As tradition dictates, a few weeks ago, NBA commissioner Adam Silver stood on a stage emblazoned with the league’s trademark colors to announce the number one draft pick for the upcoming season. The bespectacled, lanky lawyer-turned-COO-turned-commissioner by way of NBA Entertainment greeted a crowd made up of players, agents, and media.
“History begins today,” said Silver with that trademark boyish grin of his. It’s the same grin that has guided the league through some of its most storied years – the negotiation of the last three collective bargaining agreements with the National Basketball Players Association, a $24 billion, nine-year deal signed in 2014 to keep NBA games and exclusive content on ESPN, ABC, TNT and NBA TV, and the creation of NBA China, among other things.
But today is particularly significant, something a little different, a new milestone.
“And now, with the first pick in the 2018 NBA 2K league draft Mavs Gaming selects Artreyo Boyd a.k.a. Dimez from Cleveland, Ohio,” said Silver. At that, the man hailed as the “Lebron James” of NBA 2K – one of the best-selling sports game franchises of all-time, having sold a reported 68 million copies – took the stage, signifying the ceremonial beginning of the draft for the 15-week eSports competitive gaming basketball season.
Dimez and his fellow gamers in the first round will be paid $35,000 for six months, with housing and benefits, a comparable salary to new players in the WNBA or G-League. But that doesn’t include endorsements, sponsorships, and prize money (there’s a $1 million prize purse spread out over the season).
However, the NBA isn’t the first to get behind eSports. The niche gaming subculture has grown its profile over the past decade, led by major investments and endorsements from sports teams.
eSports moves from farm team economy to the major leagues
According to market intelligence leader Newzoo’s 2018 Global eSports Market Report, the global economy surrounding competitive gaming will grow to $905.6 million this year. That’s year-on-year growth of 38 percent.
Brands both endemic and non-endemic are expected to spend $694 million on sponsorship, advertising and more indirect investment through media rights and content licenses. According to Newzoo, media rights will lead the investment category, up 72 percent year-on-year compared to 2018. Consumers will also spend $96 million on tickets and merchandise.
Newzoo also anticipates the global audience for eSports will crack 380 million this year, the majority of which will be occasional viewers (215 million) compared to eSports enthusiasts (165 million). Asia Pacific accounts for 53 percent of global eSports enthusiasts.
There’s no question eSports has arrived as a global sport. So, who’s leading the wave of investment?
Investor leaderboard
Football clubs like FC Schalke, West Ham United and Vfl Wolfsburg have signed eSports players, while NHL and NBA moguls Jeff Vinik, who owns the Tampa Bay Lightning, Peter Guber, who co-owns the Golden State Warriors, and Ted Leonsis, the owner of both the Washington Capitals and NBA team the Washington Wizards, launched aXiomatic, an eSports-focused investment company in November 2016.
Franchise fees for the North American League of Legends Championship Series, of which sports teams like the Houston Rockets, Cleveland Cavaliers, and Golden State Warriors have already backed teams, run from $10 million to $13 million per team.
As one of the major voices in eSports investment, aXiomatic co-founder Guber has become a major voice surrounding the potentials of the eSports market.
“Here is an audience that’s so effervescent, this whole young audience that’s embraced the whole e-technology, the whole e-gaming and have for the last 12 years,” Guber told CNBC last year. “(But) eSports and egaming hasn’t plateaued when somebody went off to college. It’s bigger in college; and after college, the audience continues to consume it both as players and watchers, and observers in location-based entertainment, on PCs, on mobile. You have a device that makes people digitally aware, and so this fits right into the sweet spot.”
aXiomatic, which owns eSports Team Liquid, raised $25 million in a Series B funding round in May. The investment echoes Cloud9, an American eSports organization with teams in popular games including League of Legends, Counter-Strike: Global Offensive, and Super Smash Bros. Melee, which closed a $25 million Series A round led by Founders Fund last October. And Bessemer Venture Partners reported $25 million investment in Team SoloMid.
eSports “Year One”
As the eSports market continues to grow, deal flow and deal size are expected to follow suit. eSports M&A volume doubled in 2016 compared to 2015, accord to Deal Law Wire. In 2014, Amazon paid $1 billion in cash for live streaming service Twitch and Amazon bought Beam, another live-streaming service in 2016.
The streaming platforms are an easy choice, but where M&A action is sure to heat up in the coming years is the ancillary sphere – the content, analytics, chat and voice communication technology, talent management and eSports-oriented social networks, among other services that will come out of the woodwork over the next few years as the market becomes more sophisticated.
If you need any more convincing, eSports are set to be included in the 2022 Asian Olympics, with serious discussion surrounding bringing competitive video gaming to the 2024 Olympics in Paris.
And why not? As NBA commissioner Silver pointed out surrounding the NBA 2K draft, professional video gaming is an inclusive environment, one that’s open to “a much larger pool of players,” while still rewarding the same skillsets used by other athletes – discipline, dedication, and teamwork.
“In terms of the gaming community, this is something where virtually anyone can set out to try to achieve at the highest level,” Silver said. “It’s a different set of physical skills here certainly, but just to watch these gamers/athletes compete, what I’ve read about the training regimens they go through, it’s incredibly hard work.”