The Economics of Professional E-Sports Teams in 2024
The competitive gaming industry is facing a massive financial reality check. After years of sky-high valuations and eager venture capital investments, the e-sports bubble has officially burst. Today, professional gaming organizations are shifting away from rapid expansion and focusing on pure survival as they scramble to replace lost sponsorships and find sustainable ways to make money.
The Bursting of the E-Sports Bubble
Between 2018 and 2021, investors poured billions of dollars into competitive gaming. Traditional sports owners, celebrities, and venture capital firms bought into the idea that e-sports would quickly rival the NFL or NBA in profitability. Franchise slots in major leagues, like Riot Games’ League of Legends Championship Series (LCS) and Activision Blizzard’s Overwatch League, sold for anywhere from $10 million to $20 million each.
By 2024, that optimism has faded. The most glaring example of this crash is FaZe Clan. In 2022, FaZe Clan went public through a SPAC merger with a valuation of $1 billion. Just over a year later, the company was struggling to maintain cash flow. In late 2023, GameSquare agreed to acquire FaZe Clan for roughly $17 million. This massive drop in value set the tone for the entire industry.
Other legacy organizations have also been forced to downsize. Evil Geniuses, one of the oldest brands in North American e-sports, completely exited the LCS at the end of 2023 to cut costs. Similarly, 100 Thieves had to lay off roughly 20% of its workforce and spin off its energy drink brand, Juvee, to keep its core gaming business afloat.
The Struggle to Secure Sponsorships
For years, e-sports teams relied heavily on sponsorships to pay player salaries and cover operational costs. During the boom, cryptocurrency exchanges and tech hardware companies eagerly wrote massive checks to put their logos on player jerseys.
That money has largely dried up. The most devastating blow to e-sports sponsorships happened when the crypto exchange FTX collapsed in late 2022. Team SoloMid (TSM) had signed a historic 10-year, $210 million naming rights deal with FTX in 2021. When FTX went bankrupt, TSM lost its primary source of revenue. TSM eventually sold its LCS franchise slot to Shopify Rebellion and scaled back its e-sports operations.
Traditional automotive and beverage brands are also pulling back. BMW previously ran a massive “United in Rivalry” campaign sponsoring top teams like Cloud9, Fnatic, and G2 Esports. By 2023, BMW quietly ended these partnerships. Brands have realized that while e-sports tournaments attract millions of viewers, those viewers use ad-blockers and rarely click on traditional sponsor links. Converting young gamers into paying customers is proving to be incredibly difficult.
How Leagues are Changing the Financial Rules
Because teams are struggling to secure outside sponsors, game developers are stepping in to change the underlying business model.
Riot Games is currently leading this transition. In early 2024, Riot announced a complete overhaul of how it shares revenue with teams in the LCS. Previously, Riot paid teams a set stipend to participate. Now, Riot is moving toward a digital revenue-sharing model. Teams will earn a percentage of the money generated from in-game digital items.
This model has already proven successful in Riot’s tactical shooter, Valorant. During the 2023 Valorant Champions Tour, Riot sold a specific bundle of in-game cosmetic items and shared the profits with the partnered teams. That single digital bundle generated over $20 million for the participating e-sports organizations. In 2024, Riot introduced VCT Team Capsules, allowing fans to buy specific gun skins and player cards that directly fund their favorite teams.
Meanwhile, other leagues have collapsed entirely. The Overwatch League failed to secure enough viewership or sponsor interest to justify its massive operating costs. In late 2023, Microsoft and Activision Blizzard offered teams a $6 million buyout to dissolve the league. The competitive Overwatch scene has now transitioned to a more open, third-party tournament circuit run by the ESL FACEIT Group.
Revenue Streams: What Actually Works in 2024?
E-sports organizations can no longer rely on investor cash or basic jersey sponsors. To survive in 2024, teams are pivoting to new revenue streams.
- Digital Item Sales: As seen with Riot Games, selling in-game skins is the most direct way to monetize a fanbase. Fans are highly motivated to buy digital goods that enhance their personal gaming experience.
- Content Creator Networks: Organizations are signing popular Twitch and YouTube streamers instead of expensive professional players. Streamers cost less to manage and bring in consistent daily viewership. Moist Esports, co-owned by popular creators Cr1TiKaL and Ludwig, uses the founders’ massive personal audiences to sell merchandise and secure sponsors without needing to win world championships.
- White-Label Production: Some teams are renting out their state-of-the-art production facilities to other companies. Since organizations already own expensive cameras and broadcasting equipment, they act as production agencies for corporate events to generate side income.
The Path Forward for E-Sports Organizations
The era of paying teenage gamers million-dollar salaries is largely over. In 2024, the focus is strictly on running lean businesses. Player salaries across major titles like League of Legends and Valorant have dropped significantly compared to their peaks in 2021. Teams are signing younger, unproven talent on smaller contracts to keep overhead low.
The e-sports winter is forcing a necessary market correction. While the massive valuations of the past were artificial, millions of people still watch competitive gaming every week. The organizations that survive this crash will be the ones that stop operating like massive tech startups and start operating like disciplined, niche media companies.
Frequently Asked Questions
Why are e-sports teams losing money? E-sports teams lose money because player salaries, housing, and travel costs heavily outweigh the money brought in from merchandise and tournament winnings. Many teams relied on venture capital to cover these losses, but that funding has stopped.
How do e-sports teams make money in 2024? Teams are transitioning away from traditional sponsorships and focusing on digital revenue sharing. This includes earning a percentage of in-game cosmetic item sales, producing sponsored content through YouTube and Twitch, and selling physical merchandise directly to fans.
What happened to the Overwatch League? The Overwatch League officially dissolved at the end of 2023. The franchise model failed to generate enough revenue for the participating teams. Activision Blizzard paid a $6 million termination fee to the franchise owners, and the game’s competitive scene is now managed by the ESL FACEIT Group.
Are e-sports player salaries going down? Yes, player salaries have decreased significantly over the last two years. As organizations lose sponsorship money, they can no longer afford the inflated, multi-million dollar contracts that were common between 2019 and 2021.