The following was largely authored by Columbia student Maurice Eisenmann
This week, Wesley Edens, co-owner of the Milwaukee Bucks, joined many of his colleagues and bought his way into an eSports team for $2.5 million. Over the past couple of months, the trend of traditional sports teams and their owners investing in eSports has reached new heights, with multiple investments per week. According to TNL Media, as of now 22 professional sports teams have invested in eSports. While these facts may surprise some traditionalists (especially the fact that the majority of these investments are done by European teams), expect to hear about many more American teams investing in eSports in the near-future. Here is a look at why these investments are just that; smart hedges on potential future growth, not get rich quick schemes following a fad.
The first reason might be to most logical one, money! According to video gaming research firm SuperData, eSports’ worldwide revenue this year totals $892.8 million, and that number is only expected to rise over the next couple of years. As with any regular investment, the owners know that they can use their assets to multiply the value of their investments in eSports. For example, Blizzard recently announced at their annual Blizzcon convention that they are starting an Overwatch league. New England Patriots owner Robert Kraft and LA Rams owner Stan Kroenke just happened to be sitting on the front row next to Activision-Blizzard CEO Bobby Kotick. Obviously, Kraft and Kroenke understand that an investment of a couple million dollars into an eSports franchise, combatted with their current assets such as a stadium and a sports team, can potentially make eSports a very interesting investment for them. If the recent $200 million Riot Games/MLBAM deal is any indication, these Overwatch teams can be a lot more valuable in a couple of years.
eSports can bring an answer to the biggest need of sports stakeholders, their need for content. While with the current eSports environment, team owners will not own the content of the big eSports tournaments. They will own the rights to any tournament they create themselves, more importantly, their rosters’ Twitch streams. With the biggest eSports players getting over three million viewers on their Twitch streams, investing in eSports will deliver quality content for sports team owners. For instance, Ted Leonsis, recently announced his own live-sports OTT platform, Monumental Sports & Entertainment. Only a few weeks later, Leonsis and co-owner of the Golden State Warriors Peter Guber, bought a controlling interest in Team Liquid, one of the world’s biggest eSports teams. Also a key differentiator here is that Team Liquid is multiple game players in multiple games, not just an investment in one team playing one game, which is where a former athlete like Rick Fox and his EchoFox team made their stand. Team Liquid reaches a wide range of young consumers of games, and with that brings a wide variety of content beyond one silo.
Investors in eSports understand that in the current digital landscape where companies like Facebook and Amazon are heavily interested in buying live-sports content and team owners are creating their own OTT platforms, eSports can provide these stakeholders with all the content that they need.
Investing in eSports, can also provide traditional sport owners with their future generation of fans. With NFL ratings dropping and ESPN losing subscribers at a rapid pace, it is clear that the new generation is not looking for a traditional sports experience. With Riot Games’ League of Legends Worlds final having an astonishing 43 million unique viewers, the signs are there that the digitally-native generation is looking towards the only digitally-native genre of sports, eSports. Traditional sports owners are realizing this and are looking to invest in eSports not only to create an extra source of revenue, but also, to have a tool to generate new fans for their existing sports franchises. If the New England Patriots had an Overwatch team playing their weekly games before the Pats game, how many young Bostonians would go to Gillette Stadium? More importantly, if the New England Blasters (name not confirmed), become the best team in the Overwatch league, how many new Pats fans will that success bring with them? Even if the eSports and the regular sports teams do not play on the same day, traditional sports owners have a stadium that is empty 6 days a week. Investing in an eSports team will provide these owners with another weekly seat-filler for their stadiums. Admittedly, this is a long-term reason, as I believe that the current eSports atmosphere will not fill 25,000 seats on a weekly basis, it is definitely a long-term influence that owners factor in when they buy into an eSports franchise(especially NBA owners that play in smaller stadiums). You also get to control all the inventory for those coming to see events, even if it is one a year, with little risk (as the buildings are still rental spaces). However you get merch, concessions, parking etc. as a venue holder, AND you may be getting a new clientele coming into the building who could come back for other events if they enjoy the experience.
Finally, investments in eSports in the virtual version of the sport that the team is playing in, can be a logical extension of their current sports offering. For example, our favorite soccer team, Ajax Amsterdam, recently signed, five-time Dutch FIFA champion and YouTuber, Koen Weijland. Koen will now represent the Ajax brand in all of his FIFA tournaments, during his YouTube videos and while he is livestreaming on Twitch. This allows Ajax to tap into Koen’s fan base and become not only the best traditional soccer team in the Netherlands but the best virtual soccer team as well. After all, Koen’s audience plays FIFA, but might not be tied to a specific club. Believe me, Koen’s fans looking for a team to support will got to Ajax. The French Professional Football League (Ligue 1), is probably the most progressive sports league when it comes to eSports. They recently announced the creation of the e-Ligue 1, the first ever professional FIFA League created by a traditional soccer league. Plans are to have professional FIFA players representing all 20 Ligue 1 teams. So far, the response has been incredible, without any game played, e-Ligue 1 just signed a broadcast agreement with BeIN Sports and Webedia for their inaugural season, providing both traditional television and traditional sports leagues with a way to reach a cord-cutting audience.
Let’s also not forget the age and engagement of the athletes playing for most of the professional teams around the world. they fall into a demo who enjoy games, from DOTA and World of Warcraft to FIFA and Madden, so you now have more of a common connection to your employees, and maybe another way to engage a traditional sports base that is also interested in both gaming and the local team or club.
Are there issues? For sure. eSports will not be for the quick fix. Turner, ESPN are all trying to figure out the right play to create a traditional TV broadcast model. Schools are looking at eSports teams, which may or may not work. Sponsors are pushing against traditional models trying to be authentic and look for an ROI which is a hedge against the future, while those selling it need to see numbers and results right away. There are issues with authenticity of placement, incorrect brands, and players who are still warming to the idea of traditional media exposure and are not adept at telling their own stories. Think the early days of the X Games, or better yet, MMA from 8-10 years ago and you see eSports today. Also on the building side, how many events are enough to break even? Is one a year enough? Is there oversaturation coming in? Even the UFC has looked to go quality over quantity recently, seeing that the per cap is dropping when going to a city or a region too many times. It is not a business for the light pocketed or the parson looking for a quick buck; it’s not there yet.
To summarize, there are plenty of reasons why traditional sports teams should invest into eSports but the main ones we believe are: a new source of revenue, additional quality live-sports content, a way to reach the new “cord-nevering” and cord-cutting generation of sports fans and a logical extension of the clubs’ current sports offering. If you work at a traditional sports team and still don’t believe in the power of eSports we would advise you to reconsider, because Leonsis, Guber, Kroenke and Kraft get it: numbers do not lie and the potential is pretty strong.