The current economic downturn has impacted the esports industry, which may be on the verge of its first-ever recession - according to experts.
Of big concern are the sky-high salaries that top esports players have: now that the sources of funding for player salaries are becoming scarce, electronic sports organizations may need some reform.
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As per Digiday, it’s not uncommon for professional players of Tencent TCEHY’s “Valorant” to earn more than $40,000 per month or over $480,000 per year. It’s worth noting that most “Valorant” teams consist of five players and that the organizations also have to pay for coaches, support staff like cooks and psychologists, and boot camp facilities.
But, why are the salaries so high? Successful esports teams recognize the importance of having top players and are willing to pay high salaries to attract them. And, as the esports industry is an open market system, the amount a team is able to spend is determined by the wealth of the team's owner. As a result, wealthy teams are able to outbid other teams for top players, leading to an inflation of player salaries across the industry.
In this regard, Dave Martin, director at investment and consultancy firm Esports Global, told Digiday: “When teams need to get a foothold, it doesn’t matter to them if they double the salaries of a few players. But actually, it really does matter. Then, everyone looks across and goes, ‘What is he or she worth? What am I worth?’ If they’re getting £10,000 I should be getting £10,000 a month.”
Esports: Is The Boom Fading?
According to Cecilia D’Anastasio, an award-winning journalist specializing in video games, quite a few of America’s most prominent esports teams and organizations are contracting.
See also: Could The Hype Around eSports Be Fading? Find Out Why Some Experts Think So
Moreover, while esports organizations were meant to create revenue mainly by selling stadium tickets and merchandising, and sharing profits with game publishers like Sony SONY, Tencent, Nintendo NTDOY and Microsoft MSFT, the market has not been behaving how it was expected.
Even though esports do sell tickets, their price is lower than the average American football game. And, above all, each esports fan -of the 261 million people that watch electronic sports at least once a month- produces only $5.30 in revenue per year, industry tracker NewZoo has revealed.
What’s Next For The Esports Industry?
Some of the esports organizations are beginning to focus more on content creators and streamers rather than on esports teams.
But that’s not the only alternative for the big teams. Billy Studholme, a journalist specializing in electronic sports, concluded: “Esports must find a way to tame player salaries, or find other sources of income to supplement competition — which, in that case, must be found alongside a reason to continue with esports at all if it remains a money-burning operation.”
Continue reading: These Are The Most Popular Video Games Of 2022 (And How Much They Gave Out In Prizes For Esports Pro Players)
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