Esports, Sports, and Revenue

The world of esports has been changing lately.  With the new franchising for the NA LCS, new team owners buying up talent and money beginning to come in for the players, what could this mean for the esports economic landscape in the next few years? In order to better understand this I’d like to first look at how more traditional sports generate their income and what parallels we can draw between sports and esports.

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People will pay to watch a ball get kicked around? Sign me up!

Enter football.  No, not the football I pictured here, American football!  Specifically the National Football League, or NFL.  The NFL doesn’t have to tell us how much money they generate or how, but we have a pretty good guess thanks to one publicly traded team, the Packers.  The league generated about $13 billion in 2016, the most of any sports league in the world.  Teams in the NFL negotiate the redistribution of this revenue so that teams that are more profitable help out the teams that aren’t quite able to pull their weight.

The whole system keeps all the teams and their owners very happy.  You could think of the NFL like the United States: the team owners, like states in the union, vote on and work together to benefit everyone.  They redistributing wealth when needed to keep the system of teams working to generate money for everyone.  The league head is the president, a leader and negotiator for the good of all the teams.  This system works great for the owners who use their teamwork to negotiate for amazing broadcasting deals.

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How the vast majority the NFL’s money gets to them

This part is important because broadcasting rights make up nearly two-thirds of the income for leagues like the NFL! While teams like the Packers generate money by selling tickets, gaining sponsors,and selling rights to media and video games, a huge portion of their income is from selling the right to broadcast their games on various television networks.  ESPN, Fox, CBS, and NBC all want to be able to show football games on their channels to drive viewership and get people to see their advertisers, so the NFL negotiates (and negotiates HARD) to the highest bidder for the rights.

We’ll see in the next post how this is in sharp contrast to the way that a league like the North American League Championship Series (NA LCS) operates, or will operate with their new franchise model.  See you them!

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