Virgin Gaming is teaming up with the world’s biggest video game retailer, GameStop, to create online video game tournaments.

The partnership makes Virgin Gaming the preferred online tournament provider for games sold in thousands of U.S. GameStop locations and through The deal is the first sign that billionaire Richard Branson’s move into gaming with the Virgin Gaming business is getting some traction. If it succeeds, then another big media giant will have a foothold in the increasingly successful video game industry. That means that games matter in the larger entertainment and media market.

The deal, announced at the E3 trade show in Los Angeles, is the biggest major announcement since Branson (pictured last year) announced the Virgin Gaming business at a press conference at E3 a year ago.

Last year, Branson announced his parent company, Virgin Group, made an investment in the online game tournament site and was rebranding it as Virgin Games. Branson promised the company would give away more than $1 million in prizes in its first year. At the time, Virgin Gaming had more than 80,000 users. Now it has more than 400,000 registered users.

“The idea was very Virgin,” Branson said last year. “To help in an area that needs better customer service.”

Today’s announcement, as well as last year’s deal with Branson, was a big deal for a pair of young entrepreneurs. Billy Levy, president of Virgin Games, and Zachary Zeldin, vice president of gaming operations, founded When the two played way too many video games during their Florida university days, they fancied themselves good enough to try out for video game tournaments. But Levy says those events were always dominated by game superstars.

They started a tech business and sold it. Then Levy and Zeldin decided to start They wanted to create game tournaments for the mass market of gamers who are competitive but don’t play every moment of the day.

Under the GameStop deal, Virgin Gaming will stage large-scale online tournaments around big game titles. Virgin will give GameStop customers a chance to win cash and prizes in those tournaments. It will also award Virgin Gaming credits, which are redeemable for games and other merchandise.

Rob Segal, chief executive of Virgin Gaming, said that the partnership was an ideal fit because both companies want to see gamers get more deeply engaged with games and their brands. And publishers want help promoting their games.

Levy said that Virgin Gaming will move on from online events to physical tournaments at some point, as “you always want to look someone in the eye and pwn them face to face” (pwn is gamer-speak for own or dominate). The first live event dates will likely be announced in the fourth quarter of this year. Levy said players have set up more than a million matches in the past year and have embraced the service, even though the company has yet to stage some massive tournaments. Those are coming in the future.

Besides GameStop, Virgin Gaming also has deals in place with Sony, Electronic Arts, Ubisoft, Codemasters, and 2K Games, Segal said. He said the goal is to be above 1 million registered users by the end of 2011.

Rivals include Worldwinner, which powers sites such as AOL Games, and, which handles competitive games for Yahoo. Virgin Gaming will target males ages 18 to 35 who play hardcore games. As Microsoft has done with matchmaking on Xbox Live, Worldgaming strives to match players with similar skills. Players can win points that are redeemable on Virgin properties such as Virgin Airlines or some of Virgin’s 200 other businesses.

Branson was actually an early pioneer in video games. His company formed Virgin Games in 1981. The company made acquisitions and steadily expanded its operations, renaming itself  Virgin Interactive in 1994. It fostered some great talent such as David Perry, Louis Castle, and Brett Sperry. Sperry and Castle’s Westwood Studios made memorable games such as the real-time strategy games Dune II and Command & Conquer. But Virgin also made some major duds, such as the movie-based game Demolition Man. In 1998, Virgin sold the game company’s U.S. assets to Electronic Arts, while it unloaded the British game studios in a management buyout.

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