WEBVTT - The Billion Dollar Industry of Professional Video Game Battles 0:00:10.720 --> 0:00:17.880 Zon We're gonna die. Oh Dash set the scene for 0:00:17.960 --> 0:00:21.439 us here. Well, there's about a half dozen guys sitting 0:00:21.520 --> 0:00:24.560 in a dark room just playing video games. They're mostly 0:00:24.640 --> 0:00:27.080 in the early twenties, and it's pretty clear that it's 0:00:27.080 --> 0:00:28.800 a group of guys who's been hanging out with one 0:00:28.840 --> 0:00:33.080 another for quite some time. Similar scenes are probably playing 0:00:33.120 --> 0:00:36.840 out in hundreds of basements and addicts at this very moment, 0:00:37.479 --> 0:00:40.599 but this is a little different. Yeah, that's right. This 0:00:40.680 --> 0:00:43.720 isn't just a group of kids goofing around. It's actually 0:00:43.720 --> 0:00:48.440 a professional sports team practicing. People have been playing video 0:00:48.479 --> 0:00:52.400 games against one another since video games have existed, but 0:00:52.440 --> 0:00:56.480 there's a rapidly growing industry being built around professional video 0:00:56.520 --> 0:01:06.640 game competitions, also known as e sports. The big championship 0:01:06.680 --> 0:01:10.920 matches draw live crowds of over ten thousand people and 0:01:11.080 --> 0:01:14.800 online audiences that hit the tens of millions of viewers. 0:01:15.680 --> 0:01:18.360 What you heard earlier was a team I recently visited 0:01:18.360 --> 0:01:21.720 in Los Angeles. They're called Echo Fox, and they were 0:01:21.760 --> 0:01:26.679 practicing for this year's North American League Championship Series, which 0:01:26.720 --> 0:01:29.559 is a contest for people who play the game League 0:01:29.640 --> 0:01:33.039 of Legends LCS is one of the most prominent e 0:01:33.160 --> 0:01:37.280 sports leagues, and Echo Fox is built on a particularly 0:01:37.319 --> 0:01:41.240 ambitious vision for the future of the sports. Taken together, 0:01:41.600 --> 0:01:44.920 Echo Fox and LCS show us just how big e 0:01:45.040 --> 0:01:48.440 sports might eventually become, and also how much has to 0:01:48.440 --> 0:02:02.920 be figured out along the way. Hi, I'm Akio and 0:02:03.000 --> 0:02:06.720 I'm Joshua Bursting, And this week on Decrypted, we're taking 0:02:06.720 --> 0:02:10.760 you inside this world of video game competitions. We'll be 0:02:10.800 --> 0:02:14.359 showing you how e sports resembles traditional sports and how 0:02:14.400 --> 0:02:18.120 it looks much much different. We'll also introduce you to 0:02:18.200 --> 0:02:21.680 a couple of key characters in this business, starting with 0:02:21.800 --> 0:02:25.799 Rick Fox. Rick is an actor and he also won 0:02:25.960 --> 0:02:30.080 three NBA Championships playing basketball for the Los Angeles Lakers. 0:02:30.840 --> 0:02:34.320 Money is pouring into e sports from professional sports, and 0:02:34.360 --> 0:02:38.400 the sports business is changing fast. We'll look ahead at 0:02:38.440 --> 0:02:40.960 what the industry is trying to build for the coming years. 0:02:48.280 --> 0:02:51.480 So josh to report out this episode, you escape the 0:02:51.560 --> 0:02:54.200 brutal New York winter to spend a couple of days 0:02:54.200 --> 0:02:56.880 in California. That's right, I flew out to l A 0:02:57.000 --> 0:02:59.240 in January to spend some time with the people who 0:02:59.360 --> 0:03:03.000 run Echo Box, the professional sports team we mentioned earlier. 0:03:03.639 --> 0:03:05.360 Bad luck for me. It was actually kind of cold 0:03:05.360 --> 0:03:07.880 and rainy when I got there, so I jumped in 0:03:07.880 --> 0:03:10.040 a cab at the airport and headed to what Echo 0:03:10.080 --> 0:03:12.800 Foxes Pressed people had described to me as the team's 0:03:12.960 --> 0:03:17.480 training facility. Sounds fancy. Thank you, okay, thank you very much. 0:03:17.520 --> 0:03:23.560 Hav a good day. Okay, So here I am. I 0:03:23.600 --> 0:03:28.440 can say that from the looks of this building, professional 0:03:28.520 --> 0:03:30.720 video games have not quite made it to the level 0:03:32.080 --> 0:03:34.639 of the NBA in terms of glamour and glitz. I'm 0:03:34.680 --> 0:03:40.680 standing on pretty drab street right across the street from 0:03:40.680 --> 0:03:47.240 a self storage unit, um, a dentist and a gas station. 0:03:47.360 --> 0:03:52.040 It's like a plane brick building. Um, so you know, 0:03:52.320 --> 0:03:57.600 clearly not quite the big time yet. Okay, so not 0:03:57.720 --> 0:04:01.200 so fancy. Well, the player has had these huge, comfortable 0:04:01.200 --> 0:04:04.840 looking padded chairs. Those were kind of fancy, but otherwise no, 0:04:05.960 --> 0:04:08.720 so I'm trying to picture it here. Would you see. 0:04:09.120 --> 0:04:12.360 There was no stretching or drills or anything. The guys 0:04:12.400 --> 0:04:15.520 pretty much walked in, sat down and started playing video games. 0:04:16.440 --> 0:04:18.719 They all refer to one another by their screen names. 0:04:18.800 --> 0:04:21.720 So the captain is frogging and he's kind of a joker. 0:04:21.839 --> 0:04:24.040 He was messing around. He kept flipping back and forth 0:04:24.040 --> 0:04:26.920 to watch a basketball game when the action slowed down 0:04:27.520 --> 0:04:30.080 and they're big free agent is is a young guy 0:04:30.160 --> 0:04:32.720 named Looper. He didn't say much of anything at all 0:04:32.839 --> 0:04:36.040 because he just came over from Korea and doesn't really 0:04:36.040 --> 0:04:40.479 speak English. While they were playing, I hung out with 0:04:40.520 --> 0:04:42.880 Tim Cho, he's one of the coaches, and he had 0:04:42.880 --> 0:04:47.440 his laptop open on his knees. So I'm just writing 0:04:47.440 --> 0:04:51.320 about why certain players need to work on, specifically learned 0:04:51.320 --> 0:04:53.480 when we notice him the things we need to immediately correct. 0:04:53.760 --> 0:04:55.960 Let do you have a spreadshade open on your computer 0:04:56.080 --> 0:04:59.159 and you just have a column for each player or something. 0:04:59.279 --> 0:05:01.600 That's what I'm gonna right now. And then what I'm 0:05:01.640 --> 0:05:02.960 kind of doing is I'm going to print out a 0:05:03.000 --> 0:05:05.960 sheet because coaching in this game is really arbitrary and 0:05:06.000 --> 0:05:08.520 a lot of it's something that hasn't been figured out 0:05:08.560 --> 0:05:16.760 yet completely. E sports is changing fast. Video game publishers 0:05:16.800 --> 0:05:19.320 are now just starting to treat this as a potentially 0:05:19.480 --> 0:05:22.880 serious part of their business. According to the research firm 0:05:22.920 --> 0:05:26.640 super Data, it was an eight hundred ninety two million 0:05:26.680 --> 0:05:30.919 dollar industry last year. This year's projected to cross the 0:05:31.000 --> 0:05:35.880 billion dollar mark, and people in organizations associated with traditional 0:05:35.920 --> 0:05:39.640 sports have begun investing in the sports organizations or just 0:05:39.680 --> 0:05:42.760 setting up their own teams from scratch. The owners of 0:05:42.760 --> 0:05:46.480 the basketball teams the Philadelphias have Any Sixers, the Miami Heat, 0:05:46.680 --> 0:05:50.120 and the Sacramento Kings have all made recent e sports investments. 0:05:50.839 --> 0:05:53.960 The NBA itself just announced that it was starting its 0:05:54.000 --> 0:05:57.160 own video game league. It's based on NBA two K, 0:05:57.520 --> 0:06:00.840 which is this popular basketball video game tam made by 0:06:00.839 --> 0:06:05.520 the company Take two Interactive. In the league, actual NBA 0:06:05.600 --> 0:06:08.719 teams will field their own digital teams that will compete 0:06:08.720 --> 0:06:12.280 against one another in a video game depicting the actual 0:06:12.360 --> 0:06:17.000 NBA teams. Sounds meta, yeah, very But before all that, 0:06:17.040 --> 0:06:19.560 there was Echo Fox. It was one of the first 0:06:19.920 --> 0:06:24.000 moves from traditional sports to e sports. It's named after 0:06:24.160 --> 0:06:28.920 Rick Fox, the former NBA player and actor Rick Fox. 0:06:29.680 --> 0:06:37.960 Now we're guarding him. He popped three crazy like a Fox. 0:06:39.320 --> 0:06:41.719 He got together a group of investors that started the 0:06:41.760 --> 0:06:45.920 team near the end of Rick is six ft seven 0:06:46.200 --> 0:06:49.080 and I'm not much of a basketball fan, so I 0:06:49.120 --> 0:06:52.080 had to google him. But he's a very handsome guy. 0:06:52.360 --> 0:06:55.640 He's also acting in a bunch of TV shows. Yeah, 0:06:55.760 --> 0:06:57.880 if you walk around l a with him, people hunk 0:06:57.920 --> 0:07:00.760 their horns and wave. He's a real celebrity and when 0:07:00.760 --> 0:07:03.120 he started this e sports team, it was as if 0:07:03.160 --> 0:07:06.160 the popular Jack had walked into the cafeteria one day 0:07:06.480 --> 0:07:08.719 and just suddenly decided to sit down with the nerds. 0:07:09.400 --> 0:07:12.920 So this was a big validation for the people already 0:07:12.960 --> 0:07:16.720 involved in the sports. They were onto something big. Yeah, 0:07:16.800 --> 0:07:19.080 and Ric has served as something of a tour guide 0:07:19.080 --> 0:07:22.240 for other people in traditional sports who want to follow 0:07:22.280 --> 0:07:25.120 him into the business but are a bit confused. He said, 0:07:25.160 --> 0:07:28.400 it's a funny feeling. Um, I feel like someone dropped 0:07:28.400 --> 0:07:29.840 me in a foreign country and I was forced to 0:07:29.920 --> 0:07:32.000 learn the language, you know. So I've I've been able 0:07:32.040 --> 0:07:37.120 to speak it. I would say pretty pretty fluently as 0:07:37.160 --> 0:07:42.080 a Fiday. But still I miss maybe misscongregat a herb 0:07:42.160 --> 0:07:46.440 here and there every once in a while. But I'm 0:07:46.480 --> 0:07:50.280 getting there. Yeah. So, another guy I want to introduce 0:07:50.320 --> 0:07:53.840 you to is Jace Hall. He's the CEO of Echo Fox. 0:07:54.760 --> 0:07:57.400 Jace is a celebrity in the video game world. He's 0:07:57.440 --> 0:07:59.440 made a bunch of his own video games and he 0:07:59.520 --> 0:08:02.120 used to run the video game studio at Warner Brothers. 0:08:02.800 --> 0:08:05.280 Jason is also about six ft seven which makes him 0:08:05.280 --> 0:08:07.520 one of the only people in the industry as tall 0:08:07.560 --> 0:08:10.840 as Rick Fox. The two men met nearly a decade 0:08:10.840 --> 0:08:14.000 ago at a conference. They immediately hit it off, and 0:08:14.120 --> 0:08:17.000 Jason invited Rick over to the film production studio he 0:08:17.040 --> 0:08:21.640 was running at the time. Here's Jason. He eventually came 0:08:21.680 --> 0:08:26.760 over and he saw the world that you know this is. 0:08:27.880 --> 0:08:30.160 You took a look at the office, right, it's like 0:08:30.240 --> 0:08:35.640 a bit of a playground for video games. Yes, and 0:08:35.840 --> 0:08:38.480 uh um, you know, the minute he walked in, it 0:08:38.559 --> 0:08:41.320 was like, you know, the little kid gets unlocked. Next 0:08:41.320 --> 0:08:44.120 thing we know, we're playing video games against each other 0:08:44.240 --> 0:08:49.760 and competing. Jason is unbelievably good at video games, and 0:08:49.800 --> 0:08:55.560 according to Jason, so is Rick. Rick is probably the 0:08:55.559 --> 0:08:59.840 best Miss pac Man player that's ever been in the NBA. 0:09:00.080 --> 0:09:03.319 I can tell you that right now with the higher levels, 0:09:03.320 --> 0:09:06.600 packing is pretty serious. He has not yet been able 0:09:06.640 --> 0:09:11.040 to take me in that game. Um. But serious competition 0:09:11.559 --> 0:09:14.319 evolved out of that. We started live streaming it and 0:09:14.920 --> 0:09:18.560 you know, just and we start building an audience around that. Um. 0:09:18.600 --> 0:09:20.920 And then that's really where some of our competitive rival 0:09:21.000 --> 0:09:23.920 we just started spanning different video games. I will give 0:09:24.040 --> 0:09:27.960 Rick this, there's an arcade game called Galagha or some 0:09:28.000 --> 0:09:35.760 people call it Galaga, which he is just dominates. The 0:09:35.840 --> 0:09:38.000 day after I met Jason, I had breakfast with Rick. 0:09:38.520 --> 0:09:40.640 I told him that jas had mentioned MS pac Man. 0:09:41.480 --> 0:09:44.439 Did he bring up Gallaght? And he did. I don't 0:09:44.440 --> 0:09:46.120 think there's a single person that building would never bring 0:09:46.160 --> 0:09:48.640 up there gallagh because they're all they were all blown away. 0:09:48.640 --> 0:09:54.479 Then it's it's rare that I will sit down and 0:09:54.480 --> 0:09:59.600 and and just prove my authenticity to my friends when 0:09:59.640 --> 0:10:02.079 it comes in his face. But when I do, it's 0:10:02.080 --> 0:10:06.160 always like, what where did this come from? Um? Jason's 0:10:06.280 --> 0:10:12.600 miss MS pac Man stories? Ring ring true? I'm about 0:10:12.760 --> 0:10:16.960 I'm probably like to points behind him in top score, 0:10:17.040 --> 0:10:19.600 So I gotta let him have that one. I can't. 0:10:19.760 --> 0:10:22.800 I can't gotta let him have one. Care So, for 0:10:22.840 --> 0:10:25.680 the first few years of this relationship, Rick was having 0:10:25.800 --> 0:10:29.319 a great time fooling around playing video games. He's always 0:10:29.320 --> 0:10:31.560 been into video games. He plays with his son, Kyle, 0:10:32.040 --> 0:10:35.679 who's working towards becoming a game developer himself. But then 0:10:35.800 --> 0:10:40.000 something changed in Rick and Kyle went to a League 0:10:40.000 --> 0:10:44.000 of Legends tournament at Madison Square Garden. Thousands of people 0:10:44.040 --> 0:10:47.920 showed up to watch with solo bid versus Outer Logic, 0:10:48.000 --> 0:10:59.840 gaving very low lot of for parent City Gaming super megac. 0:11:03.000 --> 0:11:06.360 Within months, Rick and some other investors had paid one 0:11:06.520 --> 0:11:09.560 million dollars for the right to feel the team. The 0:11:09.600 --> 0:11:12.160 whole team lives together in a house in Los Angeles, 0:11:12.360 --> 0:11:16.040 paid for partially by Riot, the video game publisher, and 0:11:16.120 --> 0:11:19.520 partially by Echo Fox, their team. Rick when it talks 0:11:19.559 --> 0:11:23.000 specifically about the money he pays his players, but other 0:11:23.040 --> 0:11:26.160 people involved in lcs tell me that most players make 0:11:26.200 --> 0:11:29.680 six figure salaries. Okay, and tell us a little more 0:11:29.679 --> 0:11:32.320 about these players, who they are, where they come from, 0:11:32.880 --> 0:11:41.280 how they stumbled into this lucrative world of professional video games. Yeah, 0:11:41.320 --> 0:11:44.320 it's really different for each game. There's a whole scene 0:11:44.320 --> 0:11:48.280 around various video games, mostly playing online. When I asked 0:11:48.280 --> 0:11:51.200 most of the players for Echo Fox how they came 0:11:51.240 --> 0:11:54.480 to be pros, they said they pretty much started competing, 0:11:54.960 --> 0:11:58.400 showed they were really good, and began moving up the ranks. 0:11:58.920 --> 0:12:01.600 They also all said that it's much harder to become 0:12:01.640 --> 0:12:03.880 a pro now than it was a few years back. 0:12:04.880 --> 0:12:08.000 Rick is constantly relating the sports to his time playing 0:12:08.000 --> 0:12:10.800 in the NBA. One of the first things he did 0:12:10.840 --> 0:12:13.480 after forming Echo Fox was to take the team on 0:12:13.480 --> 0:12:16.800 a tour of the Lakers practice facility. I wanted them 0:12:16.800 --> 0:12:18.640 to see my world. I wanted to understand where I 0:12:18.640 --> 0:12:21.839 came from. Um, I wanted them to get a sense 0:12:21.880 --> 0:12:27.000 of what a professional franchise, you know, structure looked like, 0:12:27.880 --> 0:12:30.320 because that's what we want to That's what drives us 0:12:30.400 --> 0:12:34.079 right to bring that level of of support and background today. 0:12:34.280 --> 0:12:38.880 So Rick also wants them to work out like athletes. 0:12:39.640 --> 0:12:41.680 When I visited the team, they were preparing for the 0:12:41.720 --> 0:12:45.520 new season, which started in late January. The organization was 0:12:45.600 --> 0:12:48.720 launching into a special e sports training regiment that had 0:12:48.760 --> 0:12:50.360 been set up for them at a gym in Santa 0:12:50.400 --> 0:12:53.240 Monica that's right near the arena that Riot built to 0:12:53.280 --> 0:12:56.679 host the actual games. One of the big purposes of 0:12:56.679 --> 0:12:59.439 today is just here's our starting point, right, so reaction 0:12:59.480 --> 0:13:02.000 time and to get health and fitness. So we're gonna 0:13:02.240 --> 0:13:04.480 also measure like blood pressures that just these kind of 0:13:04.480 --> 0:13:07.600 basic things. Are also going to measure grip strength, which 0:13:07.640 --> 0:13:09.560 is a measure of your brain activation, believe it or not. 0:13:09.640 --> 0:13:13.240 So they tested everyone's memory, measured how high they could jump, 0:13:13.640 --> 0:13:15.880 and had this little machine to see how many times 0:13:15.920 --> 0:13:18.720 they could click on a button in ten seconds. They 0:13:18.720 --> 0:13:21.679 could click on a button a lot. But one surprising 0:13:21.760 --> 0:13:25.440 thing was the fastest person on the team was actually Rick. 0:13:26.640 --> 0:13:29.440 A few guys had spent their offseason working out, but 0:13:29.559 --> 0:13:31.800 this is still a group of guys who spent most 0:13:31.840 --> 0:13:34.680 of their free time sitting at a computer. The gym 0:13:34.800 --> 0:13:38.199 was clearly not their natural habitat. I gotta measure something 0:13:38.240 --> 0:13:40.480 in order to manage it, right, So this is all 0:13:40.520 --> 0:13:42.480 about just seeing kind of where one's at today and 0:13:42.840 --> 0:13:44.280 then giving it. Looks at an old review of some 0:13:44.320 --> 0:13:46.480 of the the exercise stuff and the cycling, so it's gonna 0:13:46.480 --> 0:13:55.720 be funny. The price dragging rights clearly. Speaking of prizes, 0:13:56.000 --> 0:14:01.360 let's talk about how these sports teams are actually making money. 0:14:03.600 --> 0:14:07.040 So there is the prize money from tournaments, but no 0:14:07.080 --> 0:14:09.360 one really wants to rely on that for a business. 0:14:10.280 --> 0:14:14.040 Mostly investors are betting that big opportunities will develop in 0:14:14.080 --> 0:14:17.440 the future. This could happen in a few ways. There's 0:14:17.480 --> 0:14:20.920 the value of the team itself. That is, Rick and 0:14:21.040 --> 0:14:25.280 his co investors bought a slot in LCS, assuming that 0:14:25.360 --> 0:14:27.520 if they want to sell it five or ten years 0:14:27.520 --> 0:14:30.480 from now, it could be worth much more. Then there's 0:14:30.520 --> 0:14:32.880 the media rights deals. Those work a lot like they 0:14:32.880 --> 0:14:35.120 do in professional sports, or at least they hope they 0:14:35.120 --> 0:14:38.520 will at some point. And there's advertising where teams and 0:14:38.520 --> 0:14:42.520 players take on sponsors. That's the big one. A lot 0:14:42.560 --> 0:14:46.360 of this sounds pretty similar to the economics of traditional sports, 0:14:46.440 --> 0:14:49.960 but there's one thing that's very different. The game they're 0:14:50.000 --> 0:14:53.080 playing is the property of a video game publisher. In 0:14:53.120 --> 0:14:56.680 the case of legal lessons, this is Riot Games, but 0:14:56.760 --> 0:15:00.240 it's not just Riot. Pretty much every major video game 0:15:00.280 --> 0:15:03.720 publisher now wants to have the sports leagues built around 0:15:03.720 --> 0:15:06.800 some of their games. Here's what Jas had to say. 0:15:07.480 --> 0:15:14.320 Imagine football. Imagine the stadium and the players and everything 0:15:14.360 --> 0:15:21.600 about it is owned by Wilson, who sells and makes footballs, 0:15:22.440 --> 0:15:26.720 and the whole point of everything is to actually sell 0:15:26.920 --> 0:15:30.520 the football. Well's everybody in the stadium and bout the football. 0:15:30.600 --> 0:15:36.040 Everybody watching needs football. Now, if that's the case, the 0:15:36.120 --> 0:15:40.960 orientation of the entire economic structure how you would manage 0:15:41.200 --> 0:15:44.920 that area fastly different than the way football is today. Right. 0:15:46.000 --> 0:15:49.160 Riot recently signed a deal with bam Tech, which is 0:15:49.240 --> 0:15:53.480 Major League Baseball streaming media unit. Bam Tech is paying 0:15:53.560 --> 0:15:57.400 Riot a minimum of three hundred million dollars to stream 0:15:57.480 --> 0:16:01.800 league competitions through the year three, it'll run its own 0:16:01.880 --> 0:16:06.080 Legal Legends streaming app and handle the technology for streaming 0:16:06.120 --> 0:16:09.560 on platforms like Twitch and if you don't know what twitches, 0:16:09.920 --> 0:16:13.960 it's the most popular live streaming website for video games. 0:16:17.120 --> 0:16:19.960 So the main way that traditional sports teams make money 0:16:20.000 --> 0:16:22.520 now is by sharing in the revenue that comes from 0:16:22.560 --> 0:16:25.760 TV deals. But Riot is keeping all the money from 0:16:25.760 --> 0:16:29.560 its streaming deal to itself, at least for now. Some 0:16:29.720 --> 0:16:32.960 team owners were unhappy about that. You can see these 0:16:33.080 --> 0:16:38.200 tense exchanges on Reddit between Riot executives and team owners. Yeah, 0:16:38.520 --> 0:16:41.400 Jason Rick were not involved in those. They like to 0:16:41.440 --> 0:16:44.560 present themselves as kind of the grown ups in the room, 0:16:44.800 --> 0:16:47.080 something that seems to annoy some of the other owners 0:16:47.080 --> 0:16:49.880 at times. Either way, they say they're fine with what 0:16:50.000 --> 0:16:54.760 Riot's doing, and Ryot's position makes sense. Here. Here's a 0:16:54.800 --> 0:16:57.920 company that made a video game that became popular in 0:16:57.960 --> 0:17:02.560 this brand new way, and now the company's capitalizing on that. Yeah, 0:17:02.600 --> 0:17:05.480 but that's not even its main business. Riot made nearly 0:17:05.520 --> 0:17:08.679 two billion dollars in revenue from League of Legends just 0:17:08.840 --> 0:17:12.200 last year. Most of that was unrelated to the sports, 0:17:12.800 --> 0:17:15.040 and we should also mention there's costs for Riot to 0:17:15.359 --> 0:17:19.440 it put some money towards player salaries and other team costs. 0:17:20.240 --> 0:17:23.560 At the same time, the publisher wouldn't have this new 0:17:23.600 --> 0:17:27.080 opportunity in e sports if these teams didn't come along 0:17:27.119 --> 0:17:30.719 and start competing. So it has to figure out how 0:17:30.720 --> 0:17:34.720 to keep its new business partners happy and financially sustainable. 0:17:34.760 --> 0:17:39.200 To this has both sides a bit on edge. There's 0:17:39.280 --> 0:17:42.200 the promise of all this new money floating around, and 0:17:42.440 --> 0:17:46.600 no one wants to get left out. Soon after Rick 0:17:46.680 --> 0:17:50.840 started Echo Fox, another team called Energy was started by 0:17:50.880 --> 0:17:54.760 two of the owners of the Sacramento Kings. It started 0:17:54.800 --> 0:17:57.919 to look like the new big money teams would come in, 0:17:58.480 --> 0:18:02.840 dominate the league and change everything. The teams with less 0:18:02.880 --> 0:18:06.040 money were worried. It turns out they did not have 0:18:06.160 --> 0:18:09.720 to be. Echo Fox and Energy were both really bad 0:18:09.760 --> 0:18:12.840 at first, so bad that the end of the summer 0:18:12.880 --> 0:18:15.320 season they had to play in a tournament where the 0:18:15.359 --> 0:18:18.719 losers would be sent down to the minor leagues. And 0:18:18.800 --> 0:18:21.600 even though Echo Fox managed to stay in the league, 0:18:21.960 --> 0:18:25.840 Energy lost. Now this is bad for Energy, obviously it 0:18:26.000 --> 0:18:29.240 lost its investment, but it was also bad for Riot. 0:18:29.880 --> 0:18:32.639 Instead of playing in the minor leagues. Energy said it 0:18:32.680 --> 0:18:35.840 was going to stop competing in League of Legends altogether. 0:18:36.800 --> 0:18:40.000 Right now, video game publishers are competing with one another 0:18:40.119 --> 0:18:43.760 for the attention of new investors, and having a big 0:18:43.840 --> 0:18:47.760 name abandoned league was not a great look. Rick sees 0:18:47.800 --> 0:18:50.040 all of this as a sign that everyone in the 0:18:50.160 --> 0:18:52.880 sports is still going through some growing pains right now. 0:18:54.280 --> 0:18:57.040 If we go back in the history of any league, 0:18:57.080 --> 0:19:00.480 any before, any professional sporting league, you'll see that, you know, 0:19:00.560 --> 0:19:04.560 league was formed. Owners come in a group of you know, 0:19:04.600 --> 0:19:07.280 savvy owners come in and they and in some cases 0:19:07.320 --> 0:19:10.760 it's six teams that start a league, right, and then 0:19:10.760 --> 0:19:13.680 he grows to twelve. Then it grows to four, right, 0:19:14.040 --> 0:19:16.679 And that doesn't happen overnight, right, it happens over a 0:19:16.720 --> 0:19:20.000 period of time. It'll get to that. Uh, and we'll 0:19:20.040 --> 0:19:22.639 look back thirty years from now and go, wow, they 0:19:22.640 --> 0:19:25.320 did that really quickly, you know, just we're in the 0:19:25.359 --> 0:19:27.679 middle of it now, so it feels it feels like 0:19:27.720 --> 0:19:33.639 it's taking forever. Riot's been struggling with these really basic questions. 0:19:34.040 --> 0:19:37.000 After all, they're trying to build a sports league from scratch. 0:19:38.480 --> 0:19:40.960 The company did not want to record an interview for 0:19:41.000 --> 0:19:44.840 this show, but an executive told me that it's developing 0:19:44.880 --> 0:19:47.560 new ways to share media rights and what to do 0:19:47.600 --> 0:19:50.560 about teams getting relegated to the minor leagues, which it 0:19:50.640 --> 0:19:54.320 says fans like but team owners hate. The company thinks 0:19:54.359 --> 0:19:58.240 it will have the details ironed out sometime in And 0:19:58.320 --> 0:20:00.879 this is kind of the situation that everyone in the 0:20:01.040 --> 0:20:04.280 sports is in right now. They say, the broad outlines 0:20:04.359 --> 0:20:17.359 of the future are emerging. Echo Foxes LCS team is 0:20:17.400 --> 0:20:20.520 playing okay this year. As of mid February, they were 0:20:20.600 --> 0:20:22.880 right in the middle of the pack. You know, Rik 0:20:23.000 --> 0:20:25.959 and Jason, the coaches you talked to in l A. 0:20:25.960 --> 0:20:28.440 Are they starting to get a feel for what makes 0:20:28.440 --> 0:20:30.639 an e sports team good? And you know what are 0:20:30.680 --> 0:20:34.639 they doing better this year than last year? Well, they 0:20:35.240 --> 0:20:37.920 brought in a bunch of new players. I mentioned Looper, 0:20:37.960 --> 0:20:41.720 that was big. And when they talk about strategy, they'll 0:20:41.760 --> 0:20:45.120 stress that individual players can be talented, but the real 0:20:45.240 --> 0:20:49.440 factor for success is playing together as a team. And 0:20:49.640 --> 0:20:52.879 that sounds a lot like traditional sports. But there's another 0:20:52.920 --> 0:20:56.399 way that the sports is different, and that's that Echo 0:20:56.440 --> 0:21:01.360 fox isn't just a single team, right The organization owns 0:21:01.400 --> 0:21:05.800 eleven teams playing a range of different video games. They 0:21:05.840 --> 0:21:09.240 also sponsor players who compete in video games like Mortal 0:21:09.320 --> 0:21:13.000 Kombat and Street Fighter. Those don't have teams per se. 0:21:13.200 --> 0:21:15.480 It's it's more like the tennis circuit, where there's a 0:21:15.520 --> 0:21:19.639 single player playing taken together. You can think of this 0:21:19.800 --> 0:21:22.919 kind of like if a single company employed everyone who 0:21:23.000 --> 0:21:27.280 worked for the Knicks, the Jets, the Rangers, and the 0:21:27.280 --> 0:21:30.720 guys who box at Madison Square Garden. And this lowers 0:21:30.760 --> 0:21:33.919 the stakes a bit for what happens in any one league. 0:21:34.359 --> 0:21:37.159 So if you're bad at LCS, you might still be 0:21:37.280 --> 0:21:41.680 good at other games like Counterstrike or Overwatch. They're diversifying 0:21:41.720 --> 0:21:47.520 their portfolio. Unlike uh, say, the Lakers, who who just 0:21:47.600 --> 0:21:51.440 played basketball in the NBA. We at Echo Fox get 0:21:51.480 --> 0:21:54.159 to we get to play in Legal Legends, we get 0:21:54.200 --> 0:21:56.560 to play in E League and cs GO. We get 0:21:56.560 --> 0:21:58.520 to play in Call of Duty. You get to play 0:21:58.560 --> 0:22:01.160 and gear the War like. We're in different leagues. So 0:22:01.640 --> 0:22:07.720 most professional sporting organizations just have one expression. We have 0:22:07.840 --> 0:22:14.080 numerous expressions. It's kind of like this conglomerate of video 0:22:14.200 --> 0:22:18.520 game related business ventures. The company just signed its first 0:22:18.720 --> 0:22:24.440 million dollar sponsorship deal with a computer maker. Asis Rick 0:22:24.480 --> 0:22:27.000 and Jason are looking beyond having just a bunch of 0:22:27.040 --> 0:22:30.000 competitive teams. They say they want to dabble in things 0:22:30.080 --> 0:22:33.639 like making scripted comedy videos and maybe running their own tournaments, 0:22:33.720 --> 0:22:36.639 and who knows what else. It's not clear which of 0:22:36.640 --> 0:22:39.840 these ingredients are the most important for a mature e 0:22:39.960 --> 0:22:45.320 sports business. But that's mostly because there's no such thing yet. Yeah, 0:22:45.359 --> 0:22:46.600 of course we have a team and then they play. 0:22:46.960 --> 0:22:49.080 That's just that's like looking at a piano and looking 0:22:49.080 --> 0:22:52.680 at one key, you know, the whole keyboard here. There's 0:22:52.720 --> 0:22:54.800 like a bunch of notes that can be played, not 0:22:54.960 --> 0:23:00.600 just one. And I think the most successful esport ornizations 0:23:01.240 --> 0:23:04.160 are going to be the ones that figure out as 0:23:04.240 --> 0:23:07.320 much of that as possible. But you want to be 0:23:07.400 --> 0:23:09.040 the model. We're not looking at it. There there's no 0:23:09.080 --> 0:23:12.120 one out there right now you can model yourselves after it. No, 0:23:12.160 --> 0:23:16.639 absolutely not. We're we have to be as far as 0:23:16.680 --> 0:23:19.760 I'm concerned personally, we are the ones that are are 0:23:20.800 --> 0:23:27.840 setting the model. There's we have to be. There's no no, 0:23:27.920 --> 0:23:34.320 there's nothing. So, Josh, do you think the traditional sports 0:23:34.359 --> 0:23:40.440 industry is even a good analogy to understand the sports business? Well, yeah, sure, 0:23:40.600 --> 0:23:43.600 I think people like to watch competitions and so if 0:23:43.640 --> 0:23:46.600 you're trying to understand the appeal, there's a lot of 0:23:46.640 --> 0:23:51.679 similarity there. It's easy to dismiss video games as sports. 0:23:51.680 --> 0:23:54.240 Like for me, I love basketball, but I don't get 0:23:54.280 --> 0:23:57.159 anything out of watching League of Legends. Then again, I 0:23:57.160 --> 0:24:01.280 don't find golf airy exciting either. I don't either. So 0:24:01.760 --> 0:24:04.000 what do you think is different here? I think the 0:24:04.040 --> 0:24:07.440 businesses is really different. I think the sports business is 0:24:07.520 --> 0:24:11.680 less straightforward. Advertisers want to access people who watch video 0:24:11.800 --> 0:24:15.760 game related content. They're generally not watching traditional TV. But 0:24:15.840 --> 0:24:20.240 advertisers also don't really understand this population. So what Echo 0:24:20.320 --> 0:24:24.600 Fox or another sports organization does is it gathers all 0:24:24.640 --> 0:24:27.719 these audiences up through a bunch of various sports leagues 0:24:27.800 --> 0:24:31.240 or through its YouTube channels or whatever, and it says, hey, 0:24:31.359 --> 0:24:34.040 big brands, we speak your language, but we also speak 0:24:34.080 --> 0:24:45.560 this other language. Let us be your translator. And that's 0:24:45.600 --> 0:24:49.040 it for this week's episode of Decrypted. Thanks for listening 0:24:49.840 --> 0:24:52.520 tell us. Are you a fan of E sports? Record 0:24:52.520 --> 0:24:54.840 a voice memo and send it to us at Decrypted 0:24:54.880 --> 0:24:57.600 at Bloomberg dot net, or you can write to me 0:24:57.640 --> 0:25:00.720 on Twitter. I'm at Joshua Brewsting and I'm at Aki 0:25:00.760 --> 0:25:04.399 Ito seven. You can subscribe to decrypt it on iTunes 0:25:04.680 --> 0:25:07.520 or wherever you get your podcasts, and leave us a 0:25:07.600 --> 0:25:10.359 rating and review. This helps us make our shows better 0:25:10.560 --> 0:25:13.160 and it also gets our podcasts in front of more listeners. 0:25:13.560 --> 0:25:16.840 This episode was produced by Pierre Getcari, Liz Smith, and 0:25:16.920 --> 0:25:21.400 Magnus Hendrickson. Alec McCabe is head of Bloomberg Podcasts. We'll 0:25:21.400 --> 0:25:22.200 see you next week.