Finding a sustainable business model is further complicated by the esports ecosystem. Besides being more complex, a fundamental difference compared to traditional sports is that no one owns basketball or football, whereas there are publishers who own games like Call of Duty or League of Legends. Game publishers are an additional, powerful stakeholder at the negotiating table – they are the gatekeepers determining whether a title can be used for esports or not. Other stakeholders have limited say in publishers’ plans for a game’s evolution (e.g., update, discontinue or launch a new version of a game).
Publishers’ shift from a traditional business model of one-time sales towards ongoing monetization via in-game items and subscriptions significantly extends games’ shelf life, making them businesses in themselves with constant development. For example, World of Warcraft has been around for 18 years, through 8 major expansions. This means that a game has its own community and brand, which may be damaged by misaligned PR or activities. If an esports tournament is poorly organized or attracts unwanted publicity, it can have a negative impact on the community, game, and financial performance.
This game-specific context slows down esports’ development, limiting both supply and demand:
- Supply. Esports is not generating money so far, while game sales are lucrative. Game publishers are likely to keep being careful about esports participation, treating it more like a marketing expense than a stand-alone business with its own potential.
- Demand. As each game is owned by another company, it carries risks for third parties who want to develop esports. It is possible to create and nurture a football league without any dependency on a third party, but impossible with a video game. This risk profile means that most of the investment into esports will come from either game publishers or governments.
Some game publishers have separated esports into stand-alone businesses, organizing esports leagues around their games. While some games are easy enough to attract general video game fans (e.g., CS:GO or Rocket League), it may take a long time for more complex games to become operationally and financially sustainable. A good example is leagues for MOBA or some FPS games with complex mechanics like Valorant and Overwatch 2 (many distinct heroes with own special abilities / skills – >15 in Valorant and >35 in Overwatch 2), which limits the potential to game fans only. Each league is focused on one game only, so does not capture the broader gaming audience, which is critical at this early stage. We are already seeing the first signs of difficulty. Activision-Blizzard had to allow franchises in its Overwatch leagues to postpone paying fees, equalling up to $25 million per franchise. Arguably, this led to a somewhat safer approach from Riot, where teams for its new Valorant esports league were selected through an interview and financial review process, but with no franchise fee required.
This status quo will likely drive a change of approach in the market, like focusing on more open leagues (e.g., Valve licenses CS:GO rights to third parties and has 3 successful leagues – ESL, BLAST, and PGL), growing popularity through international events (e.g., Olympic games), or even becoming a part of larger events such as Gamers8 in Saudi Arabia. Potential partnerships to grow not only events for a publisher’s own game(s), but esports as a whole, might also take place in the future, especially if the pace of growth slows down.
The secondary importance of esports relative to games also leads to a lack of unified rules supporting esports athletes, further slowing industry development. The esports ecosystem requires at least some level of alignment to keep the industry moving forward. For instance, sports leagues typically have clear competition rules, event schedules, athlete contract models, processes for trades between the teams, and other elements that address potential conflicts and provide an opportunity for cross-league coordination (e.g., allowing players to participate in national events or change leagues between seasons). A similar infrastructure could benefit esports as well, with some specific cases requiring additional alignment. Sometimes top players can change video games, which is rare in sports. It is especially relevant within the same genre, like when the strong CS:GO player “KennyS” joined Valorant. This could use additional clarification and alignment between game publishers / third party event organizers and their leagues. Another area that requires unification is the overall health and wellbeing of esports athletes, whose career requires them spending long hours sitting in front of their PCs or mobile devices.
In traditional sports, rule changes are approved and facilitated by some form of governing committee. An equivalent body does not yet exist in esports, but may have a role in shaping the format of competitions (e.g., how many rounds of a game to play, points awarded, etc.). Clearly, not everything should be unified or regulated. Game publishers often know their games and communities much better than anyone else, so they are the best stakeholders to oversee the evolution of a specific game (e.g., the balance of power between different game characters, new game mechanics, etc.).
Some degree of unified or aligned regulation is especially critical at this early stage to persuade people that esports can offer a viable career. Fortnite had a prize pool of $30 million for its top event several years ago, but subsequently reduced it to only $2 million today. Activision-Blizzard created an esports scene for its MOBA called Heroes of the Storm by establishing the Heroes of the Storm Global Championship in 2016. But then they shut it down in 2018, which forced athletes to quickly change games if they wanted to stay in esports. Such volatility impacts esports athletes’ ability to plan a career.
Countries have been slow in supporting esports – perhaps understandably, given the context. But this hesitancy translates into a lack of support for esports athletes, which undermines the overall perception and likelihood of someone choosing it as a career. National recognition as an athlete comes with certain obligations and benefits, which cost money that governments may not always be willing to spend. For example, Spain is, in many ways, the esports hub of Europe because of its popularity there. But the country has not recognized esports as an actual sport. Instead, it includes esports under audiovisual industry development, with a current view that no separate legislation is required. This decision makes it challenging for some people to see esports as a sustainable career. Firstly, it makes esports inherently less stable: a professional esports athlete cannot rely on any game as it can be easily cancelled, or have its support withdrawn – not just by the publisher but by the government. Secondly, because esports athletes are not yet recognized by the state (so not technically employed), they do not receive medical insurance or other benefits, compounding the financial insecurity.
To drive esports forward, governments can consider adopting measures including: holistic regulations for esports; incentives for players to select esports as a career; a clear development path from amateur to professional levels; transition after a person’s esports career ends (both direct involvement as a team owner or a coach, and in adjacent sectors such as game development); and guarantees for players during and especially after the end of their careers (typically in their late 20s – early 30s). Governments and their federations can also organize and sponsor esports clubs and events at multiple levels, from in schools through to major global championships, and invest in dedicated or cross-functional infrastructure like venues.
The Middle East offers strong potential for the gaming industry, with many gamers in the population
and a track record of recent investment
. It is also very promising for esports.
Gamers8 is hosted by Saudi Esports Federation (SEF), with Savvy Games Group as lead sponsor and EFG as event operator. The first Gamers8, was launched in July-August 2022 as the largest independent esports event globally, both in terms of elite-level game coverage (6 tournaments in Rocket League, Dota 2, Rainbow 6, Fortnite, and PUBG Mobile over 8 weeks) and prize pool ($15 million). Gamers8 attracted top competitors from around the world, including winners of prestigious events like The International and ESL One. In Dota 2, Gamers8 became the #1 event outside of the Dota 2 Pro Circuit based on hours watched (7.5 million), one of the top 5 events in 2022. A new joint event in direct partnership with KRAFTON (PUBG Mobile World Invitational) garnered 2.5 million hours watched, equal to two events of the same level hosted last year (East and West) combined. As part of Gamers8, SEF also hosted a gaming and esports summit called Next World Forum that attracted leading industry stakeholders from around the globe. It facilitated the exchange of ideas and gave birth to multiple partnerships, especially between esports federations.
It seems to be only the start for Gamers8, as the event returned on an even larger scale in 2023. Top global teams compete for $45 million in prizes across >10 esports titles (same as in 2022, plus CS:GO, PUBG PC version, FIFA, Tekken 7, Street Fighter, and ESL R1). In addition to the IP-based events, Gamers8 2023 will introduce new elements like a ranking of the best clubs across different games.
KSA also supports its local esports clubs. Gamers8 gave them a chance to be a part of the event and compete with the best teams in the world, subject to qualifying for the limited number of seats allocated to local teams. Several, like Team Falcon, seized the opportunity to show their skill, and returned some strong results.
KSA is not the only country in the region pursuing esports. UAE is also active in the field, with multiple efforts to boost the sector. Abu Dhabi hosted the prestigious BLAST Premier World Final in CS:GO in 2022 (and plans to host it in 2023 as well), gathering the best CS:GO teams and players throughout the year to compete for the title and $1 million prize pool. Abu Dhabi’s gaming hub aims to support not only gaming companies, but esports also. It is currently home to multiple esports-focused businesses, including:
- Nigma Galaxy, a successful esports club with more than 5 teams, including globally strong ones in PUBG Mobile, Dota 2 and Free Fire.
- An esports and gaming agency that has hosted more than 100 esports events in GCC, supporting them with content creation, marketing campaigns and talent management.
- YAS HEAT, an esports club and academy that focuses on competing and training athletes in games related to motor racing.
In 2022, Abu Dhabi hosted a 2-day Games for Change summit. This event gathered global gaming and esports leaders to discuss gaming’s potential impact beyond entertainment, from cancer treatment to cultural education, and secure critical partnerships to advance these projects. Al Ain hosted a 3-day anime and gaming festival that included multiple esports competitions in CS:GO, Valorant, FIFA 23, and Super Smash Bros Ultimate. And Dubai hosted a 2-week Dubai Esports Festival (DEF) that included:
- PUBG Global Championship, the final and most prestigious PUBG (PC version) event globally with the best teams and players competing for $3.3 million in prizes.
- GameExpo with multiple gaming zones, content areas for fans to meet favorite esports athletes, streamers and industry leaders, an indie games expo and trials, a cosplay competition, and many other fun activities.
- Minecraft esports tournament for 8–11-year-old students from Dubai schools.
- A summit that gathered global leaders in esports to discuss global trends and esports, and UAE’s ambitions in the sector.
Its rapidly increasing popularity, youthful fanbase, and tremendous untapped growth potential make esports an exciting segment that will help shape the future of live entertainment. It offers a range of opportunities for established industry players and other companies wanting to leverage the buzz and reach esports’ coveted audience. While some fundamental challenges will need to be resolved, esports has the potential to scale significantly and become a major global form of live entertainment. And Middle East is establishing itself as an emerging leader with strong focus, investment, and commitment to the sector. Its young population of gaming enthusiasts and government willingness to invest in events, support, and infrastructure are positioning the region as the esports market of tomorrow.