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When talking about the structure of esports as a business, sponsorship deals and media rights are two of the top revenue generators in the industry. According to esports data company Newzoo’s 
projection, the global esports industry generates $1.1B USD total revenues, including sponsorship revenue $456.7M (+34.4%), and media rights revenue of $251.3M (+41.8%).
On June 20, Tencent Holdings and the Hainan government held the Tencent Global Esports Annual Summit in the Hainan Boao Asia International Conference Center. Multiple Chinese and Western leaders from esports-relevant companies were in attendance, and the world first witnessed a number of notable new partnerships and the announcement of a $145M governmental esports fund.
Beyond that, Tencent detailed that it earned $66M from media rights and another $64M from sponsorship deals related to its esports operations in the first half of 2019. In addition, the tech conglomerate highlighted the importance of artificial intelligence in esports, and competitive gaming’s cultural significance in China, and along with other key insights.
Below are highlights from some of the speakers who addressed the gathering on June 20:
Esports is an ‘Excellent Business’
Pictured: Dai Bin, vice general manager of Tencent Interactive Entertainment Market Department. Credit: Tencent Holdings.
Dai Bin, vice general manager of Tencent Interactive Entertainment Market Department, detailed several Tencent milestones that occurred during the first half of 2019:
“Esports has a sustainable business model and flexible development space, which makes esports an excellent business.” Bin explained that, in the first half of 2019, Tencent Esports has generated ¥460M RMB ($66M) revenue in media rights, and ¥440M ($64M) in sponsorship deals of all Tencent related esports tournaments.
“In the whole year of 2018, Tencent Esports received ¥370M RMB ($54M USD) media rights revenue, and ¥280M ($41M) in sponsorship deals from all Tencent related esports tournament,” he added.
Between 2018-2019, the Chinese esports industry has seen multiple non-endemic brands and companies enter into Tencent’s esports empire (Tencent Games, Riot Games, and TJ Sports), acting as sponsors, partners, or even team owners. This is especially true for two of the major franchise-style tournaments in the region: the League of Legends Pro League (LPL) and King Pro League (KPL).
The LPL is China’s top League of Legends tournament, run by TJ Sports , a joint venture established by Tencent and Riot Games . The KPL is Tencent’s top competition for its mobile esports title, Honor of Kings, and is fully operated by Tencent Games. Both these franchise-style competitions include franchise slot fees and sponsorship revenue-sharing with league teams. Most notably, Nike has signed a four-year exclusive apparel sponsorship deal with TJ Sports, creating exclusive apparel for teams, their staff, and stage talent.
At the summit, Jin “Bobby” Yibo, co-CEO of TJ Sports, announced that the LPL will open bids for one to two new franchise spots in 2020, and also will begin seeking partners for the 2020 League of Legends World Championship. Sources told The Esports Observer that the bid price of a spot would be a minimum of ¥80M RMB ($11.63M), and that the buyer would need a strong reputation and business background.
Esports is a Vehicle for Expanding Chinese Culture to the World
Pictured: Cheng “Edward” Wu, vice president of Tencent / CEO of Tencent Pictures. Credit: Tencent Holdings.
Cheng “Edward” Wu, vice president of Tencent / CEO of Tencent Pictures, highlighted the impact of esports on Chinese culture and how it is shining a positive light on China throughout the world:
“In the past three years, the most significant finding in esports was that esports has become an independent industry in the country,” he said. “We believe the core value of esports is not just a sport, but also a new culture carrier in China.”
In order to achieve the goal that esports to become a new culture in the next two years, Tencent Esports will develop the industry in four directions:
- Partner with local governments, to combine esports and Chinese cities.
- Help improve the synergy between multiple esports sectors in the ecosystem.
- Improve the talent training system in [the] esports industry.
- Increase investments in combining new technologies and esports.”
‘Populization,’ Globalization, and ‘Sportlization’ Has Brought Esports to a ‘New Era’
Pictured: Wei Jizhong, former secretary general of the Chinese Olympic Committee, honorary life vice president of the Olympic Council of Asia, honorary life president of the Federation Internationale de Volleyball (FIVB). Credit: Tencent Holdings.
Luminary Wei Jizhong, former secretary general of the Chinese Olympic Committee (among other honorary titles and accolades), had this to say on esports:
“Today, esports has entered a new era. The most significant symbol is that we start to differentiate what is esports and what is just playing videogames. So that esports has developed its own field.”
He added that esports follows the same patterns as sports; massive amounts of global fans, players, and audiences – noting both the popularization and globalization of esports. “‘Sportlization’ means the esports needs a legal leader/body to set up [a] unitive regulation and standardization, such as players’ registration and management system, and referee decision system,” said Jizhong.“Those three elements (populization, globalization, and sportlization) will bring esports to the next level.”
Esports is the Best Arena for Practicing Artificial Intelligence
Pictured: Yu Dong, deputy director and distinguished scientist, Tencent AI Lab, Seattle. Credit: Tencent Holdings.
Yu Dong, deputy director and distinguished scientist, Tencent AI Lab, Seattle, discussed the importance of AI in the future of Tencent esports and how his team is working with Honor of Kings developers to enhance the game in a variety of ways for its massive community:
“Esports and AI both entered new eras in the past few years. In fact, the combination of AI and esports can generate unlimited possibilities and opportunities. We believe, for normal players, AI could help players improve their gaming mechanics. For professional players, AI can become [a] personalized coach and data analyst. For [the] esports audience, AI can become the shoutcaster and commentator.
“For a long time, Tencent AI Lab has partnered with Honor of Kings developer team. We are developing Honor of Kings customized AI and trying to adopt it to serve the Honor of Kings community in many areas.”
At the summit, Yu showcased a demo of an AI shoutcaster, which could be used to commentate an Honor of Kings match.
Now is the Best Time for China Esports
Pictured: Ren Yukin, chief operating officer of Tencent Holdings. Credit: Tencent Holdings.
Finally, Ren Yukin, COO of Tencent Holdings, talked about the milestones China has witnessed and been a part of in esports, and how bright the future looks for the sector in the region:
“Today, it’s the best time for China esports to grow itself. After 20 years [of] development, China has already generated 350 million esports users. Our Chinese players had won golden medals and let [the] Chinese national flag rise at 2018 Jakarta Asian Games. What’s the future of Chinese esports industry?”
Yukin identified the following three opportunities that Tencent believes in:
- Governmental policy provides strong improvement to the esports industry. The Chinese government are fully supporting the esports industry in the country right now. In the past year, Tencent has hosted over 12K esports competitions in 413 Chinese cities, thanks to the government’s support.
- A cognitive change of esports in Chinese society. Yukin attributes this to events like the Jakarta Asian Games and League of Legends-related tournament series. According to Tencent’s statistics, over 89% of users believe esports is a normal professional sport.
- The gradual maturity of the esports tournament system. Yukin stated that Tencent believes the core of the esports ecosystem is the tournament. After years of exploration and accumulation, the esports industry has reached a breaking point. The tournament system and tournament organizer are becoming more scientific, and the broadcasting technology, team construction, tournament sponsorships, and many other constructions are becoming more standardized.
“Esports has broken through the pure concept of competitive gaming, and become an emerging industry with great business value and culture influence, just like soccer and basketball,” concluded Yukin.
