How the Business of Video Game Streaming Works

A decade ago, if you’d told someone that you could make a living from being a gamer, most people would have laughed at you. Fast forward to today and the internet is awash with people that have made gaming their full-time job.

There are two main ways that they can do this. The first is to take part in video game competitions known as eSports. The people that do this are often referred to as “eSports athletes”. These players operate in a similar way to athletes in traditional sports, joining teams and taking part in leagues and tournaments.

They earn their crust through the prize money from finishing in a high position, appearance fees, and sponsorship and endorsement deals.

The second way professional gamers can make money is by becoming a “streamer”, a word that has been used more and more to the point that now practically everyone knows it.

What is a Streamer?

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Streamers are people that broadcast their gaming sessions over the internet. They usually overlay their footage with a live video feed of themselves so that the audience can watch them as they play.

Typically, they are lively people with natural presenting skills that entertain their audience as they play. This usually involves answering questions, taking requests for things to do in the game, and narrating their actions, often in a very loud and animated way.

They commonly use a specialist setup composed of a mix of different hardware and software to make all of this happen. According to PokerStars, those that partake in online poker streams will typically use a Twitch account, a high-speed internet connection, software like OBS, and at least a webcam and microphone. The tools used for other games will be similar, though they may also need a capture device for playing console games.

How Big is the Video Game Streaming Market?

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While there are certainly many exceptions to the rule, there is a general generational gap between those that watch video game streamers and those that don’t. Ask someone in their fifties about the prospect, and they’ll likely look at you confused, unable to understand why you would want to watch someone else play a video game.

But ask someone in their twenties or thirties, and it becomes a very different story. There are around 1.2 billion people that enjoy this type of content around the world, with the largest market being in Asia, followed by Europe.

According to Mordor Intelligence, 17.9 million hours of eSports content were consumed in 2018, which has since grown at a compound annual growth rate (CAGR) of 9%. At that pace, nearly 23.2 million hours of online video game streaming will be watched in 2021.

But that only scratches the surface. In the second quarter of 2019, Twitch viewers watched 2.72 billion hours of content on its platform, while YouTube saw its users consume 735.54 million hours of live content in the same period.

These figures exclude the Chinese market, which has its own online streaming platforms. Exact figures are hard to find, but one of the biggest, Huya, reportedly surpassed 100 million monthly active users by the end of 2018, a figure that is similar to Twitch. In which case, the number of hours consumed in Q2 of 2019 is likely to also be similar.

How Do Video Game Streamers Make Money?

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Supporting such volumes is an expensive ordeal, and streaming platforms have to find ways to cover their costs for hosting the content.

Streaming is not much different to the channels of people like Scotty Kilmer who create video content for YouTube. Rather than having a single income stream, most professional games diversify their revenue to increase their earnings and spread their risk.

The first source they have comes directly from the sites that they stream on. These platforms, such as Twitch, that host the video content make money by selling ad space and then share this with their most popular and engaging content creators.

Streamers will also agree sponsorship deals with brands directly. This usually means that they receive the payment directly so don’t have to share it with the streaming platform. In exchange, they usually have to show and/or talk about the sponsor’s product or service during the stream or undertake product placement by wearing branded clothing, positioning products strategically somewhere on their set, or eating/drinking the product.

Many of the most successful streamers also produce their own ranges of merchandise. Using sites like Printify and Redbubble, streamers like Smexi and Karl Smallwood market their wares to their audiences as a way to generate additional income and help to create a community among their followers.

Other streamers will also give viewers an opportunity to donate or join a “VIP” service like Patreon. Some will offer just their gratitude for donations, while others will give exclusive content, the opportunity to chat with the streamer, and early access to non-live videos through these VIP services.

The most elite streamers with the largest number of follows are sometimes paid by streaming platforms to broadcast their content exclusively on just one platform. Most of the platforms have started to sign these deals, though Twitch has been one of the most aggressive. According to Gamesindustry.biz, its list of exclusive content creators includes Brett “Dakotaz” Hoffman, Jaryd “Summit1G” Lazar, and Josh “JoshOG” Beaver, all three of whom signed multi-year deals in May 2020.

The Future?

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The monetisation methods used by streamers and streaming platforms is the same as those used by producers of traditional television shows and movies. Since the success of Star Wars, movies and TV shows have been accompanied by merchandise deals, while product placement is a big deal in many of the biggest productions.

The only difference is the medium through which this content is consumed. Instead of a traditional TV network or a movie theatre, it is broadcast live over the internet the preferred information medium for consuming content.