Video game sports are on the cusp of going mainstream. Can game publishers, team owners, and investors like Rick Fox figure out a business model?
by Joshua Brustein March 7, 2017
Rick Fox woke up one morning in January and went to the gym. It’s a standard destination for Fox, who won three championships playing basketball for the Los Angeles Lakers in the early 2000s. But he wasn’t planning on exercising. Instead, he walked into a building in Santa Monica, California, and greeted a bashful-looking group of about a half-dozen men whom he pays to play video games.
Fox, along with three business partners, runs Echo Fox, a company that employs dozens of people dedicated to competing in professional video game leagues. (It’s the subject of the latest episode of the Decrypted podcast; subscribe here on iTunes.) The men he was meeting on this particular day play League of Legends, a fantasy-themed game developed by Riot Games, a subsidiary of Chinese gaming giant Tencent Holdings Ltd., in which two teams control characters seeking to destroy their enemy’s base while defending their own. It’s one of the biggest titles on the pro gaming circuit. Fox had called his employees to the gym for training: In a few days the North American League of Legends Championship Series, one of the most prominent video game leagues in the world, would begin its season.
He called Amit Raizada, who had been his partner in several other business ventures, and convinced Stratton Sclavos, a part-owner of the San Jose Sharks, to invest, too. Then they recruited Hall as CEO.
Fox likes to compare pro video game competitions, also known as esports, to pro basketball. But there are some unavoidable differences. Basketball involves jumping and sprinting, while esports consists of sitting in padded chairs and clicking buttons. Still, Fox hopes that the gym will help his LCS team improve from its dismal performance last season, when it had the worst record in the league. “When we stretch the minds, and we stretch their bodies—we stretch it to a place where they’re challenged—they’ll start to see the benefits,” he says.
For several hours, trainers put the gamers through a series of physical and mental tests. Some of them had no obvious connection to video games, like those that measured vertical leap and body fat percentage. Another test, which utilizes a special machine to determine how many times each player could click a button in 10 seconds, made more immediate sense. There were also classes in yoga, meditation, and spinning—which, one trainer helpfully explained, involved riding on an exercise bike and not actually spinning around in circles. Everything was tailored to the novice. At a team meeting the night before, Jake Fyfe, the team’s general manager, reminded the players that it’s customary to wear sweatpants or shorts to a gym, not jeans.
During the tour, Fox chatted with Henrik Hansen, a 23-year-old from Denmark who serves as the team’s captain. Hansen competes under the nom de guerre Froggen, a name he says he picked randomly as a 16-year old. Fox has likened Froggen’s leadership style to NBA legends Kobe Bryant and Larry Bird. The two have an easy rapport based on Hansen needling Fox constantly and Fox indulging him. As they checked out the lap pool, Fox gingerly launched into one of the finer points of self-care. “We still haven’t convinced you to eat vegetables,” he says in a mock-scold.
“I eat them sometimes, but I don’t see the point,” says Hansen. “I get my multivitamins.”
Fox turned to one of the trainers. “Your whole success will be predicated on whether you can get Froggen to eat vegetables.”
It isn’t actually clear whether Hansen’s diet impacts competitive results. The formula for Echo Fox’s broader success also remains elusive. Fox says he wants the company to be the Lakers of esports, but its business model is fundamentally different. The organization fields multiple teams across different leagues, as well as making original comedy programming related to video games. Fox and others involved in the company declined to discuss its financial performance. But suffice to say, most of the upside isn’t expected for several years.
Jace Hall, Echo Fox’s chief executive officer, is the former head of Warner Brothers’s gaming studio and a well-known game developer. He says that part of Echo Fox’s job is to create the conceptual framework for an esports team. While high-stakes video game competitions have existed for decades, the business models for companies that run teams are in their infancy. “As far as I’m concerned, we are the ones that are setting the model. We have to be,” says Hall. “There’s nothing.”
Because he’s famous, Fox is an intriguing figure, both to people already working in esports and people from other industries tempted to jump in. He says he has spent the last year talking to a wide range of people from professional sports interested in investing. For insiders, Fox represents the excitement over the opportunities of going mainstream — but also anxieties. Some worry that this new professionalism will end up marginalizing those who started esports, says Bryce Blum, the head of esports at Catalyst Sports and Media, a sports business consultancy.
Over the last year or so, investment from the professional sports world has poured into esports, with the owners of the Philadelphia 76ers, the Miami Heat, and stars like Shaquille O’Neal and Alex Rodriguez making investments. Fox is working to encourage this trend by explaining esports to the outside world even as its basic structure is in flux. “It feels like I’m teaching them a language that I’m still learning,” he says.
Esports will become a billion-dollar industry in 2017, with most of the money coming from advertising, according to projections from the market research firm SuperData. The firm estimates that 213 million people now watch competitive video games online worldwide. League of Legends championship matches take place at venues like the Staples Center, where the final two teams battle it out amid smoke machines in front of crowds of over 10,000.
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