Esports arena: Creating scarcity and demand in a digital world

Over the last decade, esports has morphed into a giant of an industry. The fact that the industry was already holding vastly successful online, as well as physical, events has placed it in a position to appeal to an enormous network of global fans, as well as a young, digitally native fanbase. This has become even more true after the Covid-19 pandemic forced events online; in 2020, the expected revenue from esports was an estimated $950m. This is set to rise to $1.6bn by 2023.

Being a digital sport undoubtedly has huge advantages, but it also comes with a set of challenges. Most concerningly for the esports industry, a digitally native fanbase is much harder to monetise than previous generations of traditional sports fans. Revenue streams like merchandising can often be less profitable, and there’s also an obvious lack of more traditional sports income streams like ticket sales and in-venue item sales, such as food and drink. So teams have to get creative. They have to think about new types of products and services that will have the ability not only to appeal to online-based fans, but will also keep the exclusivity and draw of a signed baseball trading card.

This is where blockchain comes in. In the past few months, NFTs have shot into the public eye, and with good reason. NFTs, or non-fungible tokens, are a new type of digital asset which can be created in the form of trading cards, video moments, art, collectibles and even virtual pets. By using blockchain, each NFT is either provably rare or provably unique, and essentially becomes a collector’s item that can’t be duplicated. Their authenticity can be instantly verifiable using an immutable digital ledger. This has already been proving highly profitable – for instance, the NBA’s Top Shot launched to wild popularity. Blockchain-enabled digital collectibles can unlock new revenue streams for esports teams, and aren’t something that should be overlooked.

Exclusive collectibles

Esports teams can take advantage of the popularity of NFTs by creating collectibles like digital trading cards of their players for fans to collect, opening up a completely new revenue stream. NFT technology can allow teams to create unique or limited-edition digital collectibles, which fans can purchase and which cannot be destroyed, forged or replicated. The exclusivity of these collectibles also has the added advantage of allowing fans to engage more with their teams, helping esports teams to strengthen their fanbase. These solutions are already proving to be hugely successful for monetising fanbases – people have already spent more than $230m buying and trading digital collectibles.

Teams can also tie digital collectibles into their own marketing initiatives. For instance, limited edition digital trading cards can be designed and released in conjunction with key matches, tournaments or the signing of new players. This again works two-fold, letting teams engage their fanbases around pivotal events as well as monetising them.

In-game assets

Esports teams can take digital collectibles a step further by partnering with game developers to release exclusive in-game assets in relation to their team. For instance, teams can create exclusive digital versions of their shirts or badges, in the same way football teams will release exclusive merchandise around events like the World Cup.

For fans this could do a lot to solve long standing issues around in-game assets. Until now, in-game purchases such as made-to-buy special items, like weapons or clothes, have generally been one-time, non-transferable investments. This has been a bugbear for players, who have been calling for more easily transferable assets for years. With blockchain, this call can be answered. The technology can be used to give players full ownership of the items they purchase, allowing them to take the items out of their original games, and even use them in other games. These items can also be sold on for profit outside of their gaming sphere. This can be a huge benefit for esports teams selling exclusive assets, as it means they could be used in any number of games, helping to bring in new fans.

As the esports industry continues its astronomic growth, teams will be looking to take advantage of this, as well as to cope with the issues that come with it. Teams that turn to innovative solutions like digital collectibles, based on technologies like blockchain, will be able to monetise this growth whilst simultaneously keeping fans engaged and sponsors happy. The demand for digital collectibles shouldn’t be underestimated. In the next year we’ll see even more esports teams embracing the technology, as the industry continues to explode in popularity.

Lars Rensing is CEO and co-founder of enterprise blockchain services provider Protokol. He has more than four years’ experience in the blockchain industry, helping to lead and co-found Ark; the open-source blockchain platform which underpins Protokol’s blockchain services. He is passionate about helping everyone from start-ups to enterprises unlock the opportunities of blockchain technology for their business, and as a result currently also serves as an adviser for a number of start-ups leveraging blockchain technology. He leads the overall strategy and direction for Protokol, which is helping businesses across the world solve real challenges though custom blockchain solutions.