The Game Publishers: Why They’re the Most Powerful Player in Esports

Game publishers are the primary source of power in any established esports ecosystem. They finance the design, development, marketing and distribution of video games. They are the ultimate owner of video games’ IP. Because of this, game publishers also gain control as an event organization as no one can organize competition without their permission. Some game publishers are also extending their influence to streaming platforms, as exemplified by Riot Games' initiatives trying to incentivize fans and viewers to watch LOL competition on its own broadcast platforms .

Game publishers have adopted a franchise model similar to traditional sports, introducing franchise fees and revenue-sharing arrangements for esports teams. Moreover, they exert regulatory control over rules and conduct to safeguard the industry's reputation. By centralizing competitive tournaments at the highest tier, game publishers possess substantial negotiating leverage, enabling them to dictate terms aligned with their business model and strategy. They can opt for a higher percentage in revenue sharing, permit deferral of franchise fees during revenue downturns, or even waive franchise fees entirely when launching a new league to stimulate participation.

It’s worth noting that game publishers’ incentives are slightly different from other stakeholders’. They use esports as their marketing platform to drive interest in their video games. They can afford money-losing esports as long as they are profitable for long tail revenue of the video games, which are micro-transactions in game.

Reference

Riot Games, Building the Future of Sport at Riot Games. https://www.riotgames.com/en/news/building-the-future-of-sport-at-riot-games

New York Times, The Excitement Around E-Sports Is Growing. But Where Are the Profits? https://www.nytimes.com/2022/11/26/business/video-game-e-sports-profit.html