Eager to ride high on the surging video-game competition industry, investors rushed this week to take stakes in AlphaDraft, a fantasy e-sports contest startup, and Mobcrush, an iOS app that streams video of people playing mobile games.
Though e-sports might seem like niche entertainment, it has become big business recently. The 2013 championship tournament for “League of Legends,” for instance, a computer game made by West L.A.’s Riot Games, sold out Staples Center and boasted 32 million online viewers.
In all, some 6.6 billion hours of video-game competitions are projected to be watched in 2018, up from just 2.4 billion hours in 2013, according to a study by analytic firm IHS.
That potential for massive growth is feeding an investment binge in the space. Amazon.com bought video game-streaming service Twitch for $970 million in August and encouraged ESPN2 to start televising video-game tournaments in April. It has also led startups to think of novel ways to make money from the growing industry.
While Twitch and ESPN make money from e-sports via subscription fees and advertising, AlphaDraft, housed at Venice accelerator Amplify LA, is using a novel fantasy sports model to make money. Like fantasy football, AlphaDraft runs fantasy e-sports drafts and pays out winnings to those who perform the best betting on the statistical performance of video-game players.
The startup said it has more than 1 million contest entries since launching in January and its top winner, an actuary who designed his own statistical model for creating fantasy video-game teams, has won $30,488 in prizes.
Such enthusiastic engagement in e-sports has outsiders perking up.
Investors, led by Metamorphic Ventures with participation from William Morris Endeavor Entertainment and former National Basketball Association Commissioner David Stern, among others, backed AlphaDraft with $5 million this week.
For its part, WME, a talent agency known for representing actors and musicians, is treating video-gamers like any talent; it bought e-sports talent agency Global eSports Management in January for an undisclosed amount.
“WME sees e-sports as a huge part of the industry going forward,” said AlphaDraft Chief Executive Todd Peterson. “The size of this market will likely surpass the size of all traditional sports markets.”
What’s catching WME’s attention is an industry, much like the sports world, that is flush with celebrities. By sharing their skilled gameplay or humorous in-game commentary on YouTube or Twitch, celebrity gamers have established themselves as influencers of their fans’ buying decisions. WME and others are working on turning that influence into advertising power.
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