Why Pro Teams Invest In eSports

WHY PRO TEAMS INVEST IN ESPORTS

The Miami Heat Invest In eSports Team Misfits (Photo: Ginx TV)

TNL Infographic 027: The NBA's eSports Investment (Source: The Next Level   Infographic: Jordan Fragen)

This week, John Gaudiosi wrote an article on alistdaily titled "Miami Heat And Misfits Find Synergy Between Basketball And eSports" - which sums up everything I've said for almost the past year. 

I'm going to quote directly from the article, Miami Heat executives and Misfits CEO Ben Spoont to look at exactly where the venn diagram of Pro Sports and eSports overlap.

Here's what Heat CEO Nick Arison had to say about the deal: "The Miami Heat pride ourselves on being innovative in all aspects of sports and business. For us, it made perfect sense to partner with Misfits, a young and ambitious franchise in a sport that is blazing a trail in terms of 21st century recreational competition amongst Millennials"

Quick story: When I was in college back in the Triassic period, I interned at the Miami Heat and Nick Arison was 14 years old then. This quote is from Bloomberg "Nick Arison, the Heat’s chief executive officer who declined to comment for this story, has spent most of his 32 years chasing basketball autographs -- first on posters and scraps of paper and now on hundred-million-dollar contracts". I got him Michael Jordan's autograph. I'll leave it at that.

 

AUDIENCE

The young eSports Audience (Photo: Riot Games)

While the average NBA viewer is not as geriatric as Major League Baseball, 37 is still older than than the "prime" advertiser demographic of 18-34. But eSports fit's squarely in that target market with the average viewer age around 25.

Michael McCullough, Miami Heat's EVP and CMO said “The opportunity was the fact that the eSports audience is, for the most part, younger and digital and social media savvy. We were interested in finding out if there was any crossover with their audience and ours, and how we could access that youthfulness for the benefit of the Miami Heat."

Schalke 04 was the 2nd team in Germany's Bundesliga to invest in eSports after Vfl Wolsfburg. What they recognized was the potential of eSports in attracting a younger audience.

 

MARKETING

The Miami Heat At Home (Photo: Sports Illustrated)

McCullough has seen Misfit fans who are Heat fans and are excited they have an NBA team they can root for and Heat fans who are eSports fans come to the forefront. 

Read that again. The marketing opportunity goes both ways.

Manchester City made moved into eSports in May 2016 by signing Kieran ‘Kez’ Brown.  Kez is a Twitch streamer, branded videos on YouTube as well as Facebook.

Since the start of the 2013/14 season, Man City’s Facebook page has grown 287 per cent.

 

BRANDS

ASUS ROG Sponsors French Team PSG eSports (Photo: PSG)

PSG FC (Paris Saint-Germain) has not only made the eSports move but heavily promote their team across social media.

It's not shocking that they've been one of the first Pro Sports associated eSports team to garner a sponsorship.

VfL Wolfsburg’s eSports team partnered with Turtle Beach and will use their gear and accessories during competitions.

The Miami Heat are handling the sponsorships, sales and activation and marketing for Misfits directly. Misfits CEO Ben Spoont said that one benefit of having the Heat handle that business is that brands that are non-endemics to eSports are endemic to basketball. The professional service an NBA team can provide is unparalleled.

“We’ve seen potential business partners who are either involved in the eSports world or want to be involved and are excited we partnered with Misfits and are looking to do things with both of us,” said McCullough. “That’s been the most eye-opening thing in this experience so far. We didn’t expect that.”

Read that again.

 

MERCHANDISING

Germany Soccer Club Schalke 04's eSports Team (Photo: Schalke 04)

This is an absolute no-brainer - merchandise and jerseys make a lot of money for Pro Sports teams.  Now leverage this with eSports.

Pro Teams that have invested in the space - like PSG, Schalke 04, VFL Wolfsburg - all have their eSports athletes wear the traditional Sports team jerseys.

McCullough said the Heat are creating an entire line of Misfits clothing by its in-house creative team for the Heat-specific brand Court Culture.  

“It’s very localized and we can react to things quickly on the court with player-specific shirts that resonate with fans,” he said. We’re implementing the same process we use for Court Culture, where it’s all locally designed and created and we have local distribution through the Heat store channel." 

TL/DR:

By investing in eSports, Pro teams get access to 1) a younger audience 2) a potential new International fanbase 3) Marketing opportunities for both the traditional team and the associated eSports team 4) Brand opportunities and 5) Sell more merchandise. 

 

Your move MLS and NFL.

Exclusive: Chat With The Houston Rockets Director Of eSports Development

Exclusive: Chat With The Houston Rockets Director Of eSports Development

Houston Rockets Director of eSports Development, Sebastian Park (Photo: Houston Rockets)

TNL Take:  Back in The Next Level 052, I wrote about my admiration for Houston Rocket's GM Daryl Morey and was lucky to have met him when he was on MLG's board.

I also happen to know Sebastian Park - who is super sharp - and we talk eSports all the time.

Now both of them have come together like PB&J to form a "Smart Sandwich"; the Houston Rockets are the first NBA team to hire an executive exclusively to focus on eSports.

Park's official title is Director of eSports Development and he will focus on everything from strategy to investment.

Here's an exclusive chat between Sebastian Park and The Next Level on his role and all things eSports:

/01 First, huge congrats on an amazing role with a great organization like the Houston Rockets. There are now 30+ Global teams that have invested in eSports. From the NBA side, we've seen investment from the Sacramento Kings, Memphis Grizzlies, Philadelphia 76’ers, Wizards/Warriors, Milwaukee Bucks and now the Houston Rockets.

So why the Rockets?

SP: The Rockets, the owner Mr. Leslie Alexander, and I all believe that there's a massive opportunity in Esports. The Rockets have been on the cutting edge of the data movement and we're all very excited about what Esports is and could be. 

 

/02 During my time at MLG, I got to speak with Daryl Morey, GM of the Rockets, and was just amazed at his vision and understanding of the future. He's one of the smartest people I've ever met.

How important was being able to partner with him affect your decision to join the Rockets?

SP: My mentors have always told me that the leadership of an organization is an absolutely vital part of understanding what the working environment and the opportunity will look like. Daryl, our CEO Tad Brown, and the owner Leslie Alexander comprise the vast majority of the reason why I decided to join the Rockets. Their reputation preceded them and every interaction I've had with them from the the first moment I met them till today re-affirms my initial read. 

 

/03 I'm over 40 which makes me an old man in the eSports world. You’re 25 which basically means you were born a year before I graduated high school. The lifespan of eSports Athletes, depending on genre, is really 16-24.

Do you think your "youth" helps you?

SP: Youth definitely helps you recover from long hours. It also means you probably have fewer life obligations and more time to devote to esports. But I think the key to success in esports is the desire to constantly improve and adapt to an ever-changing environment. Fortunately, I've had the pleasure of meeting people of all ages with that mindset.

 

/04 I say literally every day that "I don’t care about the next 12 months about eSports; I care about the next 12 years". Of course VC’s and Investment firms have their standard "Maximum ROI in as little time as possible" mantra - which is totally fine.

What do you care about?

SP: I believe we're in agreement to a certain extent. I do think that the future of esports is incredibly bright and one that I'm focusing on and excited to be a part of. However, it's hard to project the future of esports (or really anything for that matter) accurately beyond the next year or two. So what I care about today is making sure we're working towards creating a sustainable ecosystem that treats its people well. As members of this industry in its infancy, I think we have some agency here in doing just that. 

 

/05 Running an eSports team is extremely difficult and many people don’t know the myriad number of problems you have to deal with - along with being a Dad sometimes. You have this experience having previously co-owned Team Archon.

What did you learn running an eSports team that you can help the Rockets with?

SP: I will definitely help the Rockets avoid the common pitfalls that are easier to see when you're within the esports space, but are harder to see when you're looking in from the outside. 

Above all though, one of my biggest takeaways in my previous role was that it's all about the people you work with, the fans who support you, and the players who play for you. When we deal with sponsors, external vendors, and all of the moving parts that surrounds the space, it's easy to get caught up and lose sight of what you ought do and what you should be about on a day to day basis. We have to remember that we're in this industry to help make the dreams of aspiring pros come true. We're in this industry to see it grow into one where the people who are coming after us can have sustainable careers in esports.   

If anything else, I hope to share this mindset with my present and future colleagues here. 

 

/06 So let’s get serious. What’s your first investment? I'm kidding. 

What area’s of the industry are you going to look at for investment?

SP: We're examining all of our options. The biggest thing for us mirrors what we talked about earlier. We're not looking at this space as a quick get rich scheme. We're looking towards the future. We want to align our values and interests with the growth of esports as a whole. 

 

Thanks for your time Sebastian and best of luck in your new role.

Milwaukee Bucks To Spend $2.5M Bucks In eSports Team Cloud 9

Milwaukee Bucks To Invest $2.5M Bucks In eSports Team Cloud 9

Milwaukee Bucks and Bucks Into eSports (Photo: Milwaukee Bucks)

Milwaukee Bucks and Bucks Into eSports (Photo: Milwaukee Bucks)

TNL Take: Sorry that was way too easy to write.

As reported by Jacob Wolf of ESPN eSports - who literally breaks every major story - Wesley Edens, co-owner of the Milwaukee Bucks will invest in eSports team Cloud 9's Challenger's LCS spot and the contracts of team players for roughly $2.5 million.

Unless you spend 25 hours a day thinking about eSports as I do that maybe challenging to understand.

So here's what it means.

  • A LCS spot is a chance to play in Riot's League of Legends "League". Like having to pay to play in the NFL every year
  • Last year, the "spots" were going for $1M. 
  • Of which NRG eSports and Schalke 04 in the Bundesliga lost their investment due to relegation.

Yup its confusing but listen to someone smarter than me - Sacramento Kings Co-Owner Andy Miller and Co-Owner of NRG eSports - had to say about the situation.

The spot is apparently going for $1.8 million. 

And it's only going higher.

In the next 2 months you'll hear about some more major investments - sorry again, I have to keep confidential information confidential.

Based on the last 6 months of this year, I'm not even sure if i should keep updating this chart because every Sports League will invest in eSports.

The MLS and and NFL will get it soon - but that's another story.

Why The 76ers Bought Two eSports Teams For Millions

Why The 76ers Bought Two eSports Teams For Millions

Why The 76ers Bought Two eSports Teams For Millions (Photo: Team Dignitas)

TNL Take: The traditional Sports Team invasion of eSports has finally launched in the US.

The Philadelphia 76ers announced the acquisition of not one but two eSports teams, Dignitas and Apex, with a merger into Team Dignitas.

Let’s take a closer look into the deal and how this actually benefits the 76ers and their expanding Sports empire.

/01 WHO ARE THE 76ERS BUYING?

Team Dignitas (Photo: Team Dignitas)

Team Dignitas (Photo: Team Dignitas)

Dignitas was one of the earliest eSports Teams having formed back in 2003 with the merger of two Battlefield teams by Michael O’ Dell and David Slan. The combined Dignitas/Apex will field teams in League of Legends, Counter-Strike, Overwatch, Heroes of the Storm and SMITE.

In the ever shifting eSports landscape, Dignitas was recently relegated and then "gifted" their Challenger slot to Apex.  The larger LCS slot is what cost FC Schalke 04 and Sacramento Kings’s co-owners Mark Mastrov and Andy Miller’s eSports team NRG $1M each when both teams bought slots earlier this year.

 

/02 WHAT ARE THE 76ERS GETTING?

Dignitas League of Legends Team (Photo: Team Dignitas)

Outside of the ownership of both teams and the League of Legends slot, the 76ers are also getting eSports and Gaming experience.

Michael O’Dell will lead the newly merged Team Dignitas team operations as President and Michael Slan, will be the Vice President and General Manager of the new team.  

Even more impressive, Gaming Industry veteran Greg Richardson will serve as Chairman of the new team. Greg has a long background in Gaming, having founded developer Rumble Entertainment, a partner at Elevation Partners, a private equity fund focused on digital media and Executive roles at BioWare, EA and Eidos.

 

/03 WHY ARE THE 76ERS DOING THIS?

This would require a much longer analysis but Ill cover the two big points.

Over the past few years, Harris and Blitzer have bought seven Sports franchises, including the 76ers, New Jersey Devils, English Premier League team Crystal Palace and the Prudential Center.

So acquiring an eSports team from just a potential Marketing and Event perspective makes sense.

I pointed out in my first analysis in The Next Level 006 “Traditional Sports Invade eSports”, that there is a huge opportunity in eSports merchandise.

Michael Rubin, owner of Fanatics, the largest US online Sports Merchandise retailer, is a minority partner of the 76ers and is part of this deal.

See it now?

Finally, look deeper into the quotes from the Executive team:

“We intend to build a fan-first team that aspires for excellence in all aspects of the business from attracting premier playing talent to building out merchandising, sponsorships and broadcast rights,” said Greg Richardson, Chairman of Team Dignitas.

"There's no denying the fact that esports presents corporate America with a way to reach millennials in a way stick and ball sports just isn't," said Scott O’ Neil, CEO of the 76ers and New Jersey Devils.

 

/04 WHAT DID THE 76ERS PAYS?

This is the biggest question of all.

From ESPN: Terms were not disclosed, but more established esports team brands have been offered in the marketplace at valuations between $5 million and $15 million.

This is definitely on point as eSports Team valuations have skyrocketed.  

My estimation is that the deal was on the lower end between $5M - $10M.

 

/05 WHO IS GOING TO BE NEXT?

Back in May in The Next Level 006, I predicted five Sports personalities who would invest in eSports

There will be an update to "Traditional Sports Invading eSports" but here are are the three US Pro Teams that I believe will make the next eSports investment:

  • San Francisco 49ers
  • Miami Dolphins
  • LA Dodgers