Sponsorships and media rights still promise revenue for esports amid concerns that Riot Games is cutting its “League of Legends” budget, says Steve Arhancet, co-CEO and owner of Team Liquid, a top esports team.
“We kind of see the ecosystem where there’s substantial revenue still being earned within the space,” Arhancet said Thursday on CNBC’s “Fast Money.” “Sponsorships are healthy; the next thing is media rights.”
Arhancet has reason to be optimistic. His esports team, Team Liquid, is heading to the North America League of Legends Summer Split Finals in Oakland, California, this weekend to defend its champion title against rival team Cloud9.
But in the broader esports ecosystem, cost-saving measures by Tencent‘s Riot Games have sparked concerns the company is slashing the budget for “League of Legends.” The wildly popular multiplayer online game earned the honor of most played PC game in the world back in 2012.
Derrick “FearGorm” Asiedu, head of global events for Riot Games, took to Reddit at the end of August to address fan concerns, Engadget reported. He wrote that the company spends “way over 100 m[illion]” annually and is experimenting with ways to cut costs throughout the season to break free of “startup mode,” or to stop burning through cash.
Weighing in on the news, Arhancet said, “if anything [Riot is] becoming more thoughtful in terms of how they spend,” rather than slashing the budget. Plus sponsorships, media rights and in-game purchases offer promising revenue streams for esports.
“Media rights have to do with the exclusive right to broadcast the League, and there’s plenty of interest in the space,” he said. “You’ve got Twitch, YouTube, Twitter, Facebook, kind of all vying for these rights.”
But sponsorships, which Arhancet called “healthy,” are where the real money is. A report by Newzoo projects the global esports economy will hit $905.6 million in 2018, and about 40 percent, or $359.4 million, of that is projected to come from sponsorships. Newzoo projects an estimated $160.7 million will come from media rights.
Arhancet said in-game purchases are also a great source of potential revenue, referencing the popular game “Fortnite.”
“There’s going to be a lot of kids this Christmas that are going to be asking for V-Bucks instead of typical presents, which is the in-game currency for Fortnite,” he said.
