Competitive gaming attracted substantial investment on the expectation that it would become the next major spectator sport, with the revenue to match. The audience grew. The revenue did not keep pace, and a correction followed.
What went wrong
The audience watches for free, mostly on platforms that share little revenue with teams. Sponsorship, the main income source, depends on marketing budgets that shrank. Franchise fees for closed leagues cost teams more than the leagues returned.
Team valuations were built on growth projections that assumed a monetisation path that never materialised.
What survived
Publisher-run competitions for the largest games, where the publisher subsidises the scene as marketing for the game itself. That is sustainable because the game is the business and the competition is advertising.
A smaller number of teams with genuine fanbases and diversified income – content, merchandise, events.
And the grassroots layer that predates the investment and continues regardless.
What contracted
Teams that existed on investor money. Leagues without publisher backing. Salaries, substantially.
The comparison that misled
Traditional sports earn from broadcast rights sold to networks that sell advertising. Esports is watched on platforms where the advertising goes to the platform. The revenue structure was never analogous, and the projections assumed it was.
The realistic picture
A permanent competitive scene around the biggest games, funded by their publishers. A viable niche for a small number of organisations. Not an industry the size of the projections, and better for it.