Esports broadcast network Azubu said it is acquiring Europe’s Hitbox to bolster its global esports broadcasting reach.
The deal will create a stronger No. 2 competitor to Twitch, which Amazon acquired for $970 million in 2014. Mike McGarvey, a gaming veteran, has joined as CEO to lead the combined company. The global esports market is expected to grow from $325 million in 2015 to $1 billion by 2019, according to market researcher Newzoo.
Sherman Oaks, Calif.-based Azubu was founded in 2012 as a high-tech alternative to Twitch, and it has a strong following in South America and some Asian markets. And Vienna, Austria-based Hitbox focused on the Western and Eastern European markets. Like Twitch, both companies target esports fans by broadcasting competitive gaming events. The Los Angeles Times said the price paid for Hitbox was “tens of millions of dollars,” and an independent source told GamesBeat that was correct.
Hitbox’s development strengths lie in its low cost of operations, technical partner relationships and internally developed technologies such as good transcoding, or video conversion. Azubu has a focus on mobile user experience and monetization technologies.
“We’re incredibly excited to welcome the talented Hitbox team into the Azubu esports family,” said Mike McGarvey, CEO of Azubu, in a statement. “Over the years, Martin’s team at Hitbox has designed and developed industry-leading esports streaming and platform technology while developing a passionate and dedicated following of millions of competitive gaming enthusiasts. The synergies between our respective companies created a compelling opportunity to join forces and I couldn’t be more excited about leading both teams moving forward.”
The companies said that their combination creates the power necessary to push innovation in esports broadcasting on multiple key strategic fronts: monetization via interactive/dynamic in-space advertising, in-experience virtual goods sales and betting/wagering in allowable global markets.
McGarvey has more than 20 years of executive management experience in the videogame industry, having served as CEO of Eidos, which created The Tomb Raider franchise and was later acquired by Square Enix. He was also chief operating officer of OnLive, which pioneered cloud video game streams but didn’t survive; and, most recently, he was CEO of Testronic Labs, a game testing and quality assurance company. McGarvey replaces Ian Sharpe, the former CEO.
The company said that the vast majority of growth in esports is being driven by the millennial demographic, predicted to command the fastest growing share of retail spend through 2020. Furthermore, 76 percent of esports enthusiasts have indicated that their esports viewership is taking away hours formerly spent watching traditional sports. The net effect of this change in online, digital-based viewership is that the esports audience will remain a prime target for global brands via advertising and sponsorships for years to come.
The new Azubu-Hitbox organization hopes to monetize the 200 million esports fans in innovative new ways. Whereas today advertising represents 70 percent of revenue, with subscriptions and donations at 15 percent, the Company is targeting innovative new products in affiliate marketing, interactive sponsor-based advertising, virtual goods sales, sponsorships and in-game betting to close the gap between the revenues of traditional sports and esports.
“We’re excited by the prospect of extending our global reach with Azubu while integrating with their industry-leading mobile and monetization technologies,” commented Martin Klimscha, CEO of Hitbox, in a statement. “Having built an ever-increasing base of avid Hitbox fans over the years, we’re excited to leverage our combined strength to create an even better experience for our viewers and broadcasters through 2017 and beyond.”
The Azubu-Hitbox combination creates the largest independent broadcaster in the esports market, with the lowest-cost technical and service infrastructure, and a monthly active user peak around 20 million in 2016.
“Our plan is to relaunch the integrated Azubu-Hitbox platform and brand in early 2017,” said McGarvey. “We’re set to generate new and original content deals while harvesting additional revenue and monetization opportunities – from interactive advertising overlays and virtual goods sales to in-game betting and wagering in allowable markets—throughout the remainder of 2017.”