Booming Business

A Sport Called Computer Gaming

main 101060128 AP – Fans look on at KeyArena during the International Dota 2 Championships Aug 9 2017 in Seattle
Computer entertainment writ large. Source: AP

Believe it or not, playing computer games at tournaments has become a sport and turned into a big business, filling soccer stadiums or concert halls, including Madison Square Garden. The top players can make a couple of million dollars a year, showing their talents with fight games such as League of Legends or Dota 2 or sport games, for instance MotoGP or Fifa.

Competitive video gaming is called e-sports – short for electronic sports – and around 60 countries officially recognize it as a sport, including China, South Korea, Sweden, Britain and Brazil. Gaming tournaments originated in the US when Atari developed the rudimentary computer tennis game Pong in 1972 and staged events. The US computer maker and its Japanese rival Nintendo were the main organizers of tournaments in the 1980 and ’90s, but it really took off in 1997, when new network technology enabled massive live computer gaming at a single location. South Korea spearheaded the development as it subsidized high-speed internet connections.

This year, the global e-sports market is expected to turn around $696 million and sales could double by 2020 thanks to a growing number of viewers and advertisers (see graphics).

German companies have picked up on the trend, with Mercedes Benz hoping to connect to a relatively young, often male audience. The luxury carmaker, already a supporter of a Formula One racing team, will sponsor gaming tournaments organized by ESL, a firm based in Cologne. “The main target group is between 19 and 34,” said Kim Lachmann, an executive in the sports-business department at consultancy Deloitte: “It is an important channel to address millennials who are no longer easily reachable through classical forms of advertising.”

30 HB12 7 Worldwide e-sports sales-01

The bad reputation of computer gaming has faded, as Chancellor Angela Merkel exemplified last week when she opened the trade fair Gamescom in Cologne and promised to support the industry. “Image problems are a thing of the past. Gaming is absolutely mainstream now,” said Tobias Schelinski, an IT lawyer with law firm Taylor Wessing.

Some German gaming companies such as Innogames, GameForge, Crytek and Wooga are succeeding internationally, but the sector is small compared with US and other foreign rivals. ESL, however, has grown into one of the global leaders in organizing tournaments and gaming events, watched by people at location and online. Its acronym stands for Electronic Sports League and it competes with Major League Gaming, a subsidiary of New York-listed Activision Blizzard. Both ESL, majority-owned by Stockholm-listed entertainment firm Modern Times Group, as well as MLG claim to be global leaders in the e-sports business.

ESL was founded in 2000 and partnered up with US chipmaker Intel in 2002 to offer “Intel Friday Night Game” events. Membership of its gaming league grew to more than 1 million in 2006 and its events reached more than 70 million unique viewers in 2015, when Modern Times Group bought a 74 percent stake for €78 million. The Swedish company, a broadcaster and digital entertainment producer, has been expanding its gaming business. In June, it announced to buy US computer game maker GameStop for $55 million.

30 p20 The Popularity of E-Sports is Growing-01

Sporting battles organized by ESL and MLG in virtual space are followed by several hundred million people worldwide, making the events attractive for advertising. Many prominent German companies have recognized this. Vodafone, for instance, supports the German team Mousesports, which plays, among others, the famous Fifa soccer game.

E-sports has also been discovered by an increasing number of professional sports companies, above all large soccer clubs. In 2015, the German club VfL Wolfsburg, which is owned by Volkswagen, set up its own Fifa gaming team. The following year, FC Schalke, another top-ranking soccer club, set up its own gaming arm, which not only plays Fifa, but also the League of Legends.

 

Alexander Möthe is a writer for Handelsblatt. Johannes Steger is an editor with Handelsblatt’s companies and markets desk in Düsseldorf. Gilbert Kreijger is an editor with Handelsblatt Global. To contact the authors: steger@handelsblatt.com and kreijger@handelsblatt.com

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