- Esports is a relatively new phenomenon and one that can look geeky and niche from afar. But investors and entrepreneurs say the industry could one day look much like European soccer.
- They say that esports, which sees groups of professional gamers competing with each other in major tournaments, will end up dominated by big-name teams and big piles of cash.
- Business Insider spoke to Nicolas Maurer, CEO of esports company Team Vitality, whose teams play in “Fortnite”, “FIFA” and “Rocket League” tournaments for prizes of up to $30 million.
- We also spoke to Karen McCormick, an investor in esports firm Team Fnatic, which has been likened to Real Madrid.
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On the face of it, esports and European soccer are hardly similar industries.
The latter is a world-renowned hotbed of international megastars such as Cristiano Ronaldo and Lionel Messi, not to mention a proving ground for would-be superstars such as Christian Pulisic and Joao Felix. Esports, though growing rapidly in popularity, has not yet come close to spawning a star of Ronaldo’s caliber.
But two bullish esports backers say the industry will end up looking remarkably similar to European soccer.
Just as European soccer has become increasingly dominated by 10 to 20 elite clubs, they predict esports will end up the same.
Karen McCormick is the chief investment officer at London-based venture capital firm Beringea, and led its recent investment in London-based esports organization Fnatic as part of its $19 million Series A fundraise in April.
The term “organization” as it’s used in an esports context is analogous to “club” as it’s used in a European soccer context.
Esports organizations comprise multiple teams who specialize in playing specific games. For example, one team could focus on “Fortnite;” another could specialize in “Rainbow Six: Siege;” two teams could focus on “League of Legends,” and so on, and all be part of the same esports club.
Teams vary in size but are often around five-strong, with individual players heralding from anywhere in the world. Teams typically compete in official tournaments focused on one game, such as “League of Legends.”
Though Beringea considered investing in several esports organizations, McCormick saw Fnatic as “best in class.” Fnatic competes in tournaments centered on major titles like “Fortnite”, “FIFA” and “League of Legends” and has been dubbed the “Real Madrid” of esports by the BBC.
McCormick says the emergence of elite esports would be ‘part of the entertainment value’
In 2019, the esports industry is booming, and is expected to be worth $1.5 billion by 2023, according to Business Insider Intelligence estimates. Viewership of esports tournaments is expected rise from 454 million people in 2019 to 646 million in 2023, also per BII. That’s substantial, although by comparison, some 3 billion people watched the World Cup in 2018.
The salaries esports organizations pay their players vary widely, and can depend on the popularity of the game they play. Nevertheless, according to financial news publication The Street, average salaries for players are relatively lucrative, sitting in the $3,500 to $5,000 per month range in esports hotbeds like America and China.
It’s the cash prizes at the big tournaments, though, where the huge money lies. The total prize pool for July’s “Fortnite” World Cup was $30 million.
Asked by Business Insider if she sees esports developing like European soccer, McCormick is adamant. “It’s hard to see it developing any other way,” she says.
“We don’t think about it as the European industry versus the global industry. Within ‘League of Legends,’ which is the only [game] that has divided its leagues by geography, we’re in the European League. In every other way, we are basically a global business.
“But outside geographic considerations, I definitely think the industry is going to go that way. And that does create barriers for new entrants, the same way that [it does] in offline sports.”
McCormick says this this will benefit the industry as a whole.
“It is good [if it was to] develop that way. That’s part of the entertainment value: actually having really top quality, highly competitive, best-in-class contenders that need[ed] the infrastructure to be able to reach that level.
To put things into context, the top esports players at Team Liquid, a global esports organization founded in the Netherlands, train 50 hours per week.
“I guess it’s more fun to watch a professionally-produced event played by the top contenders in the world than to go to your friend’s house and watch a couple your friends play,” she continues. “Every midsize team isn’t going to be able to provide that experience in terms of production values and player quality.”
‘If you’re in the middle of the pack, it’s terrible’
McCormick’s view is echoed by Nicolas Maurer, the CEO and cofounder of Paris-based esports organization Team Vitality which launched in 2013.
Much like Fnatic, Vitality’s teams compete across a range of big-name titles such as “Fortnite,” “FIFA,” and “Rocket League”, and one of its teams was crowned “Rocket League” world champion this summer after winning the Season 7 Rocket League World Championship.
“Rocket League” is a hugely popular game – played by an estimated 46 million people worldwide as of June last year – in which players use cars to play a form of high-tech soccer.
“Look at European soccer,” Maurer says. “You have these 10 to 12 tier-one teams that can get everything, and the other teams very often struggle to catch up. I see esports developing the same way.”
Other major Europe-based esports organizations include G2 Esports, based in Berlin, and SK Gaming, founded in Oberhausen, Germany as early as 1997 and sponsored by the likes of Deutsche Telekom and Mercedes-Benz.
“In esports, it’s either you’re very big – you’re building an empire when you have fans around the world generating engagement, and then revenue, and then monetization – or you’re small, and you do your small business on the side,” he continues.
“But if you are in middle of the pack, it’s terrible, because you have to compete with the big [organisations] when it comes to salaries – and yet it’s harder to generate revenue, because you don’t have the partners.”
For both Maurer and McCormick, the top esports organizations will build ‘legacies’ like Real Madrid’s
What’s more, notions like ‘legacy’ and ‘history’ – so central to the identities of traditional sports clubs like Real Madrid – are just as central to McCormick’s and Maurer’s view of esports.
“[Team Vitality] sees esports developing in a way where there will be 10 or so huge teams that have their own approaches; their own legacy; their own history; their own territories; their own loyal fans,” Maurer explains.
“We want to be tier one and have fans engaged all over the world. That’s what we’re trying to build.”
To do this, Maurer wants to center Vitality around small number of games with shelf-lives of “around 20 years”, he says. As such, it’s easy to picture esports becoming utterly dominated not just by a cadre of elite teams, but by a cadre of elite games.
In another similarity to traditional sports, Maurer also wants to grow Vitality’s marketing by adding to the Adidas-sponsored organization’s already extensive range of branded clothing.
“You have a lot of people that will probably wear PSG jerseys, and the younger audiences – ages 12 to 18 – they wear the Vitality jersey the same way. And we’re not only selling jerseys. We have an entire line, and we’re creating more and more. It will be a key revenue stream for us.”
In this way, Maurer’s ultimate goal of building a legacy means he sees the specific games Vitality plays as secondary, provided its overall brand compels people.
“What exactly will this future look like? What games will we be playing? In a way, it’s kind of irrelevant, as long as we’re presenting this platform that engages the fans. That’s the key.
“Not every team will succeed, but some of them will, and that’s the rationale behind esports investment, I think.”