Los Angeles Times

Sports titans pivot to gaming

Epic Games raises $1.25 billion from group that includes major team owners.

- By Sam Dean

Epic Games, the maker of the wildly popular online battle royale game “Fortnite,” announced Friday that it had raised $1.25 billion from a group that included several big-name sports team owners.

The financing comes as investment in e-sports and the video game industry continues to rise, with nearly $700 million pouring into esports businesses alone in just the first half of the year.

The Epic Games investment mostly came from a mix of large venture capital firms such as Kleiner Perkins and the late Paul Allen’s Vulcan Capital. But one name stood out: AXiomatic, an e-sports investment group that has a controllin­g stake in the L.A.-based Team Liquid e-sports franchise, and counts analog sports titans such as Peter Guber (co-owner of the Dodgers, the Los Angeles Football Club and the Golden State Warriors), Ted Leonsis (of the Washington Wizards and Capitals), Jeff Vinik (owner of the Tampa Bay Lightning) and as of Thursday, Michael Jordan (you know this one) among its major investors.

“We’re in the sports business, period,” Guber told The Times. “It’s rare that you have the chance to help shape an industry that represents a sea change in the larger enterprise of sports — we chose to be a part of it.”

In the last year, “Fortnite” has taken over a major share of the gaming industry. August saw 80 million players log into the game for

at least one round, according to Epic. By June, 49% of the content on Twitch, the popular video platform with upward of 3 million streamers, was related to “Fortnite.”

Cary, N.C.-based Epic Games is also the creator of the Unreal Engine, a software developmen­t environmen­t for video games that undergirds one of “Fortnite’s” main competitor­s in the battle royale category, “PlayerUnkn­own’s Battlegrou­nds.”

In both games, and similar titles, up to 100 players — typically split into teams — pick their characters and then parachute onto a battlefiel­d. There they search for weapons and upgrades as the game map gradually shrinks, ultimately forcing the opposing sides into a small area for a final fight to the death.

“Fortnite” is on track to make more than $2 billion this year, and the game’s iOS version alone has grossed $300 million since its launch in mid-March, according to mobile market research firm Sensor Tower.

The new round of investment did not affect the compositio­n of the company’s board, where early investor Tencent, the Chinese tech conglomera­te that owns 40% of the company, holds two seats.

And every one of those dollars comes from players making in-game purchases to upgrade their avatars with new costumes and animations, such as dance moves or dramatic poses. The game itself is free to play.

Team Liquid, which is run as a business independen­t of its major investor, AXiomatic, launched a “Fortnite” team in June to compete for a share of the views on Twitch and the $100 million in prize pools that Epic is staking for a series of “Fortnite” tournament­s over the course of the year.

This week, before AXiomatic announced it had raised an additional $26 million in a round including Jordan and had made its major investment in Epic Games, Forbes reported that Team Liquid was the third-mostvaluab­le e-sports franchise in the world, with $17 million in revenue and a valuation of $200 million.

AXiomatic would not comment on the accuracy of those numbers, but Chief Executive Bruce Stein said that they represente­d esports’ potential.

“There are no firm metrics in a sport that is so early in its trajectory,” but e-sports should be considered an integral part of the video game industry, Stein said.

“Sometimes when people look at the forecast for esports, they consider it an industry that will grow to maybe a billion dollars this year — but e-sports in our view is just a video game with an audience, and the video gaming industry, that’s a $130-billion industry.”

Forbes has valued the Dodgers at $3 billion, but as his team prepared to play its third game in the World Series, Guber said he believed that the e-sports market had the potential to catch up to real-life sports.

“With e-sports, the audience is playing alongside the players, before, after and during,” Guber said. “The audience is not just a cacophony, it’s a voice in the lyrics and melody of the business, and that level of engagement is very seductive and so powerful for sponsors — they want that emotion attached to their product.”

He declined to guess at when e-sports might surpass so-called meatspace counterpar­ts, but he did say that change was coming fast.

“Ten years ago when you got a [Major League Soccer] franchise, they were $5 million. Now they’re $170 million,” Guber said. “In the digital world, there’s so much less friction to connect artists and audience, the ascent is so much faster and steeper.”

 ?? Frederic J. Brown AFP/Getty Images ?? ATTENDEES of the Electronic Entertainm­ent Expo in June crowd a display for “Fortnite,” which is on track to make more than $2 billion this year. Revenue comes from players’ in-game purchases to upgrade avatars.
Frederic J. Brown AFP/Getty Images ATTENDEES of the Electronic Entertainm­ent Expo in June crowd a display for “Fortnite,” which is on track to make more than $2 billion this year. Revenue comes from players’ in-game purchases to upgrade avatars.

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