[toc]Team EnVyUs, the professional esports organization based in Charlotte, N.C., recently received a $35 million investment from Hersh Family Investments and its interactive group.
More on EnVyUs and the new investment
The investment is led by Dallas-based oil and natural gas magnate Kenneth Hersh.
Originally reported by ESPN, this investment is one of the largest investments into esports we have seen to date. The announcement comes on the heels of the recent news of the Madison Square Garden Company investing in Counter Logic Gaming.
The Hersh Family is no stranger to esports, having been part of a fundraising round of London-based esports powerhouse Fnatic. Hersh’s role in Fnatic is minimal; however the Hersh family will step up esports involvement with EnVyUs in a big way. Reportedly this includes moving EnVyUs from Charlotte to Dallas to take on the Austin-Texas Overwatch League spot.
Recent months have seen a flurry of investment into esports. Where is all this coming from, and why it is happening now? The recent surge in investment is driven by a perfect storm of opportunity, a fear of missing out and need.
Investing in esports feels familiar for sports investors
Esports is a world of talented individuals, often teams of individuals going head to head in competition. At a high level, the industry is no different than sports or any other competitive activity. There are competitors, there is an arena and there are cheering fans. Sports team owners know this scene very well.
Sports owners and investors see the rapid growth of esports combined with images of sold-out stadiums and astonishing online viewer numbers. It is no surprise that so many sports teams are showing interest in owning an esports team as a result.
The existing esports teams welcomes their interest, as capital can be hard to come by in esports. Thus we have a combination of capital-hungry teams looking to grow and sports investors looking to apply their proven formula to a new market.
Current esports investments are small relative to sports teams values
With the average value of an NBA team estimated to be just above $2 billion, the fear of missing out on getting in on the ground floor of an industry that looks so similar to traditional sports is too much to bear.
This fear — along with the media hype around esports — has made for a near frenzy of investing in esports.
On the other side of the investment are many esports teams who are ready for and needing investment. To sports team owners and other investors, the opportunity to invest a few million dollars — with a potential billion dollar payoff — is too good to pass up.
Esports publishers desire stability and experience in their leagues
Publishers such as Riot Games recognize the value that esports brings to their games, their brand and of course, their revenue. These publishers want to ensure the success of each team. They also want the brands they partner with to be stable and to be around for a long time.
For all their achievements and awards, nearly all of the esports teams are led by relatively young and inexperienced individuals without years of business experience. It’s likely that these young leaders are in fact the best individuals for the job. But resources, commitment and experience go a long way.
An investment group does not have many millions to invest if it doesn’t have business acumen. Such groups also understand what it takes to keep a business going through the ups and downs of personnel issues, funding questions, wins and losses. All of that can plague an inexperienced leader.
To solve this issue, publishers have simply raised the prices of entrance to their leagues. Blizzard’s Overwatch League has a price tag of $20 million. Riot’s LCS comes with a $10 million franchising price.
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Why the steep pricetags?
These numbers ensure that no hot-shot video game players can simply show up and become part of these leagues. It will take an organization with a commitment to the future and excellent infrastructure to join.
This arrangement ensures that team will not simply bounce from one game to another. Instead, they will stick with the established powers for a considerable amount of time. The teams that buy in will likely go to great lengths to ensure the survival of a particular game.
All of this adds up to increased profits from game publishers from esports. Those profits so far have been promised to be shared with teams in a mutually beneficial way.
What is not shared with teams, however, is the revenue that comes from game sales, new champion sales and many other in-game items and purchases. This is where publishers make the bulk of their money. Much of it is fueled by esports excitement.
So long as esports keeps bringing in fans and fans keep playing games, expect esports, gaming and the investments that go along with them to keep growing.