Featured image: Microsoft Designer
The heart of the esports ecosystem is prize pools. From the grassroots to international events, the goal of the events is to discover the best players in their discipline, engage the games’ fans, and also market the titles. With the larger esports events, the topic of prize pools is one of fascination to the fans, as they vary from size of the prize pool and the events’ quality. The bigger the esports competitions, the more likely it is to have notable sponsors and major organizations competing.
The announcement of prize pools by tournament organizers has now become a thing to help market the tournaments. The Esports World Cup, which was a multiple-title event, did that with the marketing of their $60M prize pool, split across 21 games and the overall club championship. Prize pools are an indicator of growth or decline in the esports ecosystems health. An increase represents optimism while a decrease will call for concern on the delay or lowering of the prize pool.
The Prize Pool Payment System
Photo Credit: Microsoft Designer
Prize payment delays have become a crucial topic in discussion as players and teams are experiencing delays when it comes to receiving prize money. When payments are not delivered on time, it dents the tournament organizer’s reputation. There have been some notable examples of this issue, which include the Galaxy Racer’s 2023 HER Galaxy event, Nerd Street’s VALORANT competitions in 2022, and Women’s Car Ball fiasco. In an interview with Han Park (CEO of Payment Labs) for Esports Insider he breaks down the problem into three points: the trust issue, the process issue and a lack of education.
For the trust issue, Park explained that it often stems from the net terms in business practices related to receiving funding for publishers and sponsors or running events. The announced prize money may be secured but the business process of paying on net terms on invoices for prize money may be months after the competitions which makes it look like a delay in payments. The issue is that proceeds provided by sponsors or publishers are in some cases used to fund the cost of the event as well as the prize pool. This means it is vital for all parties involved to meet delivery on net terms in time, to avoid complications causing delays that could affect the event and prize pool.
The second issue is the process of paying out players. Paying a lot of individuals in one batch to get all the prize money out can be challenging for each of the players. This issue happens when there are new players featuring in esports competitions and so adding them to the regular returning names who are already a part of the tournament’s payment process. When it is new winners from new games or new superstars from the amateur scene who are getting paid for the first time it becomes a lot of work because the process takes time.
The third point is the education of the payee to ensure that the payment transaction is smooth. Competitors owe it to themselves to be well informed with the steps to getting paid by different entities in esports. This also includes what information is needed by the tournament organizer and the players being aware of their country’s tax laws on prize winnings. Tournaments organizers need to be educated on the legalities of paying out players, oftentimes which are based across the world. Park highlights that the grassroots organizations are good with running competitions but they don’t understand the business and administrative aspects of doing these events. They have to put in all the legal compliance and financial controls to do it properly.
Going forward, esports tournament organizers are to look into ways to make payments simpler for players; from handling player transactions to handling legal hurdles that occur when dealing with prize pool money from the competitions. That way players and organizers do not have to fight that battle each time.
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Written by Jeffrey Osei-Agyeman
