A few weeks ago, the Philadelphia 76ers became the first NBA franchise to acquire two esports teams, as it bought the United Kingdom-based Team Dignitas and merged it with Team Apex. And today, Philly is naming former Eidos game studio executive Jonathan Kemp as CEO of the squad.
Team Dignitas has competitive esports teams playing League of Legends, Overwatch, Counter-Strike: Global Offensive, Heroes of the Storm, and Smite. Esports is a growing market worth $493 million, and now major sports organizations like the 76ers are taking notice.
The deals are part of a big expansion staged by 76ers owners Josh Harris and David Blitzer. They have acquired seven professional sports franchises between them: Crystal Palace of the English Premier League, the Philadelphia 76ers, the New Jersey and Albany Devils, the Delaware 87ers, and the Scranton/Wilkes-Barre RailRiders.
I sat down with Kemp, who ran global publishing at Eidos, and Greg Richardson, chairman of Team Dignitas and former CEO of Rumble Entertainment. Prior to Rumble, Richardson was a partner at Elevation Partners, a $1.8 billion private equity fund focused on digital media. Here’s an edited transcript of our interview.
GamesBeat: What’s your perspective on the esports space?
Greg Richardson: Having been in the game business for—I guess I got into it 25 years ago. I watched competitive gaming grow up. I’m sure you remember it well. We started playing FIFA on our couches, two on two, screaming at each other. It mattered who the best was. Every game company I ever worked for, we always had tournaments. But I don’t think any of us understood it could be a stand-alone business in its own right.
StarCraft comes along in 1998. We all read about what happens in Korea. It’s this cultural phenomenon we half understand, because we got how fun it is to play those games, but half it’s complete de novo for us. It becomes the national pastime in Korea. Then fast forward another 10-12 years. This business created itself, frankly. I don’t know another business I’ve been involved in where, in this case, the players basically decided they wanted this industry to get built.
They didn’t wait for the publishers or for some entrepreneur to show up. They just said, “We want to see who the best is. We want to see the best teams. We want to see our favorite games. We’ll aggregate it together, online and offline, and we’ll make it happen.” Now we’re in a situation where you have nearly a quarter billion people who will watch an esports match this year, really without any outside capital or publishers exerting catalystic influence. It feels like an amazing opportunity. This giant audience cares deeply about it, and yet we haven’t been able to come in and say, “How do we cement this thing that people have decided they care so much about?”
As an investor you get excited about those opportunities. What are the ingredients we need? How do we take these people and build this into a $10-20 billion business, giving the fans what they want? What structures and rules need to be in place to create an enduring league, just like with traditional ball-and-stick sports? Jonathan and I want to be part of helping to define that and figure it out in a way that will make the fan interest go from here to five times here, build a real business behind it.
GamesBeat: How did you start noticing esports?
Jonathan Kemp: Greg’s point is why I’ve ended up here. The passion from the fans is something you don’t see elsewhere. It’s unique. This industry has grown up organically, grown through that fan engagement, to the point where it is now. It’s an exciting space to be.
For me, you have this dynamic and exciting marketplace. You have a very cool ecosystem of teams and players and fans. Now we’re bringing in the sports expertise, the broad management team. That, for me, was a huge opportunity. We can talk a bit more about my background around sport and gaming, but the crossover I saw was so significant that I knew I had an opportunity to add value.
GamesBeat: Do you have to know your sports history, sports in general, to know where the strategies and opportunities are at this point?
Richardson: In some respects you do. There are lessons to be learned around the kind of owners came in, the way players were treated over time, how brands were built, how fan engagement developed. We think about how big the ball-and-stick sports are today, but that wasn’t always the case. Arnold Palmer recently passed. He’s very fairly recognized as someone who catalyzed modern sports. He was the first guy in an individual sport who stood up and said, “Wait, I’m not just grateful to be here. Maybe there’s a way to step back from this and make it a bigger business, which rewards me and my sponsors and everyone else.” That seemed to energize the NBA to change, the NFL, and on and on.
Yes, we have to look for a lot of lessons in what has historically occurred in sports and what works today. But we also have to recognize that this is a different animal. The fans, the games, the fact that you have publishers who own these franchises and the intellectual property, the way it’s delivered digitally—there are enough differences that if you don’t recognize them, if you just think you can hire someone out of ESPN or a sports league and they’ll create the future of esports, you’d be making a mistake.
Kemp: Also, that growth has been so exponential. Other sports grew organically over such a period of time. Word of mouth was involved. In the U.K., sports have grown up from neighborhoods playing neighborhoods, villages playing villages. Now you have this growth that’s exponential around the ability to determine who is the best player, which is the best team. You can do that almost instantaneously. Historically, with traditional sports, that was a much more time-consuming experience.
Recognizing what we can learn that has happened historically in sport generally is important, but at the same time we need to acknowledge that there are fundamental differences. We need to be appreciative of those differences.
GamesBeat: It seems like everyone had to learn how to be a spectator in games. There’s such a difference between hardcore fans who appreciate spectating and the rest of us who can’t follow these games.
Richardson: You hit on both the opportunity and the challenge. The opportunity is you have these people—Twitch now says their average viewer spends 90 minutes a day. That’s a pretty engaged audience, especially when you have 100 million people like Twitch does. That’s a big opportunity.
The challenge, though, is that these games are complex. They weren’t necessarily built to be spectator sports. They’re not easy to explain. We don’t have the legacy of parents teaching the subtleties of football to their children. We as an industry have to figure out, how do we make this more entertaining? How do we create games that are easier to spectate? How do we explain what’s going on in a way that brings in an audience?
Kemp: For a lot of those fans, it’s aspirational. It’s achievable. You see somebody play these games and you think that could be you, with whatever amount of time and practice and skill. It doesn’t look a million miles away from something you’re able to do. Whereas I ruled myself out of playing professional football fairly early on in my life. [laughs] You have that great ability to inspire people. People have this aspiration. That’s a big, important part of this.
GamesBeat: What do you think became the point at which the likes of the 76ers and major sports owners started to get involved?
Richardson: At a high level, I think the number of people spectating—when you have the League of Legends world finals drawing a larger audience than the NBA finals and the BCS championships, that’s an inflection point. The specific thing is, at the NBA owners’ meeting maybe 12-14 months ago, the NBA actually presented to all the owners. “Hey, there’s this thing out there called esports. We want to walk you through it.” Josh Harris and David Blitzer, the two managing owners of the Sixers – they also own the New Jersey Devils of the NHL, and they just purchased Crystal Palace, the English football club – those guys turned to Scott O’Neil, CEO of the Sixers, and said, “What do you think? This seems like an opportunity we need to get involved in.”
That set the snowball going down the hill. Scott and his team started to investigate and look into it. I connected with them in January of this year. We started to get pretty serious about identifying who we’d want to work with, what were the elements we’d need. That came back to Dignitas. Michael O’Dell had been around forever in esports time, 13 years. Had one of the most respected and known teams out there. We wanted a championship-caliber League of Legends team, so we combined that with Team Apex, with Michael and David Slan.
Now we’re in a situation where have their core competitive expertise. The Sixers understand sports business at a high level. Jonathan and I add some elements to glue all that together. It’ll be super fun.
GamesBeat: Do you think there’s something that the big pro sports teams and their management bring that wasn’t already a part of esports? What level of sophistication do they add?
Richardson: The players themselves, right off the bat. Esports has been unfortunately marred by very short careers from some of these exceptional players. We think a lot of that is because there haven’t been resources of expertise to take care of players. The Sixers bring in medical doctors, sports psychologists, nutritionists, sleep experts, all of whom can help us define a program for our players where they’re not burning themselves out. The amount of time they spend playing versus sleeping, taking care of themselves physically, can make them happier and more successful as competitors.
The second piece is, esports has this giant audience, but it’s not yet a robust business. You don’t see a lot of the sponsorship that you see in an NBA or NFL game coming into the esports world, despite the fact that you have a large, attractive demographic profile in the audience. One of the things Scott O’Neil said is, “We want to make it safe and easy for big sponsors to get into a space they’re excited about, but don’t understand.” The Sixers, with their relationships and trust they’ve built with these brands, can be a big catalyst for that.
The last piece is fan engagement. How do you make sure your fans feel like they’re getting maximum value from their interest in your team? Where and how do you engage them? Everything from website to social media to camps—who knows all the different ways you can have an interaction? The Sixers have been doing this a long time with their fanbase, and we think esports fans will enjoy it as well.
Kemp: Team Dignitas, as Greg said, have been around for 13 years. They have this fantastic heritage as one of the founding teams in esports, and a great fanbase. There’s already been a lot of activity and fan engagement within the esports world, but the Sixers take that to another level. We can step that up in terms of the way that fans can engage with players, be that online or offline. The opportunities around that are significant.
GamesBeat: I’m wondering what kind of league structure is ideal. I’m seeing all these things happen, like the U.K. forming their own group to oversee esports, and different player associations starting to form, different regional groups. EA had their own position on how they’re going to participate and do a lot of their own tournaments. You have things like ESL. It’s a little confusing right now. Everybody’s trying to bring a different structure to it.
Richardson: It’s early days. You hear the expression “wild west” being used a lot. To reinforce the point you’re making, a lot of different people are involved here. Game publishers are trying to figure out how to weigh in here. Do they form their own leagues? Do they partner with people outside? You have independent organizations like ESL or FaceIt or the E-League that Turner is doing. They’re trying to build league organizations. You have teams forming organizations to say, “What’s best for this ecosystem from the perspective of team ownership?” There’s a group in Europe called WESA. There’s one in the U.S. called PEA.
We want to do what’s best for the fans. What do they want, in terms of knowing there’s no gambling or cheating in the sport? Or a structure and a schedule for the league that’ll build expectation and pay off in a championship that they care about. It should be distributed and broadcast in a way that has the best players involved. All of us in the ecosystem to focus on what the fans want, because if we get that right, the rest will fall into place.
For the Sixers, Jonathan, and myself, we’re excited to have a seat at the table as this all gets figured out. We look forward to partnering with the publishers, with some of the leagues that have already formed, and some of these organizations. Let us lend our perspective and expertise to hopefully to get to a place where the fans will love this and we build a sustainable, growing ecosystem.
GamesBeat: Some of the fans seem to want gambling, unfortunately or not.
Richardson: There’s gambling in every sport, but it’s regulated and controlled in a way that doesn’t violate the integrity of the game. What happened with Valve caught everybody a bit by surprise. They didn’t have that protected distance between gambling and the game.
GamesBeat: What’s a good way to set a team up for success?
Kemp: The complex part of it is choosing the right games to play and making sure you have teams playing in the games that make the most sense. We currently have teams in five games. That’s a challenge, figuring out which of those are the ones we want to participate in.
As we’ve just discussed, around leagues and tournaments and which of those to participate in—the reason why this has been successful so far is because fans want to be able to see teams compete against each other and find out who’s the best team in the world, or in a region or whatever. We should never lose sight of that, going back to your point around league formation. It needs to be something fair. There needs to be clarity – if a team wins this, they’ll be in the top three in the world or whatever. Fans want that clarity.
Choosing the players is more important than anything. What we have with Michael O’Dell at Dignitas and Mike and David Slan at Apex are people who’ve proven again and again that they know how to spot great talent and build teams. I don’t think you can be in esports for 13 years without having done that successfully.
We have great foundations to build on regarding content, games to play, players, and teams. As Greg was saying, what we can lay over the top of that with the Sixers is the ability to work with those players around nutrition, psychology, physio, just taking away those distractions from the players and making sure they’re equipped to be successful in their chosen games. That’s a huge part of what we need to do.
GamesBeat: What should esports players expect as they head into this as their profession? Once they hit a certain competitive level, what are their choices like?
Richardson: The caliber and the skill set of these players is pretty incredible. As a result, they need to feel like they have a fundamental seat of the table concerning what the esports industry is going to look like. For them, it starts with making sure they have ownership and relationships with publishers and leagues that will create monetization, so they can get compensated fairly.
Certainly from our perspective, that means very competitive base salaries, making sure these guys have all the benefits they need, all the things Jonathan talked about as far as taking care of players. Also, aligned interests, so that they don’t just care about the team winning, but also about how we flourish as a business. As the business grows, it is only going to help the players. That’s been the case in every sport and entertainment industry. The talent eventually has risen to the top and made sure they get their fair share.
GamesBeat: I talked to Minh Le, the Counter-Strike creator, not long ago. He said that the good thing about Counter-Strike is that it stayed the same and never changed. The way to play and win has stayed the same for a long time. That’s how you get players who, year after year, come back and are still skilled. There’s a consistency in the experience. Whereas for fans—Call of Duty changes up every year so fans don’t get bored with it. It’s an interesting contrast there. If you want to design your game for esports, what do you do?
Kemp: You go into it with a different mindset. If you’re creating an esport, you’re creating something sustainable, something that can support players over many years and support leagues and competitive play.
GamesBeat: League of Legends.
Kemp: Right. You come at it from a different design approach than if you’re creating a franchise that you’ll iterate on an annual basis.
Richardson: Right. But it is interesting. We’re into this world of games as a service, where ideally you want your game to last forever. You have to keep it somewhat dynamic. League of Legends is adding new heroes and so on. But as a competitive sport you don’t want it to completely change.
That’s part of what’s exciting here. Back to the difference between this and the ball-and-stick sports, this one has a dynamism to it that will force the players, coaches, owners, and publishers to figure out how to operate in an environment where not everything stays exactly the same.
GamesBeat: It seems like it’s hard for players to stay on top every year if the game keeps changing on them.
Richardson: That’ll reward the players who can adapt, and hopefully what they’re being asked to change is not radical. Let’s hope they’re not completely turning things upside down.
GamesBeat: We have the big companies taking notice. Where do you think the big money should go? Where should it be invested?
Richardson: The entire ecosystem has massive upside opportunity. Let’s start with distribution. Twitch has built an amazing business. 100 million people coming to their website every month watching 90 minutes a day. But they’re still in the early days of their product. If you think about what fans want, in terms of the live streaming, you think about what the streamers want to have in terms of a tool set, and you think about what advertisers and sponsors want, that product is in the first quarter of its life cycle. The first inning, if you want to use a baseball analogy.
GamesBeat: The thing I look at is the comments coming through. If you’re a small-time player, you can read every comment. When you have a million people in the stream, it’s just going by, whoosh.
Richardson: Right. There’s a huge opportunity for innovation and evolution. It’s not just Twitch. You have Facebook with Facebook Live. You have YouTube entering the space aggressively, Twitter, some startups out there. The whole segment around video streaming and what can be done there, both technically and in how the product is seen and produced—you have massive upside. You’ll see money invested on that side.
Content. We talked about how esports has been organic. It was created by the fans and the players. They just wanted to know who the best player was. The notion of making it super entertaining—this about how the Sixers come out for a game with the lights flashing and the fireworks and the music and the commentary. Everything ESPN does to make entertainment part of sports, we’re really early on that. In content creation, you’ll see a bunch of money pour in to create more engaging, capital-E entertainment value.
The game publishers all recognize this incredibly virtuous cycle. If people are playing and watching competition in my game, that has massively positive benefit to my business as a whole. So what do I need to invest? You look at what Riot’s done with by far the leading esports game out there right now. They’re doing more than a billion dollars in profit a year, and they’ve invested the most of any publisher. The other publishers have taken note and they’re asking what they need to do to have that kind of success.
Then you have team owners. You’re seeing the first of what I think will be many well-resourced, professional organizations not just investing as individuals, but getting in as an organization to take this to the next level. They have the capital and the expertise to do it. You’ll attract venture and private equity. They’ll also see an opportunity to build multi-billion-dollar businesses here, and they’ll put money to work across all of these areas.
GamesBeat: Something like $500 million a quarter is going to AR and VR now. Either that or $500 million so far this year. I wonder how much game-related investment will find its way into esports.
Richardson: It’ll be harder to measure, because you’ll have more existing companies going after esports. You have ESPN and Turner and Facebook and Twitch and EA and Blizzard.
Kemp: The ecosystem is broader. Within the VR and AR space, it’s content and hardware.
Richardson: There are some opportunities. I’ve invested in some esports startups on the tech side. How do you make the fan experience more engaging, bring some sophistication to video streaming? That’s an area that I think is of interest at early stages. But that’s just one piece of a pretty broad ecosystem, as Jonathan said.
For people like us, if you’re a sports fan, if you’ve been in the game business a long time, if you love these building opportunities where you need some vision and some roll-up-your-sleeves, I don’t know if there’s anything more interesting going on out there than what’s happening in esports.
Kemp: As I said at the beginning, my background has been 25 years in games publishing, with a lot of time spent working alongside big sports brands. I spent a lot of time working with the International Olympic Committee as their interactive entertainment partner, did a lot of work around London 2012 with big brands, trying to integrate sponsors into games and gaming content. When you bring together that games publishing and sports background with the big brands and sponsorship, that’s a pretty unique set of experiences I have. The crossover with what we’re trying to do here in esports, and specifically with Team Dignitas, is a perfect coming-together.
To Greg’s point, there aren’t many places where those skills can come together we can coalesce those into significant changes in the team structure and the team journey here. I’m excited about my background, my skills, and how that can come to play here in what we’re doing. It’s going to be an interesting journey.
GamesBeat: You get to hang out with a lot of different crowds.
Kemp: It’s funny. A couple of weeks ago I was at the League of Legends championships at the civic center in San Francisco. I was having conversations with Scott from the Sixers, with sponsors who don’t know anything about the space and want to get involved. Stitching that together is very exciting.