The Evolution of the Prize Pool in Esports

The 2006 MLG Pro Circuit Super Smash Bros. Melee winner
Christopher “PC CHRIS” Szygiel received a prize pool of $10,000

One of the more traditional ways esport organizations earn revenue is from prize pool money for placing high at competitions. For the most part, this was the only way an esport organization or professional player earned their money in the early days of esports, since most brand sponsorships are were going to esports were going to the competitions and events, not so much the teams. Typically, a high prize pool brought a lot of attention to a competition and the growth of the prize pools was the indicator of showing the growth of esports as a whole. For example, the prize pools of MLG tournaments of the 2000s brought a lot of attention, initially because people were amazed that you could get paid by playing video games. But even now mainstream media point out at tournaments like The International, the Dota 2 competition that has a prize pool of over 30 million, to show how big the esports industry has become.

Yet, over time prize pool money has become less and less the way an esport organization makes their money because it is unreliable. The one gaming community that still relies on prize pool money is the Fighting Game Community, even then top players of those games are often sponsored by an esports organization. Now prize pools are going away because the formatting of competitions is changing. Big esport leagues that have a set number of teams like the Overwatch League and League of Legends Champions Series have league revenue sharing agreements. Teams in the league get a shared revenue coming from sponsorships, advertisements, ticket sales, and broadcasting rights. There are still prize pools for playoff placements of those competitions but they aren’t as big as an individual one-off tournament.

Overall, prize pools were the main source of income for many esport organizations back at the start of the industry. Yet, new and safer ways of making revenue are taking more interest from esport organizations. Now, most esport organizations want their teams to succeed in competitive play because it benefits them indirectly when it comes time to negotiate new sponsorship deals as they are seen as more valuable not so much because of the prize pool money.