After years of trial and error, it looks like the esports industry has finally found a way to monetize it: with Saudi Arabian money.
Over the past two decades, esports companies have thrown a lot of spaghetti at the metaphorical wall of profitability, and most of it has failed to stick.
First, there were streaming payments for esports teams and media rights deals for esports leagues with Twitch, which dried up a few years ago, then there was esports companies dabbling in cryptocurrencies and gambling money, investment sources that plummeted during the crypto winter of 2022 and 2023.
At the same time, attempts by some esports organizations to go public have failed, and once-enthusiastic institutional investors from the venture capital and private equity worlds have seen interest wane. While brands and their marketing budgets have been a relatively stable source of revenue for esports companies, this side of the business has not grown as rapidly as many expected, especially with non-endemic advertisers retreating from the sector in 2023.
As of 2024, one of the few institutions funding esports is Saudi Arabia’s Public Investment Fund, which is now pumping money into the industry from all directions: There’s esports league operator ESL/FACEIT Group (EFG), which Saudi Arabia acquired for $1.5 billion in 2022; the upcoming Esports World Cup, which launched last year as Saudi Arabia’s tournament Gamers8; and a gaming and esports sector for the Saudi Arabian planned city of Qiddiya, among other investments. (Editor’s note: ESL/FACEIT Group paid for this reporter’s travel and lodging expenses at DreamHack Dallas, an EFG-sponsored event on June 2.)
“What we’ve tried to do over the last few years, and especially over the last year, is let the world know that the Kingdom of Saudi Arabia, Riyadh and Saudi Arabia are very serious about esports,” said Ralf Reichert, CEO of the Esports World Cup Foundation, a nonprofit founded by the Saudi government. “We have a proven track record with EFG. The acquisition worked, we’re staying true to our original mission, and Gamers8 is the vanguard of the Esports World Cup.”
So far, it seems like nearly every player in the esports industry has gotten the message: For publishers, tournament organizers and esports teams, securing a piece of the Saudi Arabian pie has become an obvious, and according to some observers, necessary, move to survive the challenges of last year’s esports winter.
“Whether we like it or not, I think this is necessary given the current state of the esports industry. It wasn’t a great place even before the esports winter. Financially, some teams are struggling to show clear revenue scales, which has led to the current situation where investors are pulling out and people are being forced to scale back,” said Grant Rousseau, global director of esports and operations at Team Falcons, a major Saudi Arabian esports organization. “Something like this is a huge boost to the industry.”
Saudi Arabia is not the only country to invest heavily in esports in recent years: tournament operator Blast, for example, was kept afloat in 2023 by a €12.7 million investment round led by the Danish Export Investment Fund and turned profitable this year. US state governments such as North Carolina have also set up grant funds for the esports industry in recent years.
“Compared to other sports, grassroots sports all the way up to professional sports, it’s heavily funded by governments around the world, and people underestimate the involvement of government funding,” Reichert said. “And this is probably the first time it’s happened on such a scale in esports, so it’s actually a good thing, not a bad thing at all.”
But of all the countries currently pouring money into competitive gaming, Saudi Arabia’s commitment to the sector is by far the largest: Savvy Games Group, a Saudi Arabian subsidiary of EFG and other Saudi gaming holding companies, has reportedly allocated $38 billion to growing the country’s presence in gaming and esports.
Saudi Arabia’s huge investment in esports poses some challenges for the esports companies that have signed on so far. As more money and attention from esports is directed to Saudi Arabia, esports fans are naturally asking the extent to which their favorite teams and leagues are aware of and supporting the human rights abuses taking place in the country. (Watch for our feature article on this subject later this week.)
To some extent, the same concerns hang over traditional sports. As Saudi Arabia expands into golf, for example, prominent athletes in the sport have acknowledged the ethical issues that come with its incursion, including Phil Mickelson, who in 2022 called the Saudi government a “horrible bunch of motherfuckers.” But money talks: Before making that statement, Mickelson had already signed a reported $200 million contract with LIV Golf, the Saudi Arabian rival on the PGA Tour.
Leaders of many prominent esports organizations and leagues are concerned about ethical issues, but those concerns pale in comparison to their broader existential anxiety following the difficulties of 2022 and 2023. After years of trial and error with the backing of investors from elsewhere, Saudi Arabia has finally handed them a blank check and they’re running with it.
For beleaguered esports companies, the choice is not whether to accept Saudi Arabian money or not, but whether to accept Saudi Arabian money or cease to exist altogether. With this in mind, it is no wonder that some executives in the industry are embracing the vision with enthusiasm.
“I love this kingdom and I love the direction we’re heading as a kingdom,” said Mike Milanov, chairman of the Qiddiya City Gaming & Esports Advisory Board. “So I just want to get this word out in the right way.”
