What Does The Future Hold for E-Sports...
Six years ago, the Madison Square Garden Company invested over $10 million in Counter Logic Gaming, an e-sports team, with the belief that professional video gaming would experience significant growth. However, the expected growth has not materialized, leading team owners to face economic realities. E-sports revenue fell short of expectations, causing investors to become skeptical of the industry. Viewership numbers have also declined, with a 13 percent drop in viewership for the League Championships Series compared to the previous year and a 32 percent drop from 2021.
E-sports teams have been struggling to turn a profit, resulting in cost-cutting measures such as laying off employees, ending contracts with star players, and even selling teams at a loss. Partnerships with streaming platforms have weakened, sponsors are reducing their advertising budgets, and team owners are operating at a loss while paying high salaries to players. Some prominent e-sports organizations, including Evil Geniuses and 100 Thieves, have let go of players and employees.
The economic challenges have affected the stock price of e-sports groups like FaZe Clan, which has experienced a significant decline in its stock value and faced the possibility of being delisted from the stock exchange. To cope with the financial strain, e-sports organizations like Cloud 9 have reduced their participation in leagues, and TSM, one of the most valuable e-sports organizations, has decided to sell its slot in the League Championship Series.
Riot Games, the company behind League of Legends, is feeling the pressure as the e-sports league around the game has been consistently losing money. While the game itself has been successful, Riot's formula of using the league to drive interest in the game has strained the relationship with team owners who expected eventual profitability. Riot has made some adjustments, including removing a developmental league requirement, to address team concerns and reduce costs.
Despite the challenges, there are still some positive factors for e-sports. Advertisers are drawn to the youth of e-sports viewers, and there is potential for revenue generation through the sale of in-game items tied to e-sports events. Riot Games reported $42 million in revenue from the sale of such items in their game Valorant, with half of the revenue going to participating teams.
Madison Square Garden Company attempted to sell Counter Logic Gaming but was unable to find a buyer willing to pay enough to recoup its costs. Instead, the company merged its League of Legends team with NRG Esports, paying NRG several million dollars to take on costs and salaries. Madison Square Garden retained a minority stake in NRG's parent company, allowing them to remain involved in e-sports.
While the e-sports industry is facing challenges and significant changes, some individuals, like Andy Miller of NRG Esports, see an opportunity to attract existing fans as big names exit the industry.