Esports team organizations are at a crossroads. While the esports industry as a whole has been exploding in recent years, with game publishers earning the lion’s share of available revenue, teams have been left behind.

Now, they have to find new ways to make their products profitable. “If we want to be able to generate a competitive advantage from a revenue perspective that actually leads to profitability, not just surviving, you need to be able to find ways to monetize up and down every level of the pyramid of your fans,” said Noah Whinston, CEO of Immortals , the organization behind Overwatch League team Los Angeles Valiant and Brazilian Counter-Strike: Global Offensive team MiBR .

Whinston, along with founder and CEO of compLexity Gaming Jason Lake, President and COO of Team Envy Geoff Moore, and CEO and founder of Kinguin Viktor Wanli, were present at the RSR Partners x HIVE conference in New York on Sept. 28 to share their insights into the future of esports organizations and how they can make themselves profitable in the long term.

[perfectpullquote align=”right” cite=”” link=”” color=”” class=”” size=””]”You need to be able to find ways to monetize up and down every level of the pyramid of your fans.”[/perfectpullquote]

It all starts with investors, Moore said. “From an investor’s standpoint, they’re looking for, ‘How can we capture, how can we enhance our current revenue streams? Can we create new ones?'”

For the representatives present at the event, traditional sports models were at the front of their mind when it comes to how to attract incoming investors. “Within the last year, maybe within the last two years,” Whinston said, “there’s been a push for more sophisticated business model around what a team is supposed to do and what a team is supposed to be. If you look at Activision Blizzard’s Overwatch League creating localized team model, suddenly teams have gone from this purely digital, almost [multi-channel network]-esque model and value delivery system, into something that is much more similar to what you would see from a traditional sports team.”

With that comes the need for activations within each teams’ local market. With teams like Team Envy and compLexity building dedicated esports facilities for fans to visit—and be sold to—Moore believes that he and his colleagues are building towards something similar to a sporting attraction that already has a worldwide appeal: soccer.

[perfectpullquote align=”left” cite=”” link=”” color=”” class=”” size=””]”We’re really creating clubs like in the European soccer model.”[/perfectpullquote]

“There’s also a local aspect that’s very important, where you can see your fans in person on a consistent basis,” he said. “We’re really creating clubs like in the European soccer model. I think that’s what we’re looking for, is how you can take these different games that you play in and coalesce them into one club model, because it’s really a lifestyle club.”

Once the fans are directly targeted within their local markets, it becomes all about monetizing them—something Whinston believes teams are not currently capable of doing well. “The other thing that not a ton of people will talk about in esports, is that for most esports teams and most esports organizers, the vast majority of the revenue that we generate right now is B2B. We don’t really monetize fans and end users correctly,” he said.

“There are revenue streams that allow you to monetize committed fandom that are significantly more scalable,” Whinston added. “Your most committed fan, with high earning power, is going to buy better seats at your stadium, they’re going to buy season tickets, they’re going to buy multiple pieces of merchandise and concessions every time they come, maybe they’ll buy a box if they’re a corporate partner and want to entertain clients there. That’s a massive amount of revenue generated off of one person that cares about your team, far more than any organization is generating off one of their individual fans right now.”

The evolution of monetization processes is coming simultaneously with the improvement of the lives of players. For Lake, that move forward represents what he calls “Esports 3.0”.

“Esports 1.0, gamers lived in their mom’s basement,” he said. “They competed with their teammates online, and maybe they saw them once or twice a year at a CPL event back in the day. Esports 2.0 arguable could be broken down into the team house phase.”

[perfectpullquote align=”right” cite=”” link=”” color=”” class=”” size=””]”That’s a massive amount of revenue generated off of one person that cares about your team.”[/perfectpullquote]

In esports, team houses are buildings in which players live and practice, creating an environment, at least according to Lake, that can cause a team to “fall apart because [the players] are all living with their coworkers.”

While many teams still use the team house model, transitioning over to the esports facility model in which players live elsewhere and commute into their practice areas provides opportunities for local activations, whether they be brandings on the walls, a merchandise store, or simply ticket sales for events and meet-and-greets at the location.

Moore doesn’t have to look far to find the exact audience he and his organization are trying to reach. In fact, a primary source of influence for his business plans comes from someplace close to home:

“I’ve got four kids from 18 to 10, and my wife and I both worked in traditional sports all our lives…and our four children all played traditional sports. And none of them have ever watched one second of traditional sports on live TV. Not one. They’re all on their phones, iPads, they’re directing their entertainment consumption, and they don’t see traditional sports as entertainment. They see gaming as entertainment. That’s, I think, the future. We just have to wrangle that and put that into this enhanced, expanded revenue model. There’s not going to be one revenue stream that does it, it’s going to be 12 revenue streams within there. It has to be digital, and physical.”

[perfectpullquote align=”left” cite=”” link=”” color=”” class=”” size=””]”Esports is not the NFL, esports is every possible competitive gaming situation.”[/perfectpullquote]

Speaking of digital, Viktor Wanli, on top of running the only European esports team represented in the panel, also heads an online digital game marketplace. On the subject of monetizing userbases, he notes the gradual shift in Kinguin’s bestselling titles—from casual games, to hardcore esports titles. “Who is making the most money thanks to esports, today? It’s definitely the publisher, the owner of the IP,” he says. “It limits the team’s options in an unprecedented way. I think this relationship, sooner or later, needs to be reset, and it will happen either in a voluntary or regulatory way.”

“Defintely then, you need to constantly look at ways to monetize your fan base. This is what we’ve been doing. Setting up the infrastructure from the bottom of the pyramid. We set up, for example, an esports performance center in Warsaw as a unique facility for bootcamping, but also for grassroots academy programs. You need to start monetizing the fans, there is no other way around it, unfortunately. I think teams are ready to monetize well on media rights, but options in this regard are very limited.”

So is there a single solution to monetizing an esports organization? Probably not, Moore said. They’re going to have to figure it out based on the markets and assets they’re dealing with.

“There’s no one model. It’s not going to look like any one thing… Esports is not the NFL, esports is every possible competitive gaming situation. The great thing about that is, it’s going to look different in India than it looks in Japan, because they’re very different cultures, very different countries. It’s going to look different in America than it looks in Mexico or Europe or the Middle East.”

But that variety is what makes esports so exciting, Moore said. “The opportunities are incredible. There’s almost no barriers in the worldwide market. Gaming and soccer are basically the only two things that can bring the world together. Religion doesn’t, politics doesn’t, business and cultural things have the elite, but these bring the masses together. That’s really the opportunity it has.”