eSports the new battleground for traditional sports teams and broadcasters by Philip Wride

By iSportconnect | June 16, 2016

In business, there is a school of thought that to expand a customer base you should take your existing products into new markets (Market Development) or diversify and build new products for new markets (Diversification) (see the Ansoff Matrix).

Both of these things are happening in the traditional sports space and it may come as a shock when I mention that the way sports teams and broadcasters are doing the above is with video games, or more accurately, eSports.

What the hell is eSports and why should you care? In simple terms eSports is the practice of playing video games in a structured competitive format whether leagues or tournaments. Over the past 5 years this market has started to gain widespread media attention and in many ways it mirrors the more traditional sports – player contracts and transfer fees, tournament prize money, image rights, broadcast rights, sponsorships, growing fan bases, packed spectator venues and so on.

One of the biggest differences when compared with traditional sports is that eSports is the bracket name for the activity but there are multiple individual video games that are played and have built substantial player and spectator audiences. League of Legends, Dota2 and Counter-Strike are three of the biggest eSports titles at the moment with a handful of others sitting not far behind.

Dota2 is expected to create a crowdfunded tournament prize pool of over $20M for The International 6, the annual major championship for the game. This is a bigger prize pool than the SuperBowl, Cricket World Cup, Masters in Golf or the NBA Finals. League of Legends welcomed 36M online spectators to the final of its “World Championship” in 2015 while Counter-Strike is just about to be used as the centrepiece for a nationally televised league in the USA.

This market is estimated to grow to be worth over a $1B by 2019 with over 300M spectators and enthusiasts globally in the same time frame according to leading industry research firms Newzoo and SuperData.

So how are traditional sports teams getting involved?

We’re seeing a difference in approaches from the USA and Europe. In the US team owners or ex-players have invested in eSports teams to create new brands while leveraging the greater infrastructure and business acumen provided by those wealthy individuals.

The owners of the Sacramento Kings and Memphis Grizzlies NBA franchises have each bought into League of Legends and created new team brands, NRG eSports and Immortals respectively. Rick Fox, 3-time NBA Champion has created his own team brand called Echo Fox while Shaquille O’Neal and Alex Rodriguez have both invested in NRG eSports. The Cleveland Cavaliers (NBA), Philadelphia 76ers (NBA), Miami Dolphins (NFL) and Mark Cuban, owner of the Dallas Mavericks (NBA), are all rumoured to be entertaining discussions about getting involved in eSports.

In Europe the approach has been very different with sports teams directly expanding their brands into the eSports space. Wolfsburg in the German Bundesliga and West Ham in the English Premiership have both recruited FIFA video game pros and given them player numbers while FC Schalke 04, also from the German Bundesliga, have just confirmed their purchase of a League of Legends team who will be competing using the Schalke 04 team name and brand.

Schalke

What about the broadcasters?

With the even gender split and key 18-30 demographic associated with eSports this is a prime market for many companies and broadcasters are no exception. ESPN have created a dedicated section on ESPN.com to provide coverage of eSports and Yahoo Sports quickly followed in their wake. In the UK the BBC and Sky Sports have started providing ad-hoc coverage of events with Sky now set to air the UK’s first ever 24 hour eSports TV channel while in the USA Turner Broadcasting has gone “all in” by creating their own league they will be broadcasting live on TBS on Friday Nights. Turner have already signed syndication deals with other broadcasters including Germany’s ProSieben MAXX. There are also mutterings that ESPN are in a $500M conversation with Riot Games, the creator of League of Legends, about televising the League Championship Series (LCS), Riot’s flagship tournament.

On the investment side we’ve also seen some major shifts with Modern Times Group (MTG), the large Swedish broadcaster, snapping up two of the world’s largest video game tournament organisers in ESL and Dreamhack. Their investment in ESL is slated to have cost them 78M Euros.

What’s next?

As teams and broadcasters look to increase the size of their fan bases and overall revenues we could see more traditional sports teams take an interest in the space, especially if broadcast deals come to fruition and teams want to grab a slice of that pie. The two-sided challenge will be about maintaining authenticity – of the existing sports brand and catering to a completely new audience in an authentic way.