Esports look beyond sponsorships

Electronic sports are living in a golden age. As the world of gaming and video games gained weight in popular culture in recent years, esports took advantage of the loyalty problems of traditional sports to attract a younger audience.

The coup de grâce has come in the form of the pandemic. An illusion that seemed distant has become a reality through an unforeseen shock that has benefited e-sports to the detriment of traditional sports. Stadiums and arenas have had to close temporarily, and esports have supplied the recreational needs of a homebound audience.

The figures speak for themselves. Spain is a particularly encouraging ecosystem for this sector. The per capita consumption of video games by Spaniards is higher than in other developed countries. Spain ranks among the world leaders in terms of esports audience. These statistics suggest an accelerated expansion of this sector and its professionalization at corporate and financial levels.

This dynamic has also been transferred to the balance sheets of clubs seeking to diversify their monetary income in search of an optimal business model. But how do you finance an esports team?

Common alternatives

Sponsorships have generally supported the classic esports business model. Good Game Group estimates that around 80% of a club’s revenue comes from this source. Sponsorships in this sector are expected to move $641 million in 2021, compared to just over $500 million in 2019, according to the latest Global Esports & Live Streaming Market report.

If broadcasting rights are the financial pillar of a traditional soccer club’s management, these revenues take second place in esports. This year, this type of revenue is estimated at US$192 million. The rest of the income is distributed mainly in fees for video game publishers, player transfers, prizes for competitions, and revenues linked to streaming and merchandising sales.

Yes to crowdfunding

As opposed to traditional revenues, some companies are already working on new ways to revalue esports. The majority dependence on a single source of income generates inherent risks that eventually affect the value of an esports club as a company and penalizes it.

Moreover, the rise in viewership is accompanied by larger brands seeking sponsorship but demanding alternative avenues to putting a logo on a T-shirt. Experts are, therefore, already looking at new revenue streams focused on audience interaction and how to monetize it. Data intelligence, tokenization, on-site events, or intra-company competitions are some of the new forms of monetization under development.

Crowdfunding is an ideal alternative to relieve the balance sheets of esports clubs as these new sources of income are being investigated. Alternative financing is already well established in e-sports in different parts of the world. In Spain, however, Fellow Funders has opened the door. In 2020, Wygers became the first esports club to close an equity crowdfunding round in Spain. Through the Fellow Funders platform, the team managed to raise more than 620,000 euros with the support of relevant figures such as former footballer Pablo Aimar.

At Fellow Funders, we wanted to back Wygers again. Currently, we have an open funding round of 300,000 euros, with which the club will continue to develop new lines of business and place itself at the forefront of the professionalization of eSports.

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