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The Past, Present, and Future of NBA Investment in Esports

The ties between the NBA and esports grew and grew quickly. Team owners and pro athletes took the popularity of esports seriously and decided to invest in a market that in many ways mirrored their own.

A few years ago Colin Cowherd, a brash and controversial sports radio host, brought basketball star Gordon Hayward on to his show to talk esports. The small forward is well-known for his love of video games, having competed in Halo and Starcraft II tournaments in the past. The back-and-forth banter between Cowherd and Hayward showed that many pro sports personalities at that time still didn’t take esports seriously.

But in the few short years since that radio show, the ties between the NBA and esports grew and grew quickly. Team owners and pro athletes took the popularity of esports seriously and decided to invest in a market that in many ways mirrored their own.

Playoff teams and the esports scene

In May of this year, four teams met in the Western and Eastern Conference Finals: the Warriors, Blazers, Bucks, and Raptors. All four teams own esports teams as well. In fact, 12 of the 16 NBA teams that played in the 2019 playoffs owned an esports organization—mostly as members of the NBA 2K League, a collaborative league run by game producer Take-Two Interactive and the NBA.

Photo courtesy of ESPN

With 21 NBA franchises currently participating in the NBA 2K League, it’s now a rarity for an NBA team to not have some direct connection to esports. Even organizations like the San Antonio Spurs without a stake in an esports team still end up with ties to the industry, renting out their arenas for large video game tourneys.

The tipoff

The Philadelphia 76ers were the first NBA team to step on to the esports court. In the fall of 2016, about a year after the Cowherd and Hayward radio show, the Sixers bought esports organizations Dignitas and Apex. Dignitas is a long-running esports group that’s been involved with many big-name games such as League of Legends (LoL), Heroes of the Storm, Overwatch, and CS:GO.

Other NBA teams would soon also invest in the popular esport League of Legends, including the Houston Rockets (Clutch City Gaming), the Golden State Warriors (Golden Guardians), and the Milwaukee Bucks (FlyQuest). Additionally, former and current players have also shown interest in the LCS—the LoL league run by Riot Games and based in North America—through investments and even active organizational roles, including Shaquille O’Neal, Andrew Bogut, Jonas Jerebko, and Rick Fox.

Rick Fox (photo courtesy of the Players’ Tribune)

Learning the game

One of the key factors in finding more of these high-profile investors came from mimicking an important aspect of professional sports: seasons and franchises. Competitive video games have been around for decades but were played primarily in a tournament format. When competitive team games like League of Legends adopted a more consistent seasonal approach, there were growing pains at first.

Initially the LCS, as well as its European counterpart the LEC, tried to include a relegation-based model from season to season, where the bottom teams would potentially be replaced with new talent. But the unpredictability of relegation—though exciting—encouraged short-term thinking and scared off investors. If a team’s place in the league could disappear at the end of the year, it’s hard to rent or build training facilities, create robust marketing plans, or support young talent.

The LCS eventually copied the franchise route that helped turn professional American sports into financial powerhouses. Spots in the league were bought by franchises (for millions of dollars) who will now keep that spot from season to season. Other popular esports organizations like the Overwatch League and the NBA 2K League started with a franchise system in mind. All three of these North American-focused leagues include many NBA, MLB, NHL, or NFL owners and teams as investors.

Overwatch League team logos (image courtesy of Overwatchleague.com)

Future moves

The move to franchising wasn’t a slam dunk for those teams that weren’t able to buy in. Instead of simply choosing the highest bidders, Riot Games, the owners of the LCS, elected teams willing to pay the buy-in based on a variety of additional criteria. One of those teams that didn’t make the cut was Dignitas, only about a year after they were acquired by the 76ers.

But Dignitas and the 76ers won’t stay casualties of the LCS franchise system. The 76ers recently bought a majority stake in the LoL team Clutch Gaming, from the Houston Rockets. At a future point, Clutch Gaming will reportedly rebrand and trade their Rockets red for the Dignitas gold and black.

Because of the organizational similarities between esports and the NBA, owners and players will likely continue to invest in the growing esports scene. While investors are intrigued by the distinct target market of young esports viewers, NBA teams’ experience with advertising and creating merchandise for fans gives those teams a solid marketing framework to build around.

It’s likely that pro sports pundits will continue to provide their hot takes on the viability of esports as a serious hobby. And it’s just as likely that more teams in the NBA and other pro leagues will spend serious cash to break into the esports market.

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