An Esports Slam Dunk: What the NBA’s Investment in Esports Means
On September 26, 2016, the Philadelphia 76ers announced that they had acquired two leading eSports teams, Team Dignitas and Team Apex. Not to be outdone, the next day Team Liquid announced they had sold a controlling share to Golden State Warriors co-owner Peter Guber and entrepreneur Ted Leonsis, who is the majority owner of the private company that owns the Washington Wizards. The Sixers, Guber, and Leonsis were not the first outsiders to show an interest in esports, but these have been some of the most high-profile investments in eSports to date.
The advantage for the eSports team is clear. Teams are gaining access to the structures, organization, space, tools, and – most critically – funds, of established sports organizations. Teams Dignitas (Dignitas and Apex will be merged under the Dignitas banner) and Liquid will have access to the NBA’s know-how in sponsorship development, sales, branding, and marketing. In addition, the teams will have new infrastructure for training and development. The NBA teams are able to provide top of the line facilities dedicated to talent development and training, even including resources for player health and nutrition. While esports teams have run professional operations without such investment, having access to the resources of the NBA will be invaluable.
But what’s in it for the Sixers and other investors? These investors are getting in on the ground floor of what promises to be a massive industry.
Esports tournaments are already selling out arenas worldwide. Just this week, League of Legends (LoL) is holding the Worlds semifinal tournament at Madison Square Garden in New York City. Ticket prices range from $57 to $75 for each of the two days of competition. While the event has not yet sold out, even the ability to hold such an event at Madison Square Garden would have been unimaginable just a few years ago. LoL players and fans will head to the Staples Center in Los Angeles for finals on October 29, 2016.
Events of this magnitude give investors unprecedented access to one of the most coveted consumer demographics: 18 to 35 year old men. This group of consumers has been notoriously more difficult to reach through traditional mediums of television and print in recent years because their attention is online. But now investors can reach them through esports online streams and live events.
Beyond the revenue coming directly from tournaments, there are additional opportunities for merchandising and broadcasting. Esports fans might not wear Sixers jerseys, but they are likely interested in Team Dignitas jerseys. Further, while the primary broadcasting action is online streaming, esports are making a jump to television with tournaments being broadcast on cable channels in the U.S. and abroad. As esports take off in mainstream mediums, the fan base will continue to grow.
While other high-profile investors have jumped on board over the past few years, the NBA is uniquely suited to apply its knowledge of team management, merchandising, and broadcasting to capitalize on the rapid growth of esports. The NBA and similar investors will be able to launch esports into commercial success. As an industry that is projected to bring in just shy of $500 million in revenue by the end of 2016 and continue growing from there, esports are looking like a smart investment.