The E-Sports World’s Future Is Uncertain as Growth Stalls

Six years ago, the Madison Square Garden Company, a group that includes James Dolan, the owner of the New York Knicks and the New York Rangers, announced a triumphant entrance into sports’ next frontier: a professional video game league.

The New York investors spent more than $10 million to purchase a majority stake in Counter Logic Gaming, an e-sports team, and said that professional video gaming “now stands on the verge of enormous change, which we believe has the potential to generate significant growth.”

Instead, that growth has stagnated. As e-sports revenue fell below expectations and investors became skeptical of the industry, Madison Square Garden’s owners last year tried to find a way out of the business by selling their marquee team.

After years of fanfare, e-sports in the United States are giving way to economic realities. Unable to turn a profit, team owners are cutting costs by laying off employees and ending contracts with star players. In some cases, they are selling their teams and sometimes at a loss, offering a blunt reality check to people who believed e-sports could be the next big thing in entertainment.

Most alarming, some viewers seem to be losing interest. They watched 14.8 million hours of the 2023 spring season of the League Championships Series, the biggest U.S. e-sports league, down 13 percent from a year earlier and down 32 percent from 2021, according to estimates from the data firm Esports Charts.

“We’re at a point where everyone has a lot of soul searching to do,” said Rod Breslau, a gaming and e-sports analyst. “There has been way too much hype and too little of actual value.”

Just like in traditional sports, star e-sports players can earn seven-figure salaries and compete for championships, attracting sponsors and fans along the way. Investors over the last decade purchased stakes in teams that participate in professional leagues for games like League of Legends, Overwatch and Call of Duty.

The biggest of those is the League Championship Series, a 10-team league established in 2013 and run by Riot Games, the company that created League of Legends. In the league, teams go head-to-head in League of Legends, a fantasy-themed game, in matches that can draw millions of viewers and fill stadiums.

But the leagues have struggled to make money. Partnerships to broadcast e-sports tournaments on sites like YouTube and Twitch have dissipated, sponsors are slashing their advertising budgets, and owners are operating teams at a loss while paying huge salaries to e-sports players.

Andy Dinh, TSM’s chief executive, said in an interview that his exit from the U.S. league was related to his desire to compete for a world championship, rather than economic troubles. Most of the best League of Legends teams come from places like South Korea or China, and the North American region has long lagged behind those areas in competitive strength.

The Madison Square Garden group did receive a minority stake in NRG’s parent company, called Hard Carry Gaming, allowing it to retain a foothold in e-sports. Dan Fleeter, a senior vice president at Madison Square Garden Company, was also named to Hard Carry Gaming’s board of directors as part of the deal, the people said.

David Hopkinson, the president of Madison Square Garden Sports, said in a statement announcing the deal that it would allow the company “to remain a significant investor in the e-sports industry.”

Some see the exodus as an opportunity. Andy Miller, the chairman of NRG Esports — which purchased Madison Square Garden’s League of Legends team — said he saw an opening in the industry as big names depart.

“It’s a tough time, but this is our time,” said Mr. Miller, a former technology executive and a co-owner of the N.B.A.’s Sacramento Kings. “I think there’s an opportunity to steal a bunch of existing fans.”

Sahred From Source link Technology

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