At the most basic level the financial mechanics of collegiate esports are fairly straightforward. Just like most initiatives on college campuses, institutions invest dollars into their esports programs, hoping to recoup—and eventually profit from!—their expenditures through enrollment and retention. While this formula does highlight the fundamental model, it is an oversimplification. It underrepresents the economic complexities and the strategic underpinnings of the collegiate esports ecosystem.
Whether you are a collegiate esports or higher education professional, understanding the economic dynamics of the industry is important. The maturing esports programs are more than just a cluster of gaming enthusiasts – they are growing into powerful economic units that can significantly impact a university's bottom line.
The State of Collegiate Esports
Esports Foundry's 2022 report "Trends in Collegiate Esports" written by Chris Postell and Kris Narayan offers invaluable insights into the growth and financial trends in the industry. The report points out that more than 50% of collegiate programs are three years old or older, an indication of an ecosystem transitioning to a new phase of maturation.
The financials of collegiate programs indicate an upward trajectory. The average budget for collegiate programs has increased year over year, with significant allocations going towards staffing, event travel, and infrastructure. Public university programs, in particular, have reported six-figure budgets. The average salary of a collegiate program director also saw an annual increase exceeding inflation.
Despite these robust financial dynamics, recruitment pipelines for new and existing programs seem inconsistent with the growth, which could lead to long-term vulnerabilities. Therefore, understanding the money flow in esports is as critical as understanding student recruitment and retention in traditional educational or athletic programs.
The Flow of Money in Esports
So where does the money come from, and where does it go?
The core financial infusion in college esports comes from a few key sources including university budgets, gifts from donors, and sponsorship deals (Illinois State University recently announced that it has signed an agreement with PIVOT Agency to secure a naming rights deal for its new, $5.95M USD, Redbird Esports Complex per THE ESPORTS ADVOCATE and James Fudge) .Traditional athletic revenue streams like merchandise sales, ticket sales for events, and individual program fundraising events are still mostly uncommon and financially unimpactful.
The spending largely goes towards staffing, event travel, and infrastructure. An estimated $27,000,000 in scholarship was distributed over the course of a year through competitive programs, indicating that a significant amount of money is funneled into esports programs to attract and retain talented players. An increase in program budgets suggests that universities are recognizing the value and potential ROI of these investments.
Facilities are a major aspect of this spending. The average esports facility has 20-25 stations, and many smaller programs are working on expanding both size and capacity. Large public universities are investing heavily into million-dollar facilities. These facilities are not only used for competitions but also offer engagement opportunities for students not directly affiliated with the program, thereby influencing student engagement metrics.
Sustainability and ROI
While the spending patterns reveal the priorities of esports programs, the question of sustainability and ROI remains pertinent. The esports programs are now integrated into campus affairs, academics, and recruitment, all of which can potentially drive higher community involvement. Successful programs will continue to engage and retain students and thus demonstrate positive returns on the investments.
It goes without saying that esports can play a pivotal role in driving enrollment and retention which directly affects their bottom lines. With the growth and mainstream acceptance of esports, universities can use their esports programs as a differentiator and a draw for both prospective and existing students interested in gaming and technology.
If you take anything away from this article, let it be this: collegiate esports are not just a game; they are a strategic economic unit in higher education.
With a comprehensive understanding of the financial currents of the industry, professionals and administrators in higher education can position their programs for greater economic success, enhancing not only their programs, but the overall health and vibrancy of their institutions.