Last week, the eSports team The Philadelphia Fusion, owned and operated by Comcast Spectator, and The Cordish Companies announced their plans to construct the $50 million Fusion Arena in the Philadelphia Sports Complex. Set to be the first arena dedicated to eSports in the Western Hemisphere, Chairman and CEO of Comcast Spectator Dave Scott said that “Fusion Arena gives eSports fans a best-in-class venue to call home and be proud of.” Fusion Arena is just the beginning of the massive expansion effort by the Overwatch League to establish an international eSports project the likes of which the world has never seen. Moreover, this announcement is representative of the innovative strides eSports has collectively undertaken to transform the medium into a highly profitable business venture for new and old sports organizations alike.
For those who are unfamiliar with the term, eSports are competitively played video games. Some of the most popular games are League of Legends by Tencent's Riot Games (NASDAQOTH:TCEHY), Dota 2 by Valve Corporation, and Starcraft II and Overwatch by Activision Blizzard (NASDAQ:ATVI). Currently eSports bring in a monthly audience of about 167 million people, a figure that is expected increase to 276 million by 2022, according to a 2018 global study. This audience differs from viewers of common sports in several ways. The largest viewing audience comes from East Asia, with popular streaming services like Douyu and Huya dominating the market. In the Americas and Europe, viewers are primarily turning to the streaming service Twitch. The age range of these fans also differs from that of traditional sports fans. About 79 percent of eSports’ audience is below the age of 30, and the majority are digital natives. This massive young market has led major tech giants to become involved with the industry. Twitch, the frequently used online streaming platform for major competitions, was bought by Amazon for $970 million in 2014. A year ago, Disney made a deal with Activision Blizzard to air the Overwatch League playoffs and finals on ABC, ESPN, ESPN 2 and Disney XD. This combination of streaming services and television provide fans of eSports with more choice when it comes to how and when they watch.
eSports have utilized and reformed conventional sports business models, as opposed to replacing them entirely. Over the past few decades, the primary structure for eSports’ largest events has been the individual event format, where a single or multi-day event annually marks the gathering of the best professionals in the world competing for the prize winnings. The largest prize pool in eSports, The Dota 2 International at $23 million, sits substantially above traditional sports events like the Daytona 500, Wimbledon, and more than doubles The Masters. The Overwatch League boldly asserted in 2017 that not only could eSports function in the half year League format, but that it could do it just as well as the other major players. The League started with 12 franchises based in 11 cities around the world, with traditional owners such as the Krafts of the New England Patriots, the Kroenkes of the Los Angeles Rams, and the Wilpons of the New York Mets. Connecting teams to a fixed location is a new idea to eSports, which utilizes energy from regional fanbases, like South Korea, Norwegian countries, and other larger regions of the world, while generating an increase in long-term dedication to a team. The Overwatch League has also created a more legitimate and less risky line of work for professional eSports athletes by requiring that teams sign players to one-year guaranteed contracts with minimum salaries, health insurance, and direct bonuses from prize pools. These innovations have expanded the options available to eSports fans, business partners, and athletes.
The challenges facing eSports are also different from those facing established sports. While games like American football have undergone changes over time to better ensure the safety of players, Online Multiplayer Video Games are continuously updated with new content and new rules to balance the gameplay and retain a continuous player base. Since they are computer programs, video games are susceptible to bugs or exploits which can affect people’s ability to play. All of these factors impact how a game is played and require the audience to have up-to-date knowledge to watch. The core concepts of the games rarely change, but comparing the beginning of the Overwatch League to the present, certain abilities athletes previously had have become obsolete, and many strategies are entirely different. The worst case scenario for a game is that it completely loses its player base. Although Activision Blizzard is known for producing games that remain highly popular for years, the current investment of infrastructure creates concern for when the game will eventually become irrelevant with the advent of new technology, new games, and shifting consumer focus. There are also logistical issues that eSports athletes face. The international scope of eSports means that the best talent often comes from different countries; however, whether eSports players should be considered athletes is a debated issue that limits availability for athletes to get P-1 visas and travel for competition.
Despite these difficulties, eSports are still set to hit a combined valuation of over $3 billion by 2022. Whether you are an investor, in the media industry, a fan, or are just hearing about eSports for the first time, there is no better time to jump into the action.