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Bat, ball and keyboard? The expansion of traditional athletic organisations into esports

Posted: 06/11/2018

Building on sustained growth since 2012, the global popularity of esports has exploded. Over 1.4 billion viewers worldwide have followed esports events online in the last 12 months, with total revenue generated by the industry estimated at over US$900 million. Prize money available to competitors in 2018 was in excess of US$125 million. In the US, esports are now arguably as, if not more, relevant to younger generations (particularly men) than American football, basketball, and baseball. In fact a recent Nielsen study found that only 66%, 57%, and 47% respectively of esports fans expressed an interest in these three traditional sports. Outside of these major sports, engagement in esports far outstrips that enjoyed by smaller traditional sports. In the UK, it is on the cusp of attaining the same status.

So it is no surprise to see investors from outside the gaming and consumer electronics industries flocking to esports, hoping to capitalise on the potentially massive financial and reputational returns arising from early involvement. In this context, leading UK-based industry news outlet Esports Insider’s annual conference at London’s Olympia exhibition centre was one of the largest esports industry events held to date, and the largest ever in the UK. Hundreds of players, team owners, and tournament organisers attended to debate the hottest topics in the industry, alongside figures from the wider video gaming and gambling communities as well as from government.

However, the growing influence of esports was best reflected by the attendance of those from outside those industries (as above) which have held longstanding interests in esports. Perhaps the most interesting group attending were those from well-established sports organisations, many of which have now made commitments to esports despite their traditional sports background.

Formula 1 has, for example, established its own esports competition in which nine of the constructors (including Mercedes, Red Bull, and McLaren) in the real-world competition participate in virtual Grand Prix (with representatives from Formula 1, McLaren and Williams all attending the conference). Similarly, a multitude of top-flight football clubs from many jurisdictions, including most recently Manchester City and Borussia Dortmund, have established esports teams to compete in virtual tournaments played in the popular ‘FIFA’ video game. Other traditional sports organisations have made even deeper commitments.  Paris Saint-Germain has established a team which, as well as playing virtual football, participates in the popular games ‘Rocket League’ and ‘DOTA2’. This move perhaps reflects a recognition that investment in esports is a long-term project with the potential to grow the PSG brand beyond its historic reach, not only in terms of sporting activities, but also in terms of geography. Similarly, both Mesut Ozil and Christian Fuchs (the latter of whom attended the conference) of Arsenal and Leicester City respectively, have launched their own esports teams. These moves are invariably driven by the desire of these high-profile individuals to capitalise on the present value of their brands while they are at or near their peak, maximising their longevity without resorting to the competitive worlds of punditry and coaching.

Conversely, while traditional sports organisations look to expand their operations into the world of virtual competition, esports teams are seeking to learn from their traditional counterparts in many areas. A current hot topic in the esports community is which competitive format will attract the most fans, generate the most revenue, and contribute to the long-term success and sustainability of the sport. Opinions are primarily divided between the franchised league model favoured by many American sports such as the NFL, NBA, and MLS (as adopted in esports most notably by the League of Legends Championship Series and Overwatch League) and the open tour tournament model of the type favoured by professional tennis, and utilised in the CS:GO and Rocket League games.

Regulation around player transfers and representation is one element in which esports is hoping to learn from its more established counterparts - and which has seen the introduction in some games of transfer windows, for example.

Finally, some organisations, like the esports brand Team CompLexity, are seeking to learn about player welfare from traditional sports. CompLexity shares an owner with the Dallas Cowboys, and uses some of the NFL team’s facilities (including its chef and nutritionist) to ensure players’ general health is as sound as their competitive performance. 

While still in relative infancy compared to traditional sports, esports is growing at an unprecedented rate. The opportunities this presents are wide, and potentially highly lucrative. Whether you are an investor looking to make a first foray into sports, a long-established organisation with a proud history in one discipline, an agent with wide and deep connections across the industry, or a sponsor looking to engage a new audience, esports provides a compelling and unique prospect that should not be ignored.

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Penningtons Manches Cooper LLP is a limited liability partnership registered in England and Wales with registered number OC311575 and is authorised and regulated by the Solicitors Regulation Authority under number 419867.

Penningtons Manches Cooper LLP