Following last week’s release of esports team valuations, we wanted to explore — how do esports teams make money?

A large majority of teams are privately held or subsidiaries of conglomerates, allowing little to zero visibility.

However, as part of the merger transaction between @Luminosity and @WeAreEnthusiast, the financials for Luminosity Gaming were made public.

Below are a few takeaways from the public filings.

1/ Luminosity Gaming was profitable in 2016 and 2018. It generated a loss in 2017.

2/ More than 60% of 2018 revenues were derived from streaming. This increased from 23% and 10% in 2017 and 2016, respectively.

A large majority of “hours watched” came from a single title, Fortnite.

3/ The company’s streaming contract expired in Q1 2019. As a result, the company did not generate any streaming revenues for the quarter.

This loss of revenue accounted for the entirety of the company’s decline in revenues versus 2018.

4/ Prize revenues vary significantly from year to year, totaling C$936K, C$1,153K, and C$641K in 2016, 2017, and 2018, respectively.

5/ Sponsorship revenues and merchandise sales decreased from 2016 to 2018. The company attributed elevated 2016 sales to its performance in CS:GO.

However, merchandise sales increased in Q1 2019. Sponsorship sales were temporarily placed on hold as part of the transaction.

6/ Buyout revenue is “earned through the sale of leasing of players or teams”.

For example, the company recognized a material gain in 2016 upon the sale of one of its esports teams.

7/ The company was recently contracted to manage the Vancouver Titans of the Overwatch League.

The company generated C$113K in management revenues for Q1 2019.

We will perform additional analysis, including an analysis of expenses, if there is interest from the community.

Would you be interested in learning more? Let us know!

Enthusiast Gaming, parent company of Luminosity, is a 2.0% weighting in the Roundhill BITKRAFT Esports Index.

This is not a recommendation or offer to buy or sell securities.

For more information on the Index, please visit: https://www.roundhillinvestments.com/nerd-index