1 00:00:10,720 --> 00:00:17,880 Speaker 1: Zon We're gonna die. Oh Dash set the scene for 2 00:00:17,960 --> 00:00:21,439 Speaker 1: us here. Well, there's about a half dozen guys sitting 3 00:00:21,520 --> 00:00:24,560 Speaker 1: in a dark room just playing video games. They're mostly 4 00:00:24,640 --> 00:00:27,080 Speaker 1: in the early twenties, and it's pretty clear that it's 5 00:00:27,080 --> 00:00:28,800 Speaker 1: a group of guys who's been hanging out with one 6 00:00:28,840 --> 00:00:33,080 Speaker 1: another for quite some time. Similar scenes are probably playing 7 00:00:33,120 --> 00:00:36,840 Speaker 1: out in hundreds of basements and addicts at this very moment, 8 00:00:37,479 --> 00:00:40,599 Speaker 1: but this is a little different. Yeah, that's right. This 9 00:00:40,680 --> 00:00:43,720 Speaker 1: isn't just a group of kids goofing around. It's actually 10 00:00:43,720 --> 00:00:48,440 Speaker 1: a professional sports team practicing. People have been playing video 11 00:00:48,479 --> 00:00:52,400 Speaker 1: games against one another since video games have existed, but 12 00:00:52,440 --> 00:00:56,480 Speaker 1: there's a rapidly growing industry being built around professional video 13 00:00:56,520 --> 00:01:06,640 Speaker 1: game competitions, also known as e sports. The big championship 14 00:01:06,680 --> 00:01:10,920 Speaker 1: matches draw live crowds of over ten thousand people and 15 00:01:11,080 --> 00:01:14,800 Speaker 1: online audiences that hit the tens of millions of viewers. 16 00:01:15,680 --> 00:01:18,360 Speaker 1: What you heard earlier was a team I recently visited 17 00:01:18,360 --> 00:01:21,720 Speaker 1: in Los Angeles. They're called Echo Fox, and they were 18 00:01:21,760 --> 00:01:26,679 Speaker 1: practicing for this year's North American League Championship Series, which 19 00:01:26,720 --> 00:01:29,559 Speaker 1: is a contest for people who play the game League 20 00:01:29,640 --> 00:01:33,039 Speaker 1: of Legends LCS is one of the most prominent e 21 00:01:33,160 --> 00:01:37,280 Speaker 1: sports leagues, and Echo Fox is built on a particularly 22 00:01:37,319 --> 00:01:41,240 Speaker 1: ambitious vision for the future of the sports. Taken together, 23 00:01:41,600 --> 00:01:44,920 Speaker 1: Echo Fox and LCS show us just how big e 24 00:01:45,040 --> 00:01:48,440 Speaker 1: sports might eventually become, and also how much has to 25 00:01:48,440 --> 00:02:02,920 Speaker 1: be figured out along the way. Hi, I'm Akio and 26 00:02:03,000 --> 00:02:06,720 Speaker 1: I'm Joshua Bursting, And this week on Decrypted, we're taking 27 00:02:06,720 --> 00:02:10,760 Speaker 1: you inside this world of video game competitions. We'll be 28 00:02:10,800 --> 00:02:14,359 Speaker 1: showing you how e sports resembles traditional sports and how 29 00:02:14,400 --> 00:02:18,120 Speaker 1: it looks much much different. We'll also introduce you to 30 00:02:18,200 --> 00:02:21,680 Speaker 1: a couple of key characters in this business, starting with 31 00:02:21,800 --> 00:02:25,799 Speaker 1: Rick Fox. Rick is an actor and he also won 32 00:02:25,960 --> 00:02:30,080 Speaker 1: three NBA Championships playing basketball for the Los Angeles Lakers. 33 00:02:30,840 --> 00:02:34,320 Speaker 1: Money is pouring into e sports from professional sports, and 34 00:02:34,360 --> 00:02:38,400 Speaker 1: the sports business is changing fast. We'll look ahead at 35 00:02:38,440 --> 00:02:40,960 Speaker 1: what the industry is trying to build for the coming years. 36 00:02:48,280 --> 00:02:51,480 Speaker 1: So josh to report out this episode, you escape the 37 00:02:51,560 --> 00:02:54,200 Speaker 1: brutal New York winter to spend a couple of days 38 00:02:54,200 --> 00:02:56,880 Speaker 1: in California. That's right, I flew out to l A 39 00:02:57,000 --> 00:02:59,240 Speaker 1: in January to spend some time with the people who 40 00:02:59,360 --> 00:03:03,000 Speaker 1: run Echo Box, the professional sports team we mentioned earlier. 41 00:03:03,639 --> 00:03:05,360 Speaker 1: Bad luck for me. It was actually kind of cold 42 00:03:05,360 --> 00:03:07,880 Speaker 1: and rainy when I got there, so I jumped in 43 00:03:07,880 --> 00:03:10,040 Speaker 1: a cab at the airport and headed to what Echo 44 00:03:10,080 --> 00:03:12,800 Speaker 1: Foxes Pressed people had described to me as the team's 45 00:03:12,960 --> 00:03:17,480 Speaker 1: training facility. Sounds fancy. Thank you, okay, thank you very much. 46 00:03:17,520 --> 00:03:23,560 Speaker 1: Hav a good day. Okay, So here I am. I 47 00:03:23,600 --> 00:03:28,440 Speaker 1: can say that from the looks of this building, professional 48 00:03:28,520 --> 00:03:30,720 Speaker 1: video games have not quite made it to the level 49 00:03:32,080 --> 00:03:34,639 Speaker 1: of the NBA in terms of glamour and glitz. I'm 50 00:03:34,680 --> 00:03:40,680 Speaker 1: standing on pretty drab street right across the street from 51 00:03:40,680 --> 00:03:47,240 Speaker 1: a self storage unit, um, a dentist and a gas station. 52 00:03:47,360 --> 00:03:52,040 Speaker 1: It's like a plane brick building. Um, so you know, 53 00:03:52,320 --> 00:03:57,600 Speaker 1: clearly not quite the big time yet. Okay, so not 54 00:03:57,720 --> 00:04:01,200 Speaker 1: so fancy. Well, the player has had these huge, comfortable 55 00:04:01,200 --> 00:04:04,840 Speaker 1: looking padded chairs. Those were kind of fancy, but otherwise no, 56 00:04:05,960 --> 00:04:08,720 Speaker 1: so I'm trying to picture it here. Would you see. 57 00:04:09,120 --> 00:04:12,360 Speaker 1: There was no stretching or drills or anything. The guys 58 00:04:12,400 --> 00:04:15,520 Speaker 1: pretty much walked in, sat down and started playing video games. 59 00:04:16,440 --> 00:04:18,719 Speaker 1: They all refer to one another by their screen names. 60 00:04:18,800 --> 00:04:21,720 Speaker 1: So the captain is frogging and he's kind of a joker. 61 00:04:21,839 --> 00:04:24,040 Speaker 1: He was messing around. He kept flipping back and forth 62 00:04:24,040 --> 00:04:26,920 Speaker 1: to watch a basketball game when the action slowed down 63 00:04:27,520 --> 00:04:30,080 Speaker 1: and they're big free agent is is a young guy 64 00:04:30,160 --> 00:04:32,720 Speaker 1: named Looper. He didn't say much of anything at all 65 00:04:32,839 --> 00:04:36,040 Speaker 1: because he just came over from Korea and doesn't really 66 00:04:36,040 --> 00:04:40,479 Speaker 1: speak English. While they were playing, I hung out with 67 00:04:40,520 --> 00:04:42,880 Speaker 1: Tim Cho, he's one of the coaches, and he had 68 00:04:42,880 --> 00:04:47,440 Speaker 1: his laptop open on his knees. So I'm just writing 69 00:04:47,440 --> 00:04:51,320 Speaker 1: about why certain players need to work on, specifically learned 70 00:04:51,320 --> 00:04:53,480 Speaker 1: when we notice him the things we need to immediately correct. 71 00:04:53,760 --> 00:04:55,960 Speaker 1: Let do you have a spreadshade open on your computer 72 00:04:56,080 --> 00:04:59,159 Speaker 1: and you just have a column for each player or something. 73 00:04:59,279 --> 00:05:01,600 Speaker 1: That's what I'm gonna right now. And then what I'm 74 00:05:01,640 --> 00:05:02,960 Speaker 1: kind of doing is I'm going to print out a 75 00:05:03,000 --> 00:05:05,960 Speaker 1: sheet because coaching in this game is really arbitrary and 76 00:05:06,000 --> 00:05:08,520 Speaker 1: a lot of it's something that hasn't been figured out 77 00:05:08,560 --> 00:05:16,760 Speaker 1: yet completely. E sports is changing fast. Video game publishers 78 00:05:16,800 --> 00:05:19,320 Speaker 1: are now just starting to treat this as a potentially 79 00:05:19,480 --> 00:05:22,880 Speaker 1: serious part of their business. According to the research firm 80 00:05:22,920 --> 00:05:26,640 Speaker 1: super Data, it was an eight hundred ninety two million 81 00:05:26,680 --> 00:05:30,919 Speaker 1: dollar industry last year. This year's projected to cross the 82 00:05:31,000 --> 00:05:35,880 Speaker 1: billion dollar mark, and people in organizations associated with traditional 83 00:05:35,920 --> 00:05:39,640 Speaker 1: sports have begun investing in the sports organizations or just 84 00:05:39,680 --> 00:05:42,760 Speaker 1: setting up their own teams from scratch. The owners of 85 00:05:42,760 --> 00:05:46,480 Speaker 1: the basketball teams the Philadelphias have Any Sixers, the Miami Heat, 86 00:05:46,680 --> 00:05:50,120 Speaker 1: and the Sacramento Kings have all made recent e sports investments. 87 00:05:50,839 --> 00:05:53,960 Speaker 1: The NBA itself just announced that it was starting its 88 00:05:54,000 --> 00:05:57,160 Speaker 1: own video game league. It's based on NBA two K, 89 00:05:57,520 --> 00:06:00,840 Speaker 1: which is this popular basketball video game tam made by 90 00:06:00,839 --> 00:06:05,520 Speaker 1: the company Take two Interactive. In the league, actual NBA 91 00:06:05,600 --> 00:06:08,719 Speaker 1: teams will field their own digital teams that will compete 92 00:06:08,720 --> 00:06:12,280 Speaker 1: against one another in a video game depicting the actual 93 00:06:12,360 --> 00:06:17,000 Speaker 1: NBA teams. Sounds meta, yeah, very But before all that, 94 00:06:17,040 --> 00:06:19,560 Speaker 1: there was Echo Fox. It was one of the first 95 00:06:19,920 --> 00:06:24,000 Speaker 1: moves from traditional sports to e sports. It's named after 96 00:06:24,160 --> 00:06:28,920 Speaker 1: Rick Fox, the former NBA player and actor Rick Fox. 97 00:06:29,680 --> 00:06:37,960 Speaker 1: Now we're guarding him. He popped three crazy like a Fox. 98 00:06:39,320 --> 00:06:41,719 Speaker 1: He got together a group of investors that started the 99 00:06:41,760 --> 00:06:45,920 Speaker 1: team near the end of Rick is six ft seven 100 00:06:46,200 --> 00:06:49,080 Speaker 1: and I'm not much of a basketball fan, so I 101 00:06:49,120 --> 00:06:52,080 Speaker 1: had to google him. But he's a very handsome guy. 102 00:06:52,360 --> 00:06:55,640 Speaker 1: He's also acting in a bunch of TV shows. Yeah, 103 00:06:55,760 --> 00:06:57,880 Speaker 1: if you walk around l a with him, people hunk 104 00:06:57,920 --> 00:07:00,760 Speaker 1: their horns and wave. He's a real celebrity and when 105 00:07:00,760 --> 00:07:03,120 Speaker 1: he started this e sports team, it was as if 106 00:07:03,160 --> 00:07:06,160 Speaker 1: the popular Jack had walked into the cafeteria one day 107 00:07:06,480 --> 00:07:08,719 Speaker 1: and just suddenly decided to sit down with the nerds. 108 00:07:09,400 --> 00:07:12,920 Speaker 1: So this was a big validation for the people already 109 00:07:12,960 --> 00:07:16,720 Speaker 1: involved in the sports. They were onto something big. Yeah, 110 00:07:16,800 --> 00:07:19,080 Speaker 1: and Ric has served as something of a tour guide 111 00:07:19,080 --> 00:07:22,240 Speaker 1: for other people in traditional sports who want to follow 112 00:07:22,280 --> 00:07:25,120 Speaker 1: him into the business but are a bit confused. He said, 113 00:07:25,160 --> 00:07:28,400 Speaker 1: it's a funny feeling. Um, I feel like someone dropped 114 00:07:28,400 --> 00:07:29,840 Speaker 1: me in a foreign country and I was forced to 115 00:07:29,920 --> 00:07:32,000 Speaker 1: learn the language, you know. So I've I've been able 116 00:07:32,040 --> 00:07:37,120 Speaker 1: to speak it. I would say pretty pretty fluently as 117 00:07:37,160 --> 00:07:42,080 Speaker 1: a Fiday. But still I miss maybe misscongregat a herb 118 00:07:42,160 --> 00:07:46,440 Speaker 1: here and there every once in a while. But I'm 119 00:07:46,480 --> 00:07:50,280 Speaker 1: getting there. Yeah. So, another guy I want to introduce 120 00:07:50,320 --> 00:07:53,840 Speaker 1: you to is Jace Hall. He's the CEO of Echo Fox. 121 00:07:54,760 --> 00:07:57,400 Speaker 1: Jace is a celebrity in the video game world. He's 122 00:07:57,440 --> 00:07:59,440 Speaker 1: made a bunch of his own video games and he 123 00:07:59,520 --> 00:08:02,120 Speaker 1: used to run the video game studio at Warner Brothers. 124 00:08:02,800 --> 00:08:05,280 Speaker 1: Jason is also about six ft seven which makes him 125 00:08:05,280 --> 00:08:07,520 Speaker 1: one of the only people in the industry as tall 126 00:08:07,560 --> 00:08:10,840 Speaker 1: as Rick Fox. The two men met nearly a decade 127 00:08:10,840 --> 00:08:14,000 Speaker 1: ago at a conference. They immediately hit it off, and 128 00:08:14,120 --> 00:08:17,000 Speaker 1: Jason invited Rick over to the film production studio he 129 00:08:17,040 --> 00:08:21,640 Speaker 1: was running at the time. Here's Jason. He eventually came 130 00:08:21,680 --> 00:08:26,760 Speaker 1: over and he saw the world that you know this is. 131 00:08:27,880 --> 00:08:30,160 Speaker 1: You took a look at the office, right, it's like 132 00:08:30,240 --> 00:08:35,640 Speaker 1: a bit of a playground for video games. Yes, and 133 00:08:35,840 --> 00:08:38,480 Speaker 1: uh um, you know, the minute he walked in, it 134 00:08:38,559 --> 00:08:41,320 Speaker 1: was like, you know, the little kid gets unlocked. Next 135 00:08:41,320 --> 00:08:44,120 Speaker 1: thing we know, we're playing video games against each other 136 00:08:44,240 --> 00:08:49,760 Speaker 1: and competing. Jason is unbelievably good at video games, and 137 00:08:49,800 --> 00:08:55,560 Speaker 1: according to Jason, so is Rick. Rick is probably the 138 00:08:55,559 --> 00:08:59,840 Speaker 1: best Miss pac Man player that's ever been in the NBA. 139 00:09:00,080 --> 00:09:03,319 Speaker 1: I can tell you that right now with the higher levels, 140 00:09:03,320 --> 00:09:06,600 Speaker 1: packing is pretty serious. He has not yet been able 141 00:09:06,640 --> 00:09:11,040 Speaker 1: to take me in that game. Um. But serious competition 142 00:09:11,559 --> 00:09:14,319 Speaker 1: evolved out of that. We started live streaming it and 143 00:09:14,920 --> 00:09:18,560 Speaker 1: you know, just and we start building an audience around that. Um. 144 00:09:18,600 --> 00:09:20,920 Speaker 1: And then that's really where some of our competitive rival 145 00:09:21,000 --> 00:09:23,920 Speaker 1: we just started spanning different video games. I will give 146 00:09:24,040 --> 00:09:27,960 Speaker 1: Rick this, there's an arcade game called Galagha or some 147 00:09:28,000 --> 00:09:35,760 Speaker 1: people call it Galaga, which he is just dominates. The 148 00:09:35,840 --> 00:09:38,000 Speaker 1: day after I met Jason, I had breakfast with Rick. 149 00:09:38,520 --> 00:09:40,640 Speaker 1: I told him that jas had mentioned MS pac Man. 150 00:09:41,480 --> 00:09:44,439 Speaker 1: Did he bring up Gallaght? And he did. I don't 151 00:09:44,440 --> 00:09:46,120 Speaker 1: think there's a single person that building would never bring 152 00:09:46,160 --> 00:09:48,640 Speaker 1: up there gallagh because they're all they were all blown away. 153 00:09:48,640 --> 00:09:54,479 Speaker 1: Then it's it's rare that I will sit down and 154 00:09:54,480 --> 00:09:59,600 Speaker 1: and and just prove my authenticity to my friends when 155 00:09:59,640 --> 00:10:02,079 Speaker 1: it comes in his face. But when I do, it's 156 00:10:02,080 --> 00:10:06,160 Speaker 1: always like, what where did this come from? Um? Jason's 157 00:10:06,280 --> 00:10:12,600 Speaker 1: miss MS pac Man stories? Ring ring true? I'm about 158 00:10:12,760 --> 00:10:16,960 Speaker 1: I'm probably like to points behind him in top score, 159 00:10:17,040 --> 00:10:19,600 Speaker 1: So I gotta let him have that one. I can't. 160 00:10:19,760 --> 00:10:22,800 Speaker 1: I can't gotta let him have one. Care So, for 161 00:10:22,840 --> 00:10:25,680 Speaker 1: the first few years of this relationship, Rick was having 162 00:10:25,800 --> 00:10:29,319 Speaker 1: a great time fooling around playing video games. He's always 163 00:10:29,320 --> 00:10:31,560 Speaker 1: been into video games. He plays with his son, Kyle, 164 00:10:32,040 --> 00:10:35,679 Speaker 1: who's working towards becoming a game developer himself. But then 165 00:10:35,800 --> 00:10:40,000 Speaker 1: something changed in Rick and Kyle went to a League 166 00:10:40,000 --> 00:10:44,000 Speaker 1: of Legends tournament at Madison Square Garden. Thousands of people 167 00:10:44,040 --> 00:10:47,920 Speaker 1: showed up to watch with solo bid versus Outer Logic, 168 00:10:48,000 --> 00:10:59,840 Speaker 1: gaving very low lot of for parent City Gaming super megac. 169 00:11:03,000 --> 00:11:06,360 Speaker 1: Within months, Rick and some other investors had paid one 170 00:11:06,520 --> 00:11:09,560 Speaker 1: million dollars for the right to feel the team. The 171 00:11:09,600 --> 00:11:12,160 Speaker 1: whole team lives together in a house in Los Angeles, 172 00:11:12,360 --> 00:11:16,040 Speaker 1: paid for partially by Riot, the video game publisher, and 173 00:11:16,120 --> 00:11:19,520 Speaker 1: partially by Echo Fox, their team. Rick when it talks 174 00:11:19,559 --> 00:11:23,000 Speaker 1: specifically about the money he pays his players, but other 175 00:11:23,040 --> 00:11:26,160 Speaker 1: people involved in lcs tell me that most players make 176 00:11:26,200 --> 00:11:29,680 Speaker 1: six figure salaries. Okay, and tell us a little more 177 00:11:29,679 --> 00:11:32,320 Speaker 1: about these players, who they are, where they come from, 178 00:11:32,880 --> 00:11:41,280 Speaker 1: how they stumbled into this lucrative world of professional video games. Yeah, 179 00:11:41,320 --> 00:11:44,320 Speaker 1: it's really different for each game. There's a whole scene 180 00:11:44,320 --> 00:11:48,280 Speaker 1: around various video games, mostly playing online. When I asked 181 00:11:48,280 --> 00:11:51,200 Speaker 1: most of the players for Echo Fox how they came 182 00:11:51,240 --> 00:11:54,480 Speaker 1: to be pros, they said they pretty much started competing, 183 00:11:54,960 --> 00:11:58,400 Speaker 1: showed they were really good, and began moving up the ranks. 184 00:11:58,920 --> 00:12:01,600 Speaker 1: They also all said that it's much harder to become 185 00:12:01,640 --> 00:12:03,880 Speaker 1: a pro now than it was a few years back. 186 00:12:04,880 --> 00:12:08,000 Speaker 1: Rick is constantly relating the sports to his time playing 187 00:12:08,000 --> 00:12:10,800 Speaker 1: in the NBA. One of the first things he did 188 00:12:10,840 --> 00:12:13,480 Speaker 1: after forming Echo Fox was to take the team on 189 00:12:13,480 --> 00:12:16,800 Speaker 1: a tour of the Lakers practice facility. I wanted them 190 00:12:16,800 --> 00:12:18,640 Speaker 1: to see my world. I wanted to understand where I 191 00:12:18,640 --> 00:12:21,839 Speaker 1: came from. Um, I wanted them to get a sense 192 00:12:21,880 --> 00:12:27,000 Speaker 1: of what a professional franchise, you know, structure looked like, 193 00:12:27,880 --> 00:12:30,320 Speaker 1: because that's what we want to That's what drives us 194 00:12:30,400 --> 00:12:34,079 Speaker 1: right to bring that level of of support and background today. 195 00:12:34,280 --> 00:12:38,880 Speaker 1: So Rick also wants them to work out like athletes. 196 00:12:39,640 --> 00:12:41,680 Speaker 1: When I visited the team, they were preparing for the 197 00:12:41,720 --> 00:12:45,520 Speaker 1: new season, which started in late January. The organization was 198 00:12:45,600 --> 00:12:48,720 Speaker 1: launching into a special e sports training regiment that had 199 00:12:48,760 --> 00:12:50,360 Speaker 1: been set up for them at a gym in Santa 200 00:12:50,400 --> 00:12:53,240 Speaker 1: Monica that's right near the arena that Riot built to 201 00:12:53,280 --> 00:12:56,679 Speaker 1: host the actual games. One of the big purposes of 202 00:12:56,679 --> 00:12:59,439 Speaker 1: today is just here's our starting point, right, so reaction 203 00:12:59,480 --> 00:13:02,000 Speaker 1: time and to get health and fitness. So we're gonna 204 00:13:02,240 --> 00:13:04,480 Speaker 1: also measure like blood pressures that just these kind of 205 00:13:04,480 --> 00:13:07,600 Speaker 1: basic things. Are also going to measure grip strength, which 206 00:13:07,640 --> 00:13:09,560 Speaker 1: is a measure of your brain activation, believe it or not. 207 00:13:09,640 --> 00:13:13,240 Speaker 1: So they tested everyone's memory, measured how high they could jump, 208 00:13:13,640 --> 00:13:15,880 Speaker 1: and had this little machine to see how many times 209 00:13:15,920 --> 00:13:18,720 Speaker 1: they could click on a button in ten seconds. They 210 00:13:18,720 --> 00:13:21,679 Speaker 1: could click on a button a lot. But one surprising 211 00:13:21,760 --> 00:13:25,440 Speaker 1: thing was the fastest person on the team was actually Rick. 212 00:13:26,640 --> 00:13:29,440 Speaker 1: A few guys had spent their offseason working out, but 213 00:13:29,559 --> 00:13:31,800 Speaker 1: this is still a group of guys who spent most 214 00:13:31,840 --> 00:13:34,680 Speaker 1: of their free time sitting at a computer. The gym 215 00:13:34,800 --> 00:13:38,199 Speaker 1: was clearly not their natural habitat. I gotta measure something 216 00:13:38,240 --> 00:13:40,480 Speaker 1: in order to manage it, right, So this is all 217 00:13:40,520 --> 00:13:42,480 Speaker 1: about just seeing kind of where one's at today and 218 00:13:42,840 --> 00:13:44,280 Speaker 1: then giving it. Looks at an old review of some 219 00:13:44,320 --> 00:13:46,480 Speaker 1: of the the exercise stuff and the cycling, so it's gonna 220 00:13:46,480 --> 00:13:55,720 Speaker 1: be funny. The price dragging rights clearly. Speaking of prizes, 221 00:13:56,000 --> 00:14:01,360 Speaker 1: let's talk about how these sports teams are actually making money. 222 00:14:03,600 --> 00:14:07,040 Speaker 1: So there is the prize money from tournaments, but no 223 00:14:07,080 --> 00:14:09,360 Speaker 1: one really wants to rely on that for a business. 224 00:14:10,280 --> 00:14:14,040 Speaker 1: Mostly investors are betting that big opportunities will develop in 225 00:14:14,080 --> 00:14:17,440 Speaker 1: the future. This could happen in a few ways. There's 226 00:14:17,480 --> 00:14:20,920 Speaker 1: the value of the team itself. That is, Rick and 227 00:14:21,040 --> 00:14:25,280 Speaker 1: his co investors bought a slot in LCS, assuming that 228 00:14:25,360 --> 00:14:27,520 Speaker 1: if they want to sell it five or ten years 229 00:14:27,520 --> 00:14:30,480 Speaker 1: from now, it could be worth much more. Then there's 230 00:14:30,520 --> 00:14:32,880 Speaker 1: the media rights deals. Those work a lot like they 231 00:14:32,880 --> 00:14:35,120 Speaker 1: do in professional sports, or at least they hope they 232 00:14:35,120 --> 00:14:38,520 Speaker 1: will at some point. And there's advertising where teams and 233 00:14:38,520 --> 00:14:42,520 Speaker 1: players take on sponsors. That's the big one. A lot 234 00:14:42,560 --> 00:14:46,360 Speaker 1: of this sounds pretty similar to the economics of traditional sports, 235 00:14:46,440 --> 00:14:49,960 Speaker 1: but there's one thing that's very different. The game they're 236 00:14:50,000 --> 00:14:53,080 Speaker 1: playing is the property of a video game publisher. In 237 00:14:53,120 --> 00:14:56,680 Speaker 1: the case of legal lessons, this is Riot Games, but 238 00:14:56,760 --> 00:15:00,240 Speaker 1: it's not just Riot. Pretty much every major video game 239 00:15:00,280 --> 00:15:03,720 Speaker 1: publisher now wants to have the sports leagues built around 240 00:15:03,720 --> 00:15:06,800 Speaker 1: some of their games. Here's what Jas had to say. 241 00:15:07,480 --> 00:15:14,320 Speaker 1: Imagine football. Imagine the stadium and the players and everything 242 00:15:14,360 --> 00:15:21,600 Speaker 1: about it is owned by Wilson, who sells and makes footballs, 243 00:15:22,440 --> 00:15:26,720 Speaker 1: and the whole point of everything is to actually sell 244 00:15:26,920 --> 00:15:30,520 Speaker 1: the football. Well's everybody in the stadium and bout the football. 245 00:15:30,600 --> 00:15:36,040 Speaker 1: Everybody watching needs football. Now, if that's the case, the 246 00:15:36,120 --> 00:15:40,960 Speaker 1: orientation of the entire economic structure how you would manage 247 00:15:41,200 --> 00:15:44,920 Speaker 1: that area fastly different than the way football is today. Right. 248 00:15:46,000 --> 00:15:49,160 Speaker 1: Riot recently signed a deal with bam Tech, which is 249 00:15:49,240 --> 00:15:53,480 Speaker 1: Major League Baseball streaming media unit. Bam Tech is paying 250 00:15:53,560 --> 00:15:57,400 Speaker 1: Riot a minimum of three hundred million dollars to stream 251 00:15:57,480 --> 00:16:01,800 Speaker 1: league competitions through the year three, it'll run its own 252 00:16:01,880 --> 00:16:06,080 Speaker 1: Legal Legends streaming app and handle the technology for streaming 253 00:16:06,120 --> 00:16:09,560 Speaker 1: on platforms like Twitch and if you don't know what twitches, 254 00:16:09,920 --> 00:16:13,960 Speaker 1: it's the most popular live streaming website for video games. 255 00:16:17,120 --> 00:16:19,960 Speaker 1: So the main way that traditional sports teams make money 256 00:16:20,000 --> 00:16:22,520 Speaker 1: now is by sharing in the revenue that comes from 257 00:16:22,560 --> 00:16:25,760 Speaker 1: TV deals. But Riot is keeping all the money from 258 00:16:25,760 --> 00:16:29,560 Speaker 1: its streaming deal to itself, at least for now. Some 259 00:16:29,720 --> 00:16:32,960 Speaker 1: team owners were unhappy about that. You can see these 260 00:16:33,080 --> 00:16:38,200 Speaker 1: tense exchanges on Reddit between Riot executives and team owners. Yeah, 261 00:16:38,520 --> 00:16:41,400 Speaker 1: Jason Rick were not involved in those. They like to 262 00:16:41,440 --> 00:16:44,560 Speaker 1: present themselves as kind of the grown ups in the room, 263 00:16:44,800 --> 00:16:47,080 Speaker 1: something that seems to annoy some of the other owners 264 00:16:47,080 --> 00:16:49,880 Speaker 1: at times. Either way, they say they're fine with what 265 00:16:50,000 --> 00:16:54,760 Speaker 1: Riot's doing, and Ryot's position makes sense. Here. Here's a 266 00:16:54,800 --> 00:16:57,920 Speaker 1: company that made a video game that became popular in 267 00:16:57,960 --> 00:17:02,560 Speaker 1: this brand new way, and now the company's capitalizing on that. Yeah, 268 00:17:02,600 --> 00:17:05,480 Speaker 1: but that's not even its main business. Riot made nearly 269 00:17:05,520 --> 00:17:08,679 Speaker 1: two billion dollars in revenue from League of Legends just 270 00:17:08,840 --> 00:17:12,200 Speaker 1: last year. Most of that was unrelated to the sports, 271 00:17:12,800 --> 00:17:15,040 Speaker 1: and we should also mention there's costs for Riot to 272 00:17:15,359 --> 00:17:19,440 Speaker 1: it put some money towards player salaries and other team costs. 273 00:17:20,240 --> 00:17:23,560 Speaker 1: At the same time, the publisher wouldn't have this new 274 00:17:23,600 --> 00:17:27,080 Speaker 1: opportunity in e sports if these teams didn't come along 275 00:17:27,119 --> 00:17:30,719 Speaker 1: and start competing. So it has to figure out how 276 00:17:30,720 --> 00:17:34,720 Speaker 1: to keep its new business partners happy and financially sustainable. 277 00:17:34,760 --> 00:17:39,200 Speaker 1: To this has both sides a bit on edge. There's 278 00:17:39,280 --> 00:17:42,200 Speaker 1: the promise of all this new money floating around, and 279 00:17:42,440 --> 00:17:46,600 Speaker 1: no one wants to get left out. Soon after Rick 280 00:17:46,680 --> 00:17:50,840 Speaker 1: started Echo Fox, another team called Energy was started by 281 00:17:50,880 --> 00:17:54,760 Speaker 1: two of the owners of the Sacramento Kings. It started 282 00:17:54,800 --> 00:17:57,919 Speaker 1: to look like the new big money teams would come in, 283 00:17:58,480 --> 00:18:02,840 Speaker 1: dominate the league and change everything. The teams with less 284 00:18:02,880 --> 00:18:06,040 Speaker 1: money were worried. It turns out they did not have 285 00:18:06,160 --> 00:18:09,720 Speaker 1: to be. Echo Fox and Energy were both really bad 286 00:18:09,760 --> 00:18:12,840 Speaker 1: at first, so bad that the end of the summer 287 00:18:12,880 --> 00:18:15,320 Speaker 1: season they had to play in a tournament where the 288 00:18:15,359 --> 00:18:18,719 Speaker 1: losers would be sent down to the minor leagues. And 289 00:18:18,800 --> 00:18:21,600 Speaker 1: even though Echo Fox managed to stay in the league, 290 00:18:21,960 --> 00:18:25,840 Speaker 1: Energy lost. Now this is bad for Energy, obviously it 291 00:18:26,000 --> 00:18:29,240 Speaker 1: lost its investment, but it was also bad for Riot. 292 00:18:29,880 --> 00:18:32,639 Speaker 1: Instead of playing in the minor leagues. Energy said it 293 00:18:32,680 --> 00:18:35,840 Speaker 1: was going to stop competing in League of Legends altogether. 294 00:18:36,800 --> 00:18:40,000 Speaker 1: Right now, video game publishers are competing with one another 295 00:18:40,119 --> 00:18:43,760 Speaker 1: for the attention of new investors, and having a big 296 00:18:43,840 --> 00:18:47,760 Speaker 1: name abandoned league was not a great look. Rick sees 297 00:18:47,800 --> 00:18:50,040 Speaker 1: all of this as a sign that everyone in the 298 00:18:50,160 --> 00:18:52,880 Speaker 1: sports is still going through some growing pains right now. 299 00:18:54,280 --> 00:18:57,040 Speaker 1: If we go back in the history of any league, 300 00:18:57,080 --> 00:19:00,480 Speaker 1: any before, any professional sporting league, you'll see that, you know, 301 00:19:00,560 --> 00:19:04,560 Speaker 1: league was formed. Owners come in a group of you know, 302 00:19:04,600 --> 00:19:07,280 Speaker 1: savvy owners come in and they and in some cases 303 00:19:07,320 --> 00:19:10,760 Speaker 1: it's six teams that start a league, right, and then 304 00:19:10,760 --> 00:19:13,680 Speaker 1: he grows to twelve. Then it grows to four, right, 305 00:19:14,040 --> 00:19:16,679 Speaker 1: And that doesn't happen overnight, right, it happens over a 306 00:19:16,720 --> 00:19:20,000 Speaker 1: period of time. It'll get to that. Uh, and we'll 307 00:19:20,040 --> 00:19:22,639 Speaker 1: look back thirty years from now and go, wow, they 308 00:19:22,640 --> 00:19:25,320 Speaker 1: did that really quickly, you know, just we're in the 309 00:19:25,359 --> 00:19:27,679 Speaker 1: middle of it now, so it feels it feels like 310 00:19:27,720 --> 00:19:33,639 Speaker 1: it's taking forever. Riot's been struggling with these really basic questions. 311 00:19:34,040 --> 00:19:37,000 Speaker 1: After all, they're trying to build a sports league from scratch. 312 00:19:38,480 --> 00:19:40,960 Speaker 1: The company did not want to record an interview for 313 00:19:41,000 --> 00:19:44,840 Speaker 1: this show, but an executive told me that it's developing 314 00:19:44,880 --> 00:19:47,560 Speaker 1: new ways to share media rights and what to do 315 00:19:47,600 --> 00:19:50,560 Speaker 1: about teams getting relegated to the minor leagues, which it 316 00:19:50,640 --> 00:19:54,320 Speaker 1: says fans like but team owners hate. The company thinks 317 00:19:54,359 --> 00:19:58,240 Speaker 1: it will have the details ironed out sometime in And 318 00:19:58,320 --> 00:20:00,879 Speaker 1: this is kind of the situation that everyone in the 319 00:20:01,040 --> 00:20:04,280 Speaker 1: sports is in right now. They say, the broad outlines 320 00:20:04,359 --> 00:20:17,359 Speaker 1: of the future are emerging. Echo Foxes LCS team is 321 00:20:17,400 --> 00:20:20,520 Speaker 1: playing okay this year. As of mid February, they were 322 00:20:20,600 --> 00:20:22,880 Speaker 1: right in the middle of the pack. You know, Rik 323 00:20:23,000 --> 00:20:25,959 Speaker 1: and Jason, the coaches you talked to in l A. 324 00:20:25,960 --> 00:20:28,440 Speaker 1: Are they starting to get a feel for what makes 325 00:20:28,440 --> 00:20:30,639 Speaker 1: an e sports team good? And you know what are 326 00:20:30,680 --> 00:20:34,639 Speaker 1: they doing better this year than last year? Well, they 327 00:20:35,240 --> 00:20:37,920 Speaker 1: brought in a bunch of new players. I mentioned Looper, 328 00:20:37,960 --> 00:20:41,720 Speaker 1: that was big. And when they talk about strategy, they'll 329 00:20:41,760 --> 00:20:45,120 Speaker 1: stress that individual players can be talented, but the real 330 00:20:45,240 --> 00:20:49,440 Speaker 1: factor for success is playing together as a team. And 331 00:20:49,640 --> 00:20:52,879 Speaker 1: that sounds a lot like traditional sports. But there's another 332 00:20:52,920 --> 00:20:56,399 Speaker 1: way that the sports is different, and that's that Echo 333 00:20:56,440 --> 00:21:01,360 Speaker 1: fox isn't just a single team, right The organization owns 334 00:21:01,400 --> 00:21:05,800 Speaker 1: eleven teams playing a range of different video games. They 335 00:21:05,840 --> 00:21:09,240 Speaker 1: also sponsor players who compete in video games like Mortal 336 00:21:09,320 --> 00:21:13,000 Speaker 1: Kombat and Street Fighter. Those don't have teams per se. 337 00:21:13,200 --> 00:21:15,480 Speaker 1: It's it's more like the tennis circuit, where there's a 338 00:21:15,520 --> 00:21:19,639 Speaker 1: single player playing taken together. You can think of this 339 00:21:19,800 --> 00:21:22,919 Speaker 1: kind of like if a single company employed everyone who 340 00:21:23,000 --> 00:21:27,280 Speaker 1: worked for the Knicks, the Jets, the Rangers, and the 341 00:21:27,280 --> 00:21:30,720 Speaker 1: guys who box at Madison Square Garden. And this lowers 342 00:21:30,760 --> 00:21:33,919 Speaker 1: the stakes a bit for what happens in any one league. 343 00:21:34,359 --> 00:21:37,159 Speaker 1: So if you're bad at LCS, you might still be 344 00:21:37,280 --> 00:21:41,680 Speaker 1: good at other games like Counterstrike or Overwatch. They're diversifying 345 00:21:41,720 --> 00:21:47,520 Speaker 1: their portfolio. Unlike uh, say, the Lakers, who who just 346 00:21:47,600 --> 00:21:51,440 Speaker 1: played basketball in the NBA. We at Echo Fox get 347 00:21:51,480 --> 00:21:54,159 Speaker 1: to we get to play in Legal Legends, we get 348 00:21:54,200 --> 00:21:56,560 Speaker 1: to play in E League and cs GO. We get 349 00:21:56,560 --> 00:21:58,520 Speaker 1: to play in Call of Duty. You get to play 350 00:21:58,560 --> 00:22:01,160 Speaker 1: and gear the War like. We're in different leagues. So 351 00:22:01,640 --> 00:22:07,720 Speaker 1: most professional sporting organizations just have one expression. We have 352 00:22:07,840 --> 00:22:14,080 Speaker 1: numerous expressions. It's kind of like this conglomerate of video 353 00:22:14,200 --> 00:22:18,520 Speaker 1: game related business ventures. The company just signed its first 354 00:22:18,720 --> 00:22:24,440 Speaker 1: million dollar sponsorship deal with a computer maker. Asis Rick 355 00:22:24,480 --> 00:22:27,000 Speaker 1: and Jason are looking beyond having just a bunch of 356 00:22:27,040 --> 00:22:30,000 Speaker 1: competitive teams. They say they want to dabble in things 357 00:22:30,080 --> 00:22:33,639 Speaker 1: like making scripted comedy videos and maybe running their own tournaments, 358 00:22:33,720 --> 00:22:36,639 Speaker 1: and who knows what else. It's not clear which of 359 00:22:36,640 --> 00:22:39,840 Speaker 1: these ingredients are the most important for a mature e 360 00:22:39,960 --> 00:22:45,320 Speaker 1: sports business. But that's mostly because there's no such thing yet. Yeah, 361 00:22:45,359 --> 00:22:46,600 Speaker 1: of course we have a team and then they play. 362 00:22:46,960 --> 00:22:49,080 Speaker 1: That's just that's like looking at a piano and looking 363 00:22:49,080 --> 00:22:52,680 Speaker 1: at one key, you know, the whole keyboard here. There's 364 00:22:52,720 --> 00:22:54,800 Speaker 1: like a bunch of notes that can be played, not 365 00:22:54,960 --> 00:23:00,600 Speaker 1: just one. And I think the most successful esport ornizations 366 00:23:01,240 --> 00:23:04,160 Speaker 1: are going to be the ones that figure out as 367 00:23:04,240 --> 00:23:07,320 Speaker 1: much of that as possible. But you want to be 368 00:23:07,400 --> 00:23:09,040 Speaker 1: the model. We're not looking at it. There there's no 369 00:23:09,080 --> 00:23:12,120 Speaker 1: one out there right now you can model yourselves after it. No, 370 00:23:12,160 --> 00:23:16,639 Speaker 1: absolutely not. We're we have to be as far as 371 00:23:16,680 --> 00:23:19,760 Speaker 1: I'm concerned personally, we are the ones that are are 372 00:23:20,800 --> 00:23:27,840 Speaker 1: setting the model. There's we have to be. There's no no, 373 00:23:27,920 --> 00:23:34,320 Speaker 1: there's nothing. So, Josh, do you think the traditional sports 374 00:23:34,359 --> 00:23:40,440 Speaker 1: industry is even a good analogy to understand the sports business? Well, yeah, sure, 375 00:23:40,600 --> 00:23:43,600 Speaker 1: I think people like to watch competitions and so if 376 00:23:43,640 --> 00:23:46,600 Speaker 1: you're trying to understand the appeal, there's a lot of 377 00:23:46,640 --> 00:23:51,679 Speaker 1: similarity there. It's easy to dismiss video games as sports. 378 00:23:51,680 --> 00:23:54,240 Speaker 1: Like for me, I love basketball, but I don't get 379 00:23:54,280 --> 00:23:57,159 Speaker 1: anything out of watching League of Legends. Then again, I 380 00:23:57,160 --> 00:24:01,280 Speaker 1: don't find golf airy exciting either. I don't either. So 381 00:24:01,760 --> 00:24:04,000 Speaker 1: what do you think is different here? I think the 382 00:24:04,040 --> 00:24:07,440 Speaker 1: businesses is really different. I think the sports business is 383 00:24:07,520 --> 00:24:11,680 Speaker 1: less straightforward. Advertisers want to access people who watch video 384 00:24:11,800 --> 00:24:15,760 Speaker 1: game related content. They're generally not watching traditional TV. But 385 00:24:15,840 --> 00:24:20,240 Speaker 1: advertisers also don't really understand this population. So what Echo 386 00:24:20,320 --> 00:24:24,600 Speaker 1: Fox or another sports organization does is it gathers all 387 00:24:24,640 --> 00:24:27,719 Speaker 1: these audiences up through a bunch of various sports leagues 388 00:24:27,800 --> 00:24:31,240 Speaker 1: or through its YouTube channels or whatever, and it says, hey, 389 00:24:31,359 --> 00:24:34,040 Speaker 1: big brands, we speak your language, but we also speak 390 00:24:34,080 --> 00:24:45,560 Speaker 1: this other language. Let us be your translator. And that's 391 00:24:45,600 --> 00:24:49,040 Speaker 1: it for this week's episode of Decrypted. Thanks for listening 392 00:24:49,840 --> 00:24:52,520 Speaker 1: tell us. Are you a fan of E sports? Record 393 00:24:52,520 --> 00:24:54,840 Speaker 1: a voice memo and send it to us at Decrypted 394 00:24:54,880 --> 00:24:57,600 Speaker 1: at Bloomberg dot net, or you can write to me 395 00:24:57,640 --> 00:25:00,720 Speaker 1: on Twitter. I'm at Joshua Brewsting and I'm at Aki 396 00:25:00,760 --> 00:25:04,399 Speaker 1: Ito seven. You can subscribe to decrypt it on iTunes 397 00:25:04,680 --> 00:25:07,520 Speaker 1: or wherever you get your podcasts, and leave us a 398 00:25:07,600 --> 00:25:10,359 Speaker 1: rating and review. This helps us make our shows better 399 00:25:10,560 --> 00:25:13,160 Speaker 1: and it also gets our podcasts in front of more listeners. 400 00:25:13,560 --> 00:25:16,840 Speaker 1: This episode was produced by Pierre Getcari, Liz Smith, and 401 00:25:16,920 --> 00:25:21,400 Speaker 1: Magnus Hendrickson. Alec McCabe is head of Bloomberg Podcasts. We'll 402 00:25:21,400 --> 00:25:22,200 Speaker 1: see you next week.