Press “A” to Ready-Up: Insight into the Growing Industry of Esports

Press “A” to Ready-Up: Insight into the Growing Industry of Esports

July is a notoriously bad month for sports fans. No NHL, no NBA, no NFL, and unless your team is above .500 after the all-star break you have probably already checked out of baseball this season. Of course, Wimbledon and the British Open certainly provide their share of entertainment to golf and tennis fans, but the time change often makes it difficult for some sports fans to tune in. Luckily, there is a new sporting event on the horizon set to cure our July blues – The Fortnite World Cup.

Fortnite, the video game that has been taking the world by storm over the last year and a half, is set to take centre stage at New York’s Arthur Ashe Stadium from July 26-28 in what will be the largest video game tournament in the world to date. Up for grabs? A chance at a share of the $30 million prize pool, with the winner of the solo match receiving $3 million. The inaugural Fortnite World Cup not only boasts the largest prize pool in esports so far, but it is also one of the largest prize pools throughout all individual sports. Comparatively, the 2019 US Open was the most lucrative tournament on the PGA this season with the winner Gary Woodland taking home $2.25 million. Tennis’ recent Wimbledon Championship featured the winners of the men’s and women’s singles earning just under $3 million.

Since the release of its battle royale format over a year and a half ago, Fortnite has become a cultural juggernaut. In less than a year after its launch, the game had 125 million registered users, and a few months later that number doubled. The game also blew past the competition in viewership hours on the streaming service Twitch, reaching 1.10 billion hours watched in 2018, compared to runner-up League of Legends at 862.7 million hours watched. It is estimated that the game’s creator, Epic Games, grossed $3 billion in profits in 2018, leading to a $15 billion valuation. 

Fortnite has quickly developed into one of the most popular video games in the world, but it is only a small part of the rapidly growing industry of esports. Esports describes the world of competitive video gaming and has come a long way since groups of friends hosted LAN parties playing Halo 2 in their parents’ basements into late hours of the night. Following the basic structure of traditional sports, the world of esports includes leagues, teams, sponsorships, media deals, and increasingly, money. Games range from first-person shooter games like Call of Duty or Overwatch to multiplayer online battle arena games like League of Legends or DOTA 2. There are even leagues for mobile games such as Clash Royale and Mobile Legends.

With revenues set to surpass $1 billion in 2019, team valuations exceeding $100 million, and players earning up to a million dollars, esports is now big business. Notable celebrities like Drake, Steph Curry and Michael Jordan have all invested millions into esport teams and related start-ups. Traditional sports team owners such as Dallas Cowboy owner Jerry Jones and New England Patriot owner Robert Kraft have also purchased their own esport franchises. Bell, a Canadian telecommunications company, recently entered into a strategic partnership with Toronto-based OverActive Media Group. Founded in 2017, Overactive Media has quickly developed into an industry-leading esports organization, and the world’s only esports organization to own teams in the three biggest franchised leagues – Overwatch League, League of Legends European Championship, and Call of Duty League.

Currently, sponsorship and advertising make up the largest source of revenue in esports, accounting for nearly 50% this year, and non-endemic brands are beginning to play an important role. Brands like Sephora, Nike, and Hershey’s are all entering into the game because they see the opportunity to reach a new demographic of passionate and loyal consumers. In May, Puma announced a multiyear deal with Cloud9, an esports organization, estimated to be worth at least eight figures. In traditional sports, Nike’s sponsorship of the University of Michigan's athletic program, one of the largest in college sports, runs an average annual value of over $11 million. Other ways in which brands are entering the esports space is through the sponsoring of tournaments, leagues, and players.

Other companies are going a step further and attempting to maximize their brand outreach by acquiring trademarks. In June, the world’s largest brewer, Anheuser-Busch InBev, filed for trademark protection of “the official beer of esports” with the US Patent and Trademark Office. Meanwhile, trading card company Upper Deck will also be looking to move into the esports space after they filed for trademark protection of “the official trading card of esports” in early July.

Accompanying esports’ shift from niche to mainstream is also a new set of legal issues, in particular, issues relating to intellectual property. Intellectual property lies at the core of esports, from the software and hardware upon which the games are built and played to the content created by leagues, players, and streamers while playing the game. As such, the rest of this series will explore the various ways intellectual property is affecting esports.

Written by Alexandre Dumais, IPilogue Editor and JD Candidate at Osgoode Hall Law School. Alexandre is also the Director of Sports, Osgoode Entertainment and Sports Law Association.