, particularly among younger generations and higher-income individuals, especially in the United States. The introduction of platforms like Twitch has undoubtedly accelerated this trend.

Smack My Twitch Up

Twitch is the main live-streaming platform for video games and eSports. This platform plays a crucial role in shaping the eSports scene, especially in the context of American fans. In 2024, Twitch enjoyed great popularity among young adults in the United States. The largest percentage of Twitch users (37%) comes from the 20-29 age group, with another 33% being individuals aged 30-39. This shows that Twitch is extremely popular among the younger generation. Additionally, men dominate among Twitch users, making up 63% of the total number of users in the USA.

In the context of eSports, Twitch also plays a crucial role as a platform for watching the most important tournaments. According to a Vorhaus Advisors study, in 2024, 40% of Twitch users in the USA declared that they watch eSports streams, making eSports the third most popular type of stream on the platform, right after game streams and music.

As reported by Esports Charts, one of the most spectacular eSports events in 2023 was the League of Legends World Championship, which reached a record peak viewership of 6.4 million viewers across all platforms. Twitch alone accounted for approximately 40% of this viewership, with a peak of 2.5 million viewers. To put this in perspective, Twitch saw activity from 7.3 million distinct channels each month and averaged 2.45 million concurrent viewers in 2023, underscoring its immense popularity as a streaming platform. Notably, League of Legends was the most popular game on Twitch, with 67 billion all-time views as of December 2023 (according to TwitchStats.net).

Other popular tournaments, such as the Free Fire World Series 2021 Singapore and Mobile Legends M5 World Championship, also attracted peak viewerships exceeding 5 million on Twitch, further demonstrating the platform’s central role for eSports fans worldwide. Given these impressive numbers, it’s evident that Twitch remains the go-to hub for eSports enthusiasts worldwide. Specializing products as a global trend is therefore fully justified here.

Still Fewer Viewers than the Super Bowl

Let’s also compare this with traditional sports viewership. For instance, the League of Legends World Championship 2023, with its 6.4 million peak viewers, is getting closer to the viewership of events like the NBA Finals 2023, which drew 11.6 million viewers, and the MLB World Series 2023, which had an audience of 9.1 million. However, eSports still has a long way to go before it reaches the epic status of events like the Super Bowl, which in 2023 attracted a staggering 115 million viewers. While eSports is rapidly growing in popularity, it still lags behind the most iconic traditional sports events in terms of viewership.

The increasing popularity of Twitch, especially among young adults, is evident. According to TwitchTracker, there was a 3% increase in 2024 compared to 2023, with over 7.5 million channels going live each month. Additionally, the average number of concurrent streamers has grown by 5%, reaching 97,800 channels broadcasting live simultaneously. These trends, along with the growing number of eSports enthusiasts worldwide, indicate that eSports has the potential to compete with the biggest sports events in terms of viewership in the future. Time will tell, but perhaps you’ll remember my words.

Is eSports a Sport? How to Bite Into This Topic?

In trying to maintain a proper perspective on eSports data, the question of whether eSports should really be classified as a sport continually arises. Opinions are divided, and many have doubts.

In my opinion, eSports can be seen as “Sport 2.0” – a sport tailored to the demands and expectations of the new generation. Unlike traditional sports disciplines, eSports offers tremendous flexibility and customization for viewers. Viewers can choose not only the games they want to watch but also specific players whose style of play and personality best match their preferences. You can follow aggressive gameplay or more tactical approaches, and even choose between players who are funny or serious. This content customization is an integral part of modern times, where personalization is key to engaging younger audiences.

Esports also offers a unique opportunity for emotional engagement for the viewer. Thanks to live broadcasts and interactive platforms, such as Twitch, viewers can “empathize” with the emotions of the player, observing the gameplay almost from their perspective. According to the theory of mimicry, by observing others, we can experience similar emotions – the highs and lows, joy and frustration, making watching eSports an incredibly engaging experience. I clearly remember when my father played Dizzy on the NES console. Those were true emotions experienced collectively!

Esports as a Sport: Infrastructure and Professionalization

Many eSports enthusiasts assert without hesitation that eSports is not just entertainment, but a full-fledged sport with a developed infrastructure that supports the development of players. An example is the Kinguin Esports Performance Center in Poland, where professional players could benefit from advanced physical training, consultations with sports psychologists, balanced diets, and train in perfect conditions. 

Moreover, there are definitely more such centers. For example: Team Liquid Alienware Training Facility (Los Angeles, USA), G2 Esports Samurai Training Center (Berlin, Germany), or T1 Training Facility (Seoul, South Korea). This approach is not much different from what training centers for traditional athletes offer, and often they are even more advanced, as modernity is inherently part of the basic requirements. Thanks to this, eSports is becoming increasingly similar to traditional sports disciplines in terms of professionalism and preparation of players.

I also cannot fail to mention NASEF: North America Scholastic Esports Federation. It is an organization working to legitimize eSports as a full-fledged sports discipline by creating educational infrastructure. Its main goal is to prepare young players for professional careers in eSports and other technology industries in fields such as communication, technology, design, and management.

Despite eSports gaining more and more recognition, its status as a full-fledged sport remains controversial. Opponents of this concept argue that sports require physical endurance and fitness, which cannot be attributed to video games. However, in many countries, eSports has been recognized as an official sport – Russia recognized “cybersport” as a sport back in 2001, and China followed suit in 2003, promoting eSports as a form of physical training.

Moreover, on the international stage, eSports are increasingly being included in major sporting events. For instance, eSports was a medal event at the Asian Indoor Games and the Asian Games in 2022. These actions signal the growing acceptance of eSports as a legitimate form of sporting competition.

eSports Betting Across the U.S.

The question of recognizing eSports as a legitimate sport is also significant from the perspective of eSports betting in the U.S. This market gained popularity especially after the annulment of the PASPA (Professional and Amateur Sports Protection Act) in 2018, which had previously banned sports betting nationwide. The decision by the Supreme Court allowed individual states to independently regulate sports betting. This led to the inclusion of eSports events by bookmakers, even though the ruling did not specifically classify eSports as a sport. As a result, the USA has become one of the largest markets for eSports betting in the world, with a projected market volume of approximately $721 million in 2024.

The legality of eSports betting in the USA varies by state, creating a diverse regulatory landscape:

• Nevada: Nevada was a pioneer in legalizing eSports betting, treating it on par with traditional sports betting. These bets are available both in casinos and online, making Nevada one of the most important markets for this industry.
• New Jersey: New Jersey is a leader in online betting, including on eSports. However, players must be physically present in New Jersey to place bets; logging in from another state to bet is not allowed.
• Colorado: Since 2019, eSports betting has been legal in Colorado, both at physical locations and online. Colorado quickly became one of the key markets for eSports betting.
• Tennessee: In Tennessee, eSports betting is available exclusively online, but as with New Jersey, bets can only be placed within the state’s borders. This model has proven popular, especially among younger players.

However, not all states have embraced this trend:

• California, Indiana, Montana, Oregon: In these states, eSports betting is entirely prohibited. Although California is one of the largest eSports markets in terms of the number of players and fans, betting on eSports remains illegal there.
• New Mexico, Pennsylvania: These are examples of states that are in the legislative stage. In Pennsylvania, for example, work is underway to introduce regulations that would allow betting on eSports, aiming to attract more players and increase revenue from this market.

There are many reasons why some states still resist the legalization of eSports betting. One of the key issues is the morality of betting, especially in the context of young players, who are often minors. For example, in some eSports games, like Fortnite, the minimum age of a player is just 13 years. This raises ethical dilemmas about whether betting on such events is appropriate.

Issues in the Esports Industry. It’s Not All Rosy.

Esports is not just about successes. It’s time to add a bit of sand to the pink glitter. Despite impressive growth and increasing popularity, the eSports industry is not free from challenges and problems that could threaten its further development. Currently, the most threatening issue is the financial bubble and excessive reliance on sponsorship. According to Patrik Sättermon, Chief Gaming Officer of Fnatic, about 95% of the revenues generated by eSports teams come from sponsorship agreements, making it a relatively unstable source of income. Unlike traditional sports, where revenue streams are more diversified, eSports needs to find new ways to ensure financial stability.

In 2022, revenues from sponsorships and advertising in eSports amounted to $837 million, representing a significant majority of the industry’s total revenue. Projections indicate that by 2028, revenue from this segment will grow to $1.2 billion, confirming the continued dominance of sponsorships and advertising in the eSports ecosystem.

This strong concentration of revenues in one source makes the industry particularly vulnerable to changes in sponsors’ moods and strategies. From 2019 to 2023, the share of sponsorships in total eSports revenues fluctuated between 55% and 58%, and forecasts for 2024 to 2028 suggest that although this share will slightly decrease, it will still remain dominant, reaching 52% in 2028. This means that the influence and power of sponsors on the eSports market are unlikely to weaken significantly in the near future, which means it will still have a large impact on the stability and development of the industry.

The focus on a single revenue source, such as sponsorships, increases the risk for the industry, especially in the face of potential changes in corporate sponsors’ strategies. Naturally, this could impact the entire dynamics of the eSports market. In addition, there is overinvestment and overvaluation. As everyone observed the dynamic growth of eSports, it naturally attracted significant investments from venture capital funds and private investors. Unfortunately, as a result, many eSports organizations have been valued at amounts far exceeding their real ability to generate profits. This situation leads to the creation of a financial bubble, which may burst when investors start to realize the lack of real profitability in their investments.

eSports – This Momentum Won’t Be Stopped

Despite current challenges, experts see the future of eSports in an optimistic light – provided that appropriate changes are made and the business model is adapted to market realities. As noted by Konrad Wasiela of ESE Entertainment:

“The popularity of eSports will continue to rise and will increasingly intersect with traditional sports and music stars. We are already seeing how eSports is penetrating various aspects of entertainment, creating a single space that can be described as the metaverse.”

According to him, examples of such integration include cooperation with sports clubs. Esports organizations are currently forming partnerships with traditional sports clubs, such as FC Barcelona, which helps exchange experiences and expand the fan base. Increasingly, major cultural events are also being organized in games. Concerts by artists like Travis Scott in Fortnite show how eSports and games can become platforms for various forms of entertainment. Not to forget the development of mobile and cloud gaming. Mobile gaming currently accounts for 51% of global gaming revenues, and technological advancements in mobile devices and cloud services open up new opportunities for eSports. Despite serious threats, the case is certainly not lost!

Riot Games Takes the Lead in Reasonable Play

An example of positive action is the initially somewhat shocking approach of Riot Games. In the case of Valorant, they eliminated multi-million-dollar licensing fees for selected organizations. This step significantly lowered entry barriers for new teams, allowing them to join professional competitions without incurring large costs. Moreover, Riot Games introduced a revenue-sharing model, under which teams receive 50% of the profits from the sale of special skins associated with their brand. This approach not only provides teams with a new revenue stream but also motivates them to actively build their fan base and engage with the community. Someone had to be the first. Hopefully, others will follow their lead!

Such actions could become a model for other publishers, promoting a more fair and balanced business model in eSports. It is no secret that game developers are considered the most influential in the entire eSports industry.

As I mentioned earlier, there is also a tendency toward a more balanced distribution of cash prizes in eSports tournaments. Instead of offering huge prize pools at a few selected events, organizers are striving to distribute funds more evenly. This supports the trend toward financial stabilization of smaller teams and encourages participation in a greater number of tournaments.

Esports – Simulator of Big Money and Popularity

Esports, which was once just entertainment for game enthusiasts, is now becoming a giant in the entertainment world. Billions in revenue, millions of fans, and huge prize pools – all show that eSports is a force to be reckoned with. However, this development also comes with challenges. The industry is heavily dependent on sponsorship, which somewhat resembles walking a tightrope over a chasm – one wrong move, and you could end up at the bottom.

And what about those financial bubbles? Well, the value of some organizations is risingfaster than the temperature in Arizona in the summer, but the real profits may not keep pace with expectations. And then what? It could go either way, but there are also positive signs. Actions like those from Riot Games show that business can be done differently – by eliminating high licensing fees and sharing profits from sales. Maybe this is the way to the future? It’s definitely worth keeping an eye on.

Everyone, not just bookmakers in the USA, is asking whether eSports is really a sport. In my opinion, absolutely! It’s an activity that has rules, involves competition, requires constant training and skill improvement. After all, if chess is officially recognized as a sport, why not eSports? Here, even after pressing Ctrl+Alt+Del, you can’t undo the changes that have taken place in the world in recent years. It’s time to accept it and press “start” for version 2.0 of the sport. Are you ready to play this game?