DraftKings’ E-Sports Sponsorships on Revenue Diversification and Brand Visibility

Jun 11, 2024 | Stock Analysis

In the last couple of years, one of the most awe-inspiring trends in sports and sports betting has been the rapid growth of the e-sports industry and its incredible mix of gaming and sports that’s been watched by hundreds of millions of fans all over the world. The global e-sports market is expected to grow at a Compound Annual Growth Rate (CAGR) of 23.5 per cent over the next three years, reaching $1.61 billion by 2024, thus attracting many big names from various industries. One of them is the US fantasy sports and sports betting pioneer DraftKings. In late 2021, DraftKings CEO Jason Robins noted that the firm expanded into e-sports sponsorship to diversify revenue streams and fully leverage its brand’s significant reach and visibility. We discuss the biggest e-sports player in the US and its partnerships with the professional world’s largest e-sports giant, ESports Entertainment, which has witnessed unparalleled success over the last year and a half.

    DraftKings’ E-sports Sponsorships and Revenue

    E-sports sponsorship, too, are proving a lucrative venture, contributing a ‘meaningful portion’ of DraftKings’ revenue. e-sports is among the core growth opportunities for the company, especially during 2020 when live sporting events ground to a halt due to the COVID-19 pandemic. Sponsorship of high-profile e-sports teams and events among the most popular league and tournaments has not only translated into a boost in the company’s revenue, but also increased player spend and hours spent on DraftKings’ site. Contracts with elite e-sports organisations such as FaZe Clan and ESL have facilitated a broader reach to the younger, tech-savvy demographic, which not only spurs e-sports bets but also subscriptions.

    Brand Visibility and Engagement through E-sports

    Sponsorship of e-sports can increase DraftKings’ brand visibility through a number of avenues such as exclusive marketing rights during live-streamed e-sports events, branded in-game content and even customised e-sports tournaments. Being ingrained in e-sports culture where the community has high engagement means DraftKings will gain sustained visibility and increased retrospective recall. DraftKings also relies on social media tie-ups and influencer partnerships to increase reach and leverage other aforementioned engagement metrics.

    Market Growth Opportunities for DraftKings

    The growth of the e-sports market, with rising numbers of viewers and audience engagement, presents significant new business opportunities for DraftKings to tap into, given its ability to monetise the audience metrics to expand its market penetration. Reports indicate that global e-sports audience is estimated to grow to 577 million by 2024, which represents both a larger addressable market for DraftKings as well as new ways to penetrate deeper into the market. Additionally, shifting monetisation models such as digital merchandise sales and in-game advertising in e-sports certainly creates avenues for DraftKings to tap into with their ability to generate new revenue streams.

    Diversifying Revenue Streams and Future Opportunities

    One reason why e-sports are so important to their strategy is that they diversify the company’s revenue streams. This is linked to two factors. Firstly, traditional sports rely on seasonality. E-sports, on the other hand, are played all year round, providing a continuous stream of revenue. Secondly, e-sports are inherently digital. This means that DraftKings can offer a range of new betting options, as well as real-time analytics. This, in turn, opens up revenue streams that didn’t exist before. Looking to the future, as new technologies such as VR and AR become increasingly common, DraftKings can leverage its partnerships with both e-sports teams and e-sports streamers to provide next-gen betting experiences. By having these partnerships in place, they will be ideally positioned to offer upgraded betting advice and live streaming for next-gen experiences as they emerge.

    Benefits of E-sports Sponsorships

    In contrast to traditional sponsorships of sports, e-sports sponsorships encourage distinct benefits: traditional sports have a longer history of fans and have their own sincere media following, while e-sports have a much younger global appeal and have high engagement rates. But perhaps more importantly, e-sports sponsorships are generally more cost-effective with a higher ROI than most traditional sports sponsorships. This is especially true with regard to user engagement. DraftKing has exhibited its keen awareness of these subtle differences, adapting a strategy that has user engagement in mind and catering it specifically for each segment to optimise the return on investment.

    The Future of DraftKings and E-sports

    With a future that looks good for the e-sports sponsorships, the projections for DraftKings are also promising because the e-sports market is likely to expand. Through more sponsorship deals and creative marketing, DraftKings can continue their occupancy within the sports market by utilising the growing e-sports arena as an effective platform to market their brand to consumers. As e-sports continue to evolve and gain momentum with mainstream audiences through better technological advances and gaming systems, as well as continuous positive publicity, the future for DraftKings’ branding also looks good. Because of the sponsorships, their sports betting service and vision for delivering a seamless gambling experience will be recognized as a forward-thinking, flexible brand amidst a sports betting landscape that continues to change and challenge.

    But the DraftKings’ shift into e-sports sponsorships is also about diversifying revenue streams and increasing brand visibility as the company stakes out a future as a digital entertainment business. If the e-sports market explodes, as we suspect, DraftKings will find itself well-positioned for the future.

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