The Multi-Million Evolution of Esports Prize Pools
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In the late 1990s, when the first generation of gamers populated small LAN cafés together, few people would have envisioned a world where participating in video game tournaments could very well make you a millions of dollars. The first prize pools were small consolation prizes: a few hundred bucks or a graphics card for the winning team. The tournaments built a community of people who played Counter-Strike, Quake, and StarCraft based on bragging rights and community pride, not life-changing sums of money.
Fast-forward to today's fees and the financial scale looks entirely different. In 2019, Valve's Dota 2 annual championship, The International, which is community crowdfunded by players through the purchase of in-game skins, had a prize pool greater than 34 million dollars. Epic Games took a similar platform-based approach when they injected 100 million dollars into its competitive ecosystem for Fortnite with various events like the 2019 Fortnite World Cup. At that event, Kyle "Bugha" Giersdorf, won a solo championship and pocketed 3 million dollars.
The contrast between early eSports, and eSports today, is illuminating in showing how commercialized eSports have become: sponsorships, streaming rights, and a continually developing global audience.
What Prize Pools Mean for Players and Teams
In past times, competitors had to balance playing tournaments as a part-time position, or bring in sponsorships from their communities. Today, the best esports players earn salaries, endorsements and train in facilities comparable to traditional sports. A healthy prize purse gives players incentive to focus on the game and adds legitimacy to career paths in esports to their families and sponsors.
Consider Valorant, for example. The way Riot Games has designed the esports economy, has provided a balance for both sustainable and spectacle balance, even with its prize pools. And while the prize pools may not be comparable to Dota 2 and Fortnite yet, the existing funding and obligatory franchised leagues create stable income on top of tournament income which is key in changing the economics of esports, and building for sustainability.
For teams in particular, large prize pools can be one way or the other for profitability or financial challenges. Winning a tournament can change a team's reputation within their fan base and sponsors by bringing potential new sponsors, and locking-in deliverables for prospective renewals. But the reliance on prize money also creates volatility.
Organizations that do not qualify for the biggest tournaments will struggle financially, as they try to cover their operating cost while relying on the sporadic nature of prize money. Esports leagues are exploring developing systems like revenue shares and guaranteeing stipends to combat the instability in their ecosystem and replicate structures that can be seen in professional sports.
The Ripple Effect on Sponsors and Betting
Massive prize pools have attracted outside sponsors too. Energy drink companies, car manufacturers, and even luxury brands are seeing esports as a great way to market. You can find an event like The International or the League of Legends World Championship which boasts tens of millions of viewers across the globe and can match any sports broadcast today. Beyond the sheer exposure of being a part of a sporting event that draws fan interest, the glitter of multi-million-dollar rewards gives advertisers a means to connect with digital audiences that is increasingly appealing.
Some fans view competitive videogame play the exact same way they view the NFL or NBA during their respective seasons; they do not consider esports to be any different whatsoever.
Just as online gambling sites offer users the opportunity to stretch out their luck and winnings with rewards and bonuses, esports betting sites offer a different venue for fans that want to be more staked in the outcome of matches to use the odds to their advantage. Esports betting sites offer fans the opportunity to become more engaged in the outcome of a match. The difference is that the stakes are not only entertainment-driven but also connected to a rapidly professionalizing industry where the money in play is very real.
Towards a More Balanced Ecosystem
The increasing allocation of prize pool amounts shows that esports is on an upward trajectory. However, it is possible that esports moves away from the model of simply raising the stakes every year. Instead, prize pool money could be distributed across a greater number of tournaments (more tournaments, not less) and a wider range of players to promote a healthier ecosystem for games that are unable to rely on a world championship to carry the scene once or twice a year.
It could also be interesting to see further hybrid funding models develop, which include a mix of publisher contributions, community crowdfunding, and sponsor contributions. Similar to how Dota 2 illustrated the power of a player base in its crowdfunded player endorsements, perhaps other titles will look to reward players with direct support from a fan base in order to establish competitive funding and promote esports.