National Post - Financial Post Magazine
Let the GAMES BEGIN (online)
Competitive video gaming may seem weird to some, but it’s big business for players, companies and fans alike
Time was running out for Muzi. The other members on his team, Ninjas in Pyjamas, were gone, the clock on the bomb defuser was counting down and thousands of people, some fuelled by beer or energy drinks, were screaming for his death in a suburban Montreal arena. “SSG! SSG! SSG!” came shouts in favour of Spacestation Gaming, whose members were trying to hunt down Muzi, a.k.a. Murilo Moscatelli from Brazil.
On the line was the world championship of Rainbow Six Siege, a tactical shooter video game. Muzi, facing “the most critical moment” of his career, as one commentator put it, steered his character towards the archives section of the game map. He fired a burst from his 416-C Carbine, torquing his character’s torso left and right in an effort to peek around corners and gain the slightest of advantages.
Outnumbered, Muzi didn’t make it far. As he approached a hole blown into a wall (perhaps strategically, something you can do in Siege), he was stopped dead in his tracks by a shot from an SSG player lying in wait. Muzi’s character fell. The crowd went wild. After more than three hours of championship-match play, SSG had won the 16-team Six Invitational, breaking a losing streak of more than 1,000 days for North American Siege teams in major tournaments.
After the game, SSG’s Troy “Canadian” Jaroslawski declared that the win meant “the world” to the team. They had lived in a house together for months, training, arguing, planning. Their efforts literally paid off, since the win earned the team a prize of more than US$1 million. “We worked so hard for this,” Jaroslawski told the crowd. “This is our lives.” All that was missing from the scene was the proverbial trip to Disneyland.
Yes, people (mostly young people) play video games professionally, as in they do it for money, against other people, and in front of big crowds online and in-person. There are proper leagues, backed by large corporations, with teams competing under the bright lights and big production values typically associated with more traditional sports. People cheer, root for the home team and, in the case of the latest Six Invitational, occasionally pour beer into a shoe and drink it (something known as a “shoey”).
Competitive video gaming, otherwise known as esports, has been around for many years in different formats. People have been trying to one-up each other’s score on the original arcade version of Donkey Kong since the 1980s. The game starred Jumpman, a character who evolved into Mario, a plumber who takes mushrooms to grow in size and gain extra lives. In the late 1990s, the popularity of James Bond-inspired GoldenEye 007 on the Nintendo 64 console marked a pivotal point for first-person shooter games. Players have also been duelling each other in real-time-strategy game StarCraft since the early 2000s. It’s massive in South Korea.
Esports is also key to the video-game industry, presenting the potential for companies to keep customers’ attention and earn revenue outside their usual business of selling video games. People watch, they buy, they play, they watch some more, keep playing, purchase upgrades, and play even more. Some even dream of going pro. And while still nowhere near the size or influence of analogue sports, esports is a growing billion-dollar phenomenon around the world, and steadily marching towards the mainstream. “We’re just at the beginning” of the potential of esports, says Mohammed Benhenneda, strategic planning team leader at Ubisoft Entertainment SA, the French video-gaming company whose Montreal subsidiary developed Rainbow Six Siege.
Turns out, watching the games is becoming as important as playing the games, some of which are now streamed on Amazon.com Inc.’s Twitch and Alphabet Inc.’s YouTube sites. The latter in January was named the “exclusive streaming partner worldwide” for several games. On tap are shooters such as Rainbow Six Siege, where teams work together to destroy or remove walls and other obstacles, defuse bombs and shoot the other team’s members. There are also games where players fight, strategize against each other using space monsters or play the virtual versions of sports such as basketball.
The vision for esports is somewhat reminiscent of the rise of basketball in Canada, which really took off when the Toronto Raptors drafted Vince Carter in 1998. Carter dunked the hell out of a basketball, the team became good and a generation of Canadian players tried to emulate his through-the-legs dunks. Is it too crazy to think that there may be some kid watching clips of Siege on YouTube right now and dreaming of being the player who takes out Muzi? “It’s really a cycle that feeds itself,” Benhenneda says. “Because the players are going to watch pros that are going to do different or new strategies that are then going to be implemented into their game.”
Esports is garnering the sort of buzz that might remind you of the rise of cryptocurrency and cannabis. Almost US$2 billion was invested in esports in 2019, according to a Canaccord Genuity report, with even more activity expected this year. With the buzz come big names. One of the biggest investments Canaccord noted in 2019 was the US$35-million Series B funding round for 100 Thieves, a “premium lifestyle brand and gaming organization” that was founded by former
Esports is garnering the sort of buzz that might remind you of the rise of cannabis
competitive Call of Duty player Matthew “Nadeshot” Haag. Investors in the company include rapper Drake and Dan Gilbert, owner of the NBA’s Cleveland Cavaliers.
Retail investors can even gain exposure to the sector via esportsthemed exchange-traded funds. Evolve Funds Group Inc. launched Canada’s first such video-game and esports fund last June, and it had gained more than 15% in value since it began trading, prior to the tanking of markets in late February and early March.
“In our opinion, 2019 was the first year where esports’ status as a commercially viable sector took off,” Canaccord analysts said in a note in January. “Records were set on almost all fronts with viewership, prize pools, and investments growing materially. We think that Main Street is now viewing the industry as both a competitive sport and entertainment option while Wall Street is beginning to see the opportunity it can offer.”
But all the money coming into the sector is also prompting talk about overvaluations and there are concerns about the numbers the industry likes to throw around. Popular gaming website Kotaku in May 2019 reported that “more and more, esports is looking like a bubble ready to pop.” Not long after, DouYu International Holdings Ltd., a Chinese company that live-streams video games, held a July 2019 initial public offering in the U.S. The IPO took in an eye-catching US$775 million, but shares of the company quickly fell below their US$11.50 offering price. A rally at the end of 2019 was cut short by the recent coronavirus outbreak, the centre of which has been the city of Wuhan, where DouYu’s headquarters are located.
Potential and performance are two different things, as any blockchain or cannabis investor could tell you. Market-research firm Newzoo in February 2019 predicted that global esports revenue would top US$1 billion last year; this year’s edition of Newzoo’s report said revenue was US$950.6 million in 2019. Most of that money was projected to come from media rights and sponsorship, which can be fickle.
As a result, viewership numbers are being watched closely, especially since some of them might be a bit exaggerated. Nielsen Holdings PLC, whose ratings the TV industry lives and dies by, reported that “as esports continues to gain momentum with brand marketers and advertisers, the need for independent, third-party verification of audiences and brand exposure is critical.” Nielsen has announced that a handful of leagues have taken up its service offer.
Fledgling leagues also face an uphill climb to stay in business, something that applies whether it’s analogue football or digital football. It costs money to set leagues up and to join them. For example, the reported price tag for a spot in Activision Blizzard Inc.’s Call of Duty league was a cool US$25 million. Players must be paid, venues rented and merchandise manufactured. Leagues have gone out of business before. The Championship Gaming Series only lasted from 2005 to 2008 before shutting down, despite a US$50-million injection in 2007 by Rupert Murdoch’s News Corp.
The coronavirus also prompted the cancellation or postponement of professional esports matches in China and South Korea (another country hard-hit by the outbreak). The silver lining for esports-related companies is that the virus may keep people indoors and playing more video games.
There are plenty of issues aside from the usual risks the video-game industry faces, such as making games people want to buy and keep playing. And if consumer spending dips, gaming budgets could be hit, since it’s hard to justify shelling out for the latest shooter in a recession.
But all that hasn’t stopped some pretty big corporate players from trying to keep the esports market afloat. For instance, Ubisoft in February announced its latest revenue-sharing program for Rainbow Six Siege. The “Phase 3” program is supposed to operate for four years and support up to 44 organizations by giving them a 30-per-cent cut of the overall net revenue from certain items. “Phase 3 will provide a clear, virtuous and structured approach to supporting our valuable professional esports scene,” the company declared. “This program will redefine what it means to be a ‘Pro’ team in Rainbow Six Siege through higher industry standards.”
What Ubisoft seeks to sustain was on full display in February during the world championship of Rainbow Six Siege. The tournament had a record prize pool of US$3 million, funded by revenue raised from the
sale of a special “Battle Pass,” which provided rewards to players who paid for them. The Six Invitational was held at
Place Bell, where the Laval Rocket, the Montreal Canadiens’ minor-league affiliate, plays. More than 4,500 people from around the world reportedly showed up for the event, doing shoeys, dressing up in costumes and, because it was in Quebec, breaking into the “Olé, Olé, Olé, Olé” chant from time to time during the games.
Everything one would associate with a big sporting event was there: flashing lights, a big crowd, celebratory sparklers and announcers calling the action and providing analysis between games. After Muzi’s demise, one even had a snappy, Al Michaels-esque line ready to drop for the winner, Spacestation Gaming, who received a sledgehammer-slash-crowbar as a trophy. “The hammer heads into orbit, but its home once again is North America!” came the championship-point call.
Final figures for the 2020 event weren’t yet available, but Ubisoft said the Six Invitational in 2019 had more than 22 million views, making it the second-most watched event in Quebec last year, behind only the Montreal Grand Prix. Competition, it seems, attracts players and fans alike.
There are a number of other esports leagues in and outside North America. The Call of Duty league launched officially in January, and a February note by BMO Capital Markets analyst Gerrick Johnson said they “continue to see strong engagement for (Activision’s) Call of Duty Modern Warfare,” a well-known game for online multiplayer action that was released in October. Toronto has professional teams in the Call of Duty and Overwatch leagues, the Ultra and the Defiant, respectively. Canucks Sports & Entertainment, which owns the NHL’s Vancouver Canucks and the National Lacrosse League’s Vancouver Warriors, also owns an Overwatch team called the Vancouver Titans, which started play in 2019, won 25 of 28 league games and lost in the finals to the San Francisco Shock. All eight of its current players are from South Korea.
In March, the third season of NBA 2K, a joint-venture league between the National Basketball Association and Take-Two Interactive Software Inc., the developer of the basketball video-game series, began. There is a Toronto team in the 2K league as well, Raptors Uprising GC, which joins more than 20 others in playing most games in a New York City studio. Raptors Uprising is owned and operated by the owner of the Toronto Raptors, Maple Leaf Sports & Entertainment Ltd.
MLSE’s esports manager, Shane Talbot, says he’s been busy trying to ensure their players were all sorted out with Canada’s immigration authorities for the season. Members of the Raptors Uprising spend the season living in a “high-tech gaming house” in Toronto, and are sponsored by BCE Inc.’s Bell (sponsorship being a chief source of revenue for the league and its teams). Every week, the team boards a plane and flies to New York for games, or to another city if there’s a tournament on. Playing in the NBA 2K League is not unlike a full-time job. It has a US$1.4-million prize pool for the 2020 season, but players have sixmonth contracts and earn a base salary of between US$33,000 and US$37,500. Players are also allowed to sign endorsement deals, have their housing paid for, and receive medical insurance and a retirement plan. One unique feature of the league is its draft, where teams select players from a pool of talent, just like they do in the NBA. The first-overall selection this year was Jack “JBM” Mascone, who was picked by the Washington, D.C., franchise, Wizards District Gaming. Toronto took Eric “Timely Cook” Donald with the draft’s 11th pick. The draft pool for the 2020 season was 229 players, and each has to fight to earn one of the 68 open spots. As with Rainbow Six Siege, there is a fair amount of skill and strategy involved in high-level NBA 2K play. Choosing the right archetype is critical to winning games, but so, too, is releasing the “shoot” button at the right moment. Talbot says the team was preparing to hold its first “boot camp” soon after the draft. Even before that, the Raptors Uprising had mandated that starting point guard (“Kenny Got Work”) and centre (“Sick x 973”) play together in the offseason — they were the two players the Toronto team chose to “protect” from other squads before going into the draft — and to livestream it for the team. “They would have done it anyway, quite frankly,” Talbot says. “But for me, it’s really important that we take advantage of those offseason months to get a head start on developing that chemistry.” Millions of people are playing, perhaps dreaming of becoming the next Timely Cook or Canadian. There are now more than 48 million registered NBA 2K players just in China, and over 55 million registered players worldwide for Siege, which Ubisoft last May said had brought in more than one billion euros in revenue since its 2015 launch. Ubisoft isn’t trying to sell the next game, or even trying to sell in-game ads at the moment, Benhenneda says. Instead, the plan is to keep people playing the current game, with Ubisoft eyeing another five to 10 years of Siege. It’s conceivable then that, someday, a player today could bring their children to a Siege match, and buy them some overpriced peanuts and a Monster energy drink. It’s the sort of vision that could bring a smile to the face of a gaming-company executive. “We’re here to stay,” Benhenneda says. “There’s no sign of slowing down from our community.”