The NBA 2K League held its inaugural draft on Wednesday, at the Hulu Theatre at Madison Square Garden. 102 gamers were selected by the league’s 17 participating franchises, with NBA Commissioner Adam Silver introducing the 1st overall selection; Artreyo “Dimez” Boyd, selected by Mavs Gaming. First round selections will sign 6-month contracts worth $35,000, with the balance of the league’s players taking home a base salary of $32,000 annually. All players will receive room and board, medical insurance and a retirement plan. The teams, each consisting of 6 players, will compete for their share of $1 million prize pool. Game locations, the number of games to be played and the number of teams that will qualify for the playoffs, are among the details that still need to be worked out.
Howie Long-Short: The NBA 2K League is a collaboration between the NBA and Take Two Interactive (TTWO), the publisher of NBA 2K franchise. The company’s Q3 ’18 earnings report was highlighted by a reported +64% YoY increase in recurrent consumer spending (32% of total net revenue) and an 8% increase (to $258.4 million) in digitally delivered net revenue (54% of total net revenue). It’s expected that the increased exposure generated by the 2K League will increase both recurrent spending on the game and game sales in fiscal 2019. It should be noted that NBA 2K was the 2nd best-selling video game of 2017 in U.S.
Earlier this week, the NBA 2K League named Dell (DVMT) and Intel (INTC) as its first 2 Official Partners. Dell’s Alienware gaming PCs, powered by Intel processors, will be the exclusive machines used in competition. Both companies reported record Q4 ‘17 revenue. DVMT was +9% YoY to $21.9 billion, while INTC was +8% YoY (excluding McAfee) to $17.1 billion. Record holiday season sales for gaming products was among Dell’s quarterly highlights.
Fun Fact: NBA owners have taken the biggest leap into the esports space (projected to approach $1 billion in revenue this year), with 13 ownership teams having invested in or acquired teams. For comparison purposes, just 6 MLB ownership groups and 3 NFL owners maintain an equity interest in a competitive gaming franchise.
Fan Marino: 0 of the 102 gamers that made up the league’s inaugural draft eligible player pool, were female. While a bad look, it certainly wasn’t a conscious one by the league. Tryouts were open and gamers were not asked to disclose their sex until after the combine. Commissioner Silver said that the league has launched an initiative focused on the recruitment and development of female gamers; they’ll also work to gain an understanding of gender disparities in competitive gaming (just 1 female finished among the combine’s Top 250 performers).
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The NBA and Take-Two Interactive Software (TTWO) are launching the NBA 2K League in 2018; 17 NBA teams have committed to participating for a period of 3 years. Each franchise will have the opportunity to select 5 gamers at the March ’18 draft (tryouts begin in January), with the 15-week season (followed by 2 week post-season) set to begin in May. TTWO sold 43 million copies of “2K18” within the U.S. and China, so the NBA is convinced the league will be a success; but as it currently stands, there’s work to do. The NBA 2K League remains without a broadcast partner, a central gaming location (for competition) and has yet decide if competition will be held on Xbox or Playstation systems.
Howie Long-Short: The NBA isn’t the only business convinced esports is going to provide a significant return on investment; through 2016, 50 non-endemic brands had invested within esports and that number has more than doubled over the first 9 months of 2017. Non-Endemic? The term describes a second class of sponsorship; brands not traditionally tied to the business being advertised or product being sold (i.e. NBA – sneakers, balls etc.). Need an example of a non-endemic brand that earned endemic status? PepsiCo (PEP); NFL fans didn’t associate the brand with the sport until the company invested in the Super Bowl halftime show.
Fan Marino: Caps & Wizards owner Ted Leonsis believes “very quickly, esports will be the largest participatory sport with the most active participants”; further projecting the league will generate revenues that “dwarfs the NFL”. Leonsis is bullish because esports is a “global phenomenon”, but so is the EPL (players from 113 different nations have played) and that league generates less than half the revenue ($6 billion) of the NFL ($14 billion). I tend to believe what former AFL Commissioner David Baker recently told us; “it takes 60 years to grow a major league” and to while you can “flash”, to sustain success “it’s got to be multi-generational”.
‘It will dwarf the NFL’: The NBA’s going all-in on esports with the NBA 2K League
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Former WME-IMG executive Tobias Sherman, backed by seed funding from MGM Resorts International (MGM), has launched Foundry IV; a studio that intends on developing games with “esports prioritized at the earliest DNA.” That philosophy differs from industry norms, which tends to see publishers use competition as a method of marketing their games. Sherman, who previously lead the esports department at WME-IMG and helped to co-found the ELeague, will act as the company’s CEO. Foundry IV is raising a Series A round, with professional sports leagues said to be invested.
Howie Long-Short: Take-Two Interactive (TTWO) reported Q2 revenue figures that beat market estimates ($577 million to $511.3 million) and the company raised full-year adjusted revenue forecasts (from $1.65 billion to $1.93 billion), as sales have been strong for both NBA2K ’18 and Grand Theft Auto 5. TTWO also reported a 31% YOY increase (to $303 million) in digitally delivered net revenue and said that it expects to record net bookings in fiscal ‘19. Shares rose 10.58% following Wednesday’s news.
Fan Marino: Activision Blizzard’s (ATVI) Call of Duty: WWII generated $500M in sales over its first 3 days on the market; while setting a day 1 record for full-game downloads on PS4. The new game sold twice as many copies as last year’s Call of Duty: Infinite Warfare did during the first weekend; which would seem to indicate that gamers are not yet tired of the 15-year old franchise. That’s good news for esports franchise owners. I’ve had difficulty envisioning scenarios in which games could remain popular over an extended period. Perhaps my concerns are overblown.
Former WME|IMG executive Tobias Sherman creates game studio Foundry IV
Editor Note: The summary for this story was co-written by our friends at The Water Coolest. Check out TheWaterCoolest.com for the latest market news and professional advice.
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Qualifying tournaments for EA Sports’ (EA) FIFA eWorld Cup 2018 are underway and will run through July ’18, narrowing the field down to 128 participants (64 PS4 (SNE), 64 Xbox One (MSFT)) who will compete in the FIFA ’18 Global Series Playoffs. The tournament will include both players signed to professional teams as well as amateur tournament winners. Those who advance will play in in the FIFA eWorld Cup Grand Final, with the winner of each playoff (PS4, Xbox One) receiving a $35,000 prize.
Howie Long-Short: EA Sports announced fiscal Q2 revenues rose 7.4% YOY on an adjusted basis (to $1.18 billion), reducing the company’s net loss to $22 million (from $38 million in ’16). CEO Andrew Wilson called it a “strong quarter”, writing that “the company benefited from the customer’s response to EA Sports games (Madden NFL, FIFA), and its mobile games”. CFO Blake Jorgensen said that the company had experienced notable growth in its high-margin digital business (+21.7% to $689 million) during the quarter. As of the close on Wednesday, the stock is up more than 45% on the year.
Fan Marino: More of an NBA 2K (TTWO) gamer than a FIFA one? 2K Sports has announced that the latest release of NBA 2K18 features verified users. That means gamers will know if they’re playing against NBA players, celebrities or members of the 2K development team. Fans are going to flip when they realize they’re playing as LeBron, against LeBron.
FIFA and EA announce the first eWorld Cup
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Take Two Interactive (TTWO) has introduced Neighborhood, a new virtual game mode never seen in a sports video game, for NBA 2K18. Neighborhood enables game players to take command of their virtual character (MyPlayer) and bring it in to the “real world”, experiencing everything from haircuts to gym workouts. The Neighborhoods system will work seamlessly with MyCareer, MyPark, and Pro-Am modes; giving the game player the ability to improve their MyPlayer. NBA2K 18 is scheduled to be released on September 19th for Windows PC, Xbox 360, Xbox 1, PS3, PS4 and Nintendo Switch.
Howie Long-Short: TTWO increased earnings 36% for Q1 ’18, despite not releasing a single new game. Perhaps even more impressively, recurrent consumer spending was up 71% YOY. Recurrent Consumer spending, a term used to describe in-game sales made after the initial purchase, made up half the company’s digital net sales for the quarter.
Fan Marino: We now live in a world where people send their MyPlayer to the gym, but don’t workout themselves. What a time to be alive!
NBA 2K18 Introduces A Brand New Experience Called ‘Neighborhood’
The NBA and Take-Two Interactive (TTWO) will be launching an “NBA2K” esports league in the spring of 2018. Teams representing NBA organizations will be comprised of 5 digital athletes, each competing for contracts and endorsement deals in addition to the league championship. The idea is for the league to mirror the NBA as closely as possible, with players treating the season as a full-time job. 17 teams will compete in the inaugural season, though important details including; how to draft players, the set-up for broadcasting/streaming and the implementation of a salary cap are still to be worked out.
Howie Long-Short: Amazon (AMZN) owned Twitch publishes rankings reflecting esports games with the most viewers, hours watched etc. While “League of Legends” (HKG: 0700) drew 43 million viewers to their final, “NBA2K” drew less than 4,000 over the last week. The game also sits behind both “FIFA” (EA) and “Madden” (EA) in the viewership rankings. This partnership has a long way to go before it becomes a profitable venture.
Fan Marino: A big issue that is often overlooked when discussing a sports game as a viable esport, is that sports games are designed as a simulation. Since the games are meant to reflect real life as closely as possible, some players/teams are better than others. That causes a competitive balance problem. If you fix the stats to create parity, the game no longer provides a realistic simulation of the sport.
The NBA 2K League: What We Know So Far, And Can It Succeed As An Esport?
Electronic Arts (EA) has released the newest edition of their Madden franchise (Madden ’18) and the football simulation game is receiving tremendous reviews. The most recent iteration of the game includes a story mode known as “long shot”, which puts the player in the shoes of a rookie as he embarks on a journey to become an NFL star. EA hopes that focusing on the more personal side of football (sacrifices, stress, celebrity) will increase immersion for players of the game. Other notable changes from Madden ‘17 include an improved graphics engine, updated stats and rosters and new broadcast commentary.
Latest ‘Madden’ video game rolls out some of its biggest changes ever
Howie Long-Short: Take-Two Interactive (TTWO) has the dominant NBA game (2K), so how come they no longer make an NFL version? EA smartly signed an exclusive licensing deal with the NFL and the NFLPA back in 2004. Without player and team names, 2K simply can’t compete.
Fan Marino: It’s remarkable the game has maintained its cultural relevance for over 25 years, but you must remember that 1994-2016 was a period of astronomical growth for the NFL. I believe the popularity of the game is a direct byproduct of the league’s success. Should league interest continue to wane, so too will interest in the Madden franchise.