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XLive Esports Summit Spotlights an Industry in Transition

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"For the last 30 years, the entire video game industry has been about the video game, period," said Jace Hall speaking today at the opening day keynote for the Xlive Esports Summit in New York City. For video gaming's history, gaming companies have been the ones with money and the ones that sponsored events. That's now shifting as esports becomes less about games and more about players.

While some attended the Summit because they work in the industry, many were there to learn what the buzz was about and where the opportunities are. Hall, a partner at private equity firm Venture Vision Partners and a well known game designer and publisher, was happy to explain it. Esports are going where pro sports already are, with the same kind of supportive ecosystem involving areas like merchandising and brand support.

"That's where the opportunity is, that's where the competition will be," Hall said, talking about the shift to a player-focused model. While the video game companies won't like it, the conversation around esports will shift to be less about the product and more about the player.

"The rise of esports for a lot of people today is, 'Wow, this thing just came out of the blue,'" Hall said. Society holds a negative view on gaming and sees time spent gaming as time wasted, but that attitude is changing as esports gains validity. For brands, it offers a direct relationship with a desirable young demographic.

Former NBA player Rick Fox is also a Venture partner and spoke at the keynote. Fox said his childhood Atari 2600 "was really the first spark for me when it comes to competition." He wants parents to understand that it's okay for their kids to be involved in gaming, and that they should nurture that passion. "There's a life in esports," he said.

Fox noted that these days he gets recognized as much for his gaming activity—he's an owner of esports organization Echo Fox—as his NBA career. "it is still a young industry and we're trying to build it," he said. "It's a tidal wave coming and it's real."

Next up, a morning session called "Money Talks" looked at how venture capitalists and professional sports leagues size up the esports industry. Pro sports owners are quick to see opportunity in the market, noted Matt Saunders, president of Ryerson Futures, which advises Rogers Communications of Canada. Anyone who bought a pro sports teams in the past 20 years has made a big return on their investment, so people are now looking at how esports will develop. "It's a bit like the wild west. There is no right answer right now," he said. "There's a lot of money to be made, I believe, and they're trying to figure it out."

Venture capital is also flowing into esports, Saunders said, and VCs typically take a smaller share of the league and look for a quicker exit. These investors look for strong fanbase growth, the opportunity to develop new revenue streams with fans, the quality of the team, and the ability of the team to transition to a new game is the game they play loses popularity.

The most-watched sport in 1970 was horse racing, noted Todd Merry, chief marketing officer for Delaware North, pointing out how sports popularity changes over time. Organizations need to look ahead and understand what's next. Esports organizations looking for financial support need to get their financials in order, something that can be a challenge for young and inexperienced players.

As esports leagues develop, regulation will surely come. That's a plus for investors who want stability. "There will be regulation. The pendulum swings," Saunders noted. "There's a back and forth and it'll figure itself out." For esports today, the pendulum is definitely on the upswing.

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