The esports industry, once a beacon of rapid growth and soaring valuations, has encountered significant challenges in recent times. The pandemic era saw companies like FaZe Clan and TSM reach valuations of half a billion dollars. However, the decline from these peaks has been stark, with FaZe ceasing trading and TSM dismantling major esports divisions, including selling its lucrative LCS (League Championship Series) franchise.

Introduction

The initial euphoria surrounding esports led to substantial investments and rapid expansion. However, as the hype subsided, the reality of sustaining such growth became apparent. Investments have dwindled, prompting esports organizations to rethink their strategies. Instead of focusing solely on brand expansion, the emphasis has shifted towards revenue generation. Sponsorship deals have emerged as a crucial component of this new strategy.

The Central Role of Sponsorships

Across the globe, from Southeast Asia to Europe, the importance of sponsorships as a primary revenue stream is undeniable. “The primary revenue model for esports organizations has always been sponsorship, whether you are in SEA or Europe, it doesn’t matter,” says one team owner. Sponsorships provide the financial backbone necessary for teams to survive and thrive in the competitive esports environment.

The Power of Visibility by esports

The success of these sponsorships hinges on visibility. The more an esports team can showcase its presence, the more attractive it becomes to potential sponsors. Traditional methods such as branding on team jerseys and equipment remain important, but social media has become a pivotal driver of audience engagement. Platforms like Twitter, TikTok, Instagram, and Twitch offer unique opportunities for teams to connect directly with fans.

For esports teams, achieving substantial reach on these platforms is not just beneficial—it’s essential. Teams with a strong online presence can tap into broader markets, engage more fans, and secure more lucrative sponsorships. This visibility creates a multiplier effect: greater reach leads to more sponsorships, which in turn boosts revenue through merchandise sales and invitations to high-stakes tournaments, further enhancing reach.

Tencent and Riot Games: Leading the Charge

Publishers like Tencent and Riot Games understand the critical role of visibility and engagement in the esports ecosystem. They actively incentivize teams to expand their reach and engage with fans more effectively. Devesh Kabdwal, Chief Revenue Officer of BOOM Esports, highlights how these publishers provide tangible support to teams, helping them grow their audience and strengthen their branding.

“Tencent has its own incentive programs for PUBG Mobile and it has been in place for three years,” Kabdwal explains. “There has been support from the publisher, regardless of whether you are a top team or not. They pick up the top 10 or 15 teams in the region and then they actually help them with a marketing support fund to grow the team’s respective social media channels and hire more streamers.

Later, the teams are further rewarded based on their social media and streamer performance through a tiered incentive program that pushes them to leverage their social media channels better. This indirectly helps these publishers cement their reach and fanbase in the respective region and helps them engage and grow their overall community around the teams.”

The Impact of Social Media Incentives

The programs by Tencent and Riot Games are designed to drive social media engagement and visibility for esports teams. By providing marketing support and rewarding teams based on their social media performance, these publishers ensure that teams are motivated to maintain an active and engaging online presence. This approach not only benefits the teams but also strengthens the publishers’ overall community engagement and reach.

For example, Tencent’s incentive program for PUBG Mobile has been instrumental in helping teams grow their social media channels and hire more streamers. This support has enabled teams to create more content, engage with fans more effectively, and build a stronger online presence. The tiered incentive program further encourages teams to perform well on social media, driving continuous improvement and engagement.

A New Era of Esports Strategy

The shift in strategy from expansion to revenue generation marks a new era for the esports industry. Teams are now more focused on leveraging social media to secure sponsorships and drive revenue. The support from publishers like Tencent and Riot Games plays a crucial role in this transition, providing the necessary resources and incentives for teams to succeed.

Conclusion

The esports industry’s evolution from a period of rapid growth and exuberant investment to a more strategic focus on revenue generation and sustainability is a significant development. Sponsorships and social media engagement have become essential components of this new strategy, providing the financial stability needed for teams to thrive. With the support of publishers like Tencent and Riot Games, esports teams are well-positioned to navigate this changing landscape, ensuring continued growth and success in the competitive world of esports.

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