Activision Blizzard recently announced the new owners of seven teams in the Overwatch League. Among those who have ponied up big bucks to become involved is New England Patriots owner Robert Kraft. In May, the NBA announced 17 of its teams were jumping on the esports bandwagon and creating an NBA 2K esports league to debut in 2018. And, recently, the Madison Square Garden Company acquired a controlling interest in Counter Logic Gaming.
These are just the latest examples of what is quickly becoming an overlap between traditional sports like the National Football League, National Basketball Association, Major League Baseball, and the constantly evolving esports industry. So, what do the owners of traditional sports franchises see in esports and why are they investing in the industry? Let’s explore several reasons.
Owners of traditional sports teams are investing in esports early because they see the writing on the wall. Esports is booming, and team values will almost certainly increase with time, allowing these owners to get in at a lower price point now. No one knows what the true potential is in esports at this point, but many owners of professional sports franchises have the capital to invest now. And doing so is much more cost effective than waiting for the sport to mature.
Many of these owners have seen the increase in the value of their traditional sports franchises increase astronomically over the years. For example, Jerry Jones paid $140 million to purchase the Dallas Cowboys in 1989. Today, the franchise is valued at $4.2 billion. Owners realize the time to get in is now and be among the early adopters of organized esports.
“We have been exploring the esports market for a number of years and have been waiting for the right opportunity to enter,” Kraft said in prepared comments when his investment in the Overwatch League was announced. “The incredible global success of Overwatch since its launch, coupled with the League’s meticulous focus on a structure and strategy that clearly represents the future of esports made this the obvious entry point for the Kraft Group.” In other words, the Kraft Group saw an opportunity for return on investment. However, that return is not necessarily all directly financial.
Reaching millennials — and younger
It’s no secret the average age of traditional sports fans is increasing each year. Sports Business Journal recently released a study that showed the average age of television viewers for major sports. The NBA’s average was 42, the NFL was 50 and MLB was 57, all pointing to a need to reach a younger audience like millennials.
Millennials and Gen Z can be harder to market to because their attention span is often short, and they aren’t consuming content in ordinary places like television, where they can receive marketing messages. Advertisers crave access to millennials and sports teams owners crave the ability to renew their fan base with this younger generation. “They don’t watch traditional sports products the way our generations did,” Kraft told Bloomberg TV recently. “You see how much time is invested in playing these games and how they can connect to a global audience while doing it is unheard of to us 10 or 15 years ago. We really believe this is the future.”
One hope traditional sports team owners have is that their investment in esports will reach that new audience, building an entirely new generation of fans who will attend games in person, watch teams play on television or live stream, and buy merchandise. This strategy is hardly new to sports and entertainment. In 1995, ESPN debuted its X Games product in an effort to appeal to the younger audience of Gen X and Y, as the older baby boomer generation began the start of its decline. Many of these team owners also own or have an investment in the arenas or stadiums their teams play in. This presents another financial touch point for them, making those venues even more valuable by hosting future esports events filled with younger fans.
Who will be successful?
Esports is a unique, still evolving space and the owners who recognize that will surely have the most success crossing over from traditional sports to esports. Owners who come in and try to make esports just like the NFL, NBA or MLB will surely fail. The key to success is taking the best practices of traditional sports and adapting them for esports, while at the same time recognizing the unique traits that esports has that makes it successful already.
These owners will be the first to tell you that they realize there’s a learning curve stepping into esports, but they realize being first in has its advantages. The value proposition for these owners is pretty clear, but there’s also value for the esports industry as well. Esports will benefit from the operations infrastructure these traditional teams already have in place. Non-core esports resources like email marketing, public relations, marketing, player development, etc., will pour into esports, bringing real value to the industry.
With the esports industry in full “Wild West” mode, there is no better time for risk-takers to invest. Over the next several years, we will see financial and political power shift between publishers, leagues, promoters, teams and players. Traditional sports owners know if they have a seat at the table today, they can start to impact outcomes for their advantage in the years that come.
The bottom line is these are exciting times for both traditional sports and esports as the two industries continue to grow closer together. The picture of what the future looks like is still a little fuzzy, but every day it gets a little clearer. It won’t be long before we look back on these developments as the time when esports transitioned from the wild west into a robust, mainstream industry on a fast track toward the future.