Gaming Organizations: How they work

I’ve been reading gaming blogs/websites, for example ESFIworld.com, MLGpro.com and HLTV.org as well as other, and seeing comments on their recent articles with comments showing lack of comprehension in the field of gaming organization, so I decided to write a rough draft of how they work.

Step 1: Organizations sponsor teams/players

Organizations, like SK-gaming, Fnatic and Evil Geniuses, sponsor players and teams to represent their brand and compensate them with salaries, products and travel expenses. This is a new way deal, the organizations give these players a lot of money to support their brand and their sponsors. They hope by sending the teams to events that they will having a better chance to sell their brand to major multinational corporations like Intel, nVidia, Dr.Pepper, etc. which will provide the monetary support that they need to continue to support the players to go to more events which will then again attract more sponsors.

Advertising

The sponsors, seeing this as a valuable place to get advertising in on the 18-35 market, hope that they will being gaining a youth oriented brand identity as well as getting a word in to a market which is heavily advertised to, by attaching their name to a organization. This is why almost all organizations have various sponsors all over their shirts - ranging from energy drinks to high end computer components. Generally though they are gaming related, such as gaming peripherals like Steel-Series and Razer which hold the larger share of the advertising market.

Step 2: Events

At events the players will be representing their sponsors. The better they play, the better they make the organizations and sponsors look. It also makes monetary sense - they want their players to make the most of the large amount of money they spent on getting them to the event, grow the brand image of their organization and increase the amount of camera time they show their sponsor’s logos.

Step 3: ??????

This is an undefined place. Changes from org to org but usually it involves a method of generating revenue whether that be through the sale of shirts with their sponsors logo as well as their own on them or they send their players all over the place to work at conventions for their sponsors, or hold sponsors with the name of the organization and sponsor on it’s name.

They also do something which many would see as a bad thing. They take a percentage of the prize money from the players winnings. It’s a necessary part of the business. When they are putting out hundreds, if not thousands, of dollars to transport the teams around the world, the least the players can do is pay back a small percentage to the guys who are paying their paychecks.

Step 4: Profit!

If all goes well the organizations now has a stable line of revenue and is a valuable advertising partner to a major corporation. However few organizations ever reach this level.  Evil Geniuses, SK-gaming, etc have reach this level, but even they have a hard time producing a constant level of revenue.

Most never get to this level, as getting enough money from sponsors, ads and sales are exceptionally hard. Most run at a constant red and never make it to profitability.