It has become abundantly clear in recent months, especially to those of us working in Venture Capital, that esports are here to stay. The communities surrounding each respective game are passionate and dedicated on a level comparable to that of any conventional professional sport, but there is a differentiating factor that isn’t seen elsewhere, at least not very often: personal connection to the games involved. Most people have a group of sports teams they root for, usually influenced by their current location, where they grew up, family preferences, etc., but often the emotional connections begin and end there. Other than a select few former college/professional athletes who have a stronger connection and appreciation for their sport, there is little vested interest. Most view casually and intermittently. I just so happen to be one of those former professionals. My connection to and love for baseball started in little league, and continued all the way through a few years in the minor leagues, before I finally had to hang up the spikes. As a result, I have this close emotional connection to the game, not just to one particular team (although I do love my Cincinnati Reds), but to the sport in general. I’m entranced by any ballgame that’s on, not just the ones for my favorite team. I constantly analyze the strengths and weaknesses of each individual player, lineups, management decisions, etc. I love all sports, but while my interest in others may wax and wane, my love for baseball keeps me constantly involved…

This is a characteristic that ALL fans of esports have. Esports fans are not just enthusiasts. They are former players. They have all been in the situations they are witnessing when watching games. They have felt what those pros are feeling. Their childhood experiences are playing out in front of their very eyes. It is this connection that presents such potential for esports as a whole, and it’s what has all of us in Venture Capital so excited. I dedicated 20 years of my life to baseball, and I dedicated a great deal of my leisure time to gaming pursuits. I get the exact same feeling when I watch a World Series game as I do a GSL Code S Starcraft Final or a Evo Street Fighter Final. Esports are not just casual viewing experiences for fans. They are a reflection of our childhoods and lives.

That being said, I’m sure many are wondering what kind of investing they can expect to see on the horizon, so I thought I’d give a brief rundown. A few weeks back, I made some calls to contacts around the VC industry to see if I could get an idea. I knew our firm was interested, but who else was? What kind of numbers could we expect to see? Here is some of the information I was able to garner:

There are currently between 15 and 20 unique VC firms that are looking to invest 15-30 million apiece. The investor approval rating for an esports capital infusion is 70%+ overall, even higher for ages 20-40. The institutional investors I spoke to are considering it safe investment, and anticipate a high short-term rate of return. What can we glean from these numbers? Esports has an atypically high approval rating among potential investors, especially among those young enough to have witnessed their development firsthand. Even institutional investors have been considering the potential for growth, and are also projecting a very low chance of the investment failing to return. This speaks volumes for the stability and rabid interest of the esports community.

Now I’m sure many are wondering how such a huge capital investment would affect their communities, and whether there are any negative connotations that arise from corporate involvement. Just a few weeks ago I saw an episode of Cross Counter TV that focused extensively on this particular topic. One of the hosts of CCTV, Gootecks, made some astute observations, and was largely of the opinion that new money would be a benefit to his particular community, that of fighting games. This is not a view that many in his community share, especially the small-market purists who think too much corporate sponsorship will cause the community to lose it’s sense of closeness and familial ties. Now, while I understand their concerns, I tend to agree with Gootecks (who has an uncommon knack for analyzing the macro aspect of esports, and to see the big picture). To explain why, it’s important to outline where the majority of this new capital will be going:

The largest problem facing esports as a whole, and one that conventional sports do not typically have (due to network telecasts), is that of availability. While many of us have great internet connections and the money to pay for premium streams to support events, a huge amount of the gamer population does not, especially internationally. Consider these numbers from a recent MLG event:

“MLG reported a total of 3.6 million hours of video consumed over the course of the tournament, with peak viewership of 240,000 users watching at the same time. And those viewers were totally engrossed in the gameplay: Average viewing time was north of three hours per viewer, according to MLG. Videos were streamed to viewers in more than 175 different countries, with the US, Germany, Canada, Sweden, and the UK leading the way. To put that into perspective: When CBS Sports live streamed the matchup between No. 1 and No. 2 ranked NCAA football teams LSU and Alabama earlier this season, it reported just 214,560 unique viewers during the game.”

Huge numbers, sure, but just a fraction of the total number of potential viewers. And while there is nothing that can be done to improve the personal ISPs that each gamer utilizes, there is a ton of work to be done in the area of stream quality, vod quality, and infrastructure quality between the stream provider and the potential customer. Even among those of us with great connections, living in the same country as the stream provider, stream errors/slowdowns/lag are noticeable and irritating. There are vast improvements that can be made, and all are costly, with little immediate revenue gain for the stream provider. These are improvements that we can fund in the short-term, increasing stream quality and availability for all fans, and giving the stream providers long-term revenue increases and viewership growth. Even MLG, with 10m of VC money under their belts (http://www.venturecapitalupdate.com/company/12/26/major-league-gaming.html), can only do so much. Imagine how difficult it must be for the little guy. This is where we can help, and it does little to disturb the familial ties that all esport communities have.

Then, of course, there is the issue of prize pools and the creation of new tournaments. This seems to be the great divider as far as the pro vs con of esports investment is concerned. Many believe that larger tournaments being created with prize pools upwards of $100k for first will take away from the smaller tournaments, and create a schism within these respective communities. Let me try to alleviate some concerns right off the bat by saying that the intended targets for any new prize money will be existing tournaments. If it is determined that there are times when additional tournaments (such as east coast or central majors) would thrive, then of course they’ll be considered, but nothing would make us happier than to see tournaments like Evo or NASL sporting 100k+ for first. The intention is to keep professional players hungry, happy, and competitive, not to take away from the grass-roots feel of the communities.

Additionally, there is talk of capital going towards esport-related ventures outside the tournament scene. The same way that the general public likes to listen to sports radio and watch ESPN/CBSSports/etc, the gaming population loves to get their fix at places like Day9tv, CrossCounterTV, State of the Game, and many others. It is just as important to have knowledgeable and likable personalities discussing and commentating as it is to have players playing, and helping these people do what they do best is another avenue we are exploring. 

I sincerely hope that this has helped to inform you guys as to what’s on the horizon for esports, and to alleviate some concerns that you may have. At the end of the day, we view esports much the same way as we did the tech industry in the past. And while many people may ask “what about the bust at the end of the boom?”, it’s important to note that an industry getting ahead of itself does not mean that the said industry is a fad. Esports are here to stay, and whether or not investment capital gets ahead of potential for growth, the communities you know and love aren’t going anywhere. It’s a chance that we’re willing to take, but the risk won’t be shared. Evo will always be Evo. MLG will always be MLG. GSL will always be GSL. Just sit back and enjoy the ride.

http://www.ibtimes.com/articles/274997/20120101/2011-year-esports-starcraft-2.htm

1. imlewis reblogged this from brovietalk
2. brovietalk reblogged this from dnamhsra and added:

   At present, you can reach me only at BrovietTumblr@gmail.com or Broviet on twitter. I’m not currently at liberty

3. dnamhsra reblogged this from brovietalk and added:

   contact you brovietalk?...initial market research...get your...

4. abathtub reblogged this from gootecks
5. john3nnathan liked this
6. mindspeech reblogged this from brovietalk
7. swordvan liked this
8. gootecks reblogged this from brovietalk and added:

   eSports? Excuse me...my monitor because my head

9. brovietalk posted this