From my own knowledge, irrespective of any gaps in that knowledge I believe that organisations that form an esports team are in it for the long game.
Branding
- Creating a brand through esports and a fanbase that will buy merch and other items endorsed by the org which will generate sales revenue and therefore gross profit after taking away cost of sales.
Cashflow
- Organisations like G2 burn a lot of cash to buyout players and offer top salaries for a competitive esports team in a given game, doing this keeps them at the top of people's tongue and therefore brand value increases through word of mouth promotion which if you did marketing, know that it is the most effective concept spreading the hype of a product in our case the players and their domination in tier 1 events.
Capital Injection 1
- Sponsorships are becoming more apparent as esports garner record breaking viewers every event. Having a team like G2 for e.g. in every esports title from LoL to CS to VAL offers more exposure for sponsors.
Capital Injection 2
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Organisations and rich atheletes in Sports like NFL, Football etc... invest into the top esports team and become a limited shareholder. This is called private limited entity, where the ownership in shares of an esports org is privately traded (buying and selling) for a lump sum.
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Example: Carlos owns 100% of G2, because of G2s success and brand value with multiple revenue streams, Elon Musk decides to invest 200m for 60% stake of ordinary shares. Carlos should he accept the offer privately would be 200m richer but with 40% ownership stake.
How Elon Musk profits?
- Elon with 60% share waits until G2 is big enough to gain a 1bn valuation on the stock exchange for publicly traded shares. Once it reaches a massive valuation larger than the investment made. Elon can sell all or some of his 60% stake to the public (people like us).
Profit?
- 60% stake of Elon for 200m becomes 800m once it is publicly traded, however its not always that easy in business and investments.
TLDR: Read the whole thing. It's very informative but brief at the same time. Keep bumping it for visibility.
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