While Counter-Strike: Global Offensive is breaking one record after another for the number of concurrent players online (recently, it hit 1.4m), the esports industry is experiencing a noticeable overall decline. People on social networks tend to say that esports is dying, and very soon, we will only have to sigh nostalgically about how bright and wonderful everything was. CS.MONEY Blog decided to look into the current state of affairs: is esports really dying?
Esports had a terrible start of 2023
There’s one huge and notorious website dedicated to the economic side of esports, The Esports Advocate. They posted a separate block of news highlighting layoffs in esports in 2023. In a little over two months:
- BeyondTheSummit, one of the most respected studios and tournament organisers in Dota 2, closed.
- The North American organisations The Guild and eUnited ceased to exist.
- Many organisations (including Team Liquid, FaZe Clan, OpTic Gaming, OG Esports) have laid off a significant number of employees.
- Shares of FaZe Clan, the esports flagship org, have dropped by 94% since the start of trading on the NASDAQ stock exchange.
- The Overwatch League has big problems, and the owners of some teams are directly thinking about closing clubs even despite significant investments.
This is not a complete list of all the news. It’s also worth mentioning that some large clubs left relatively popular disciplines, such as Apex Legends and Rainbow Six: Siege because they felt the lack of developers’ support. The situation doesn’t look well. Let’s distinguish two groups of reasons that led to such a scenario.
External reasons of esports’ decline
Esports is a business that is largely built on advertising. And even it’s not the only source of income, it is still significant and cannot be ignored. Now, the world economy slowed down; some say it’s in recession, in a crisis. Global companies primarily seek to reduce costs, and advertising budgets are often the first to cut. Less advertising from big corporations means less money in esports.
Secondly, FTX’s collapse as one of the largest cryptocurrency exchange places caused some significant damage. It directly sponsored a number of major esports teams and tournaments, but in addition to direct damage, this scandal also damaged the entire cryptocurrency market, so esports, in general, will get less money from it.
Finally, inflation has jumped in many countries, meaning ordinary people have less cash. And even if merchandise sales share isn’t a large percentage, it still is.
Internal reasons are more complicated
Unfortunately, the current situation in esports is wider than the global economy’s problems. Esports orgs and managers themselves have made some crucial mistakes, trying to profit in the short but not long.
One of the main mistakes was the overheating of the salary market. If you look at the rumours around VALORANT or League of Legends, you might get stunned by some players’ ridiculously high salaries. George Geddes, a notorious esports journalist, claims that the average monthly wage of a tier-1 player in VALORANT in North America is from 10 to 30 thousand dollars. Multiply this by five, add support staff salaries (manager, coach, analyst, psychologist), and bootcamps… It turns out to be quite an impressive amount.
One of the possible explanations is that, at some point, large teams stopped counting expenses because of the huge investments they got. If you recall, the investment boom in esports took place about five years ago. And now, when the time has come to see the first clear financial results and understand how, for example, clubs could be profitable, the puzzle doesn’t really add up.
Take, for example, FaZe Clan. In 2021, the club earned a little more than $50 million. Is this enough for an org that had around 50 players and 35 streamers at that time? And this is not counting employees and staff. Forbes predicts that FaZe Clan will run out of money before the end of 2023. And we are talking about one of the most popular esports brands in the world.
Here, we should add the reputational damage to esports dealt by Activision Blizzard and their recent actions. At one time, the company dramatically raised the stakes by selling out slots in its Overwatch League for tens of millions of dollars. After accusations against the CEO of Activision Blizzard, Bobby Kotick, all sponsors left the league, and several teams are seriously considering taking collective action against the game developer for unfulfilled promises.
All these management-responsible mistakes, combined with a possible global economic recession, create a negative background for sponsors and investors. Who would want to give money to an industry with no sustainable financial model? A bubble that esports managers inflated is now close to popping, and this will be an unpleasant surprise for many ordinary employees who may have to look for new jobs.
What about us? Will CS:GO die soon?
With all the esports horrors of our industry, Counter-Strike: Global Offensive currently has one of the healthiest ecosystems, surprisingly and funnily enough. Valve calmly allows third-party organisers to hold tournaments; teams can earn a lot from sticker sales if they make it to a Major. Also, the top teams receive their share of the revenue from the largest commercial leagues.
At the same time, the game is on the rise in terms of online player numbers and tournament views. Each of the two Majors in 2022 collected over 68 million hours of views, which is a very decent figure. Moreover, with the potential CS:GO update to Source 2, the hype will grow and attract both old and new players.
CS:GO is an island of tranquillity in the world of esports covered by a huge storm. For this reason, Counter-Strike enjoyers will have esports for a long even if some things in it change under the pressure of circumstances.
At the same time, Valve doesn’t plan to abandon CS:GO. Recently, they added a new Revolution Case to CS:GO, skins from which you can already buy at CS.MONEY! Just click the link and update your inventory now.
