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Tuesday, Mar 19, 2024

E-Sports Firm Nails Big Score

A Sherman Oaks company is getting into one of the fastest growth sectors of the video-game industry – live streaming of gaming competitions. While Azubu Inc. is still in the startup phase, its streaming platform and global presence have attracted investors who see a healthy future in the business. Last month, the company raised $60 million in a financing round led by British investment firm Sapinda Group. Chief Executive Ian Sharpe said the money will further growth in the streaming service and get it ahead of well-heeled competitors when it comes to sponsorships with video-game circuits and competitive teams playing for cash. “Whether you are an amateur who loves games or a professional making a living from tournaments, you can stream on Azubu and entertain fans all around the world and potentially make some money,” Sharpe said. Azubu was founded in 2011 in South Korea but it took its present form during the last two years under Sharpe’s leadership. The company employs 75 full-time and contract employees, and reports that it attracts 9 million unique visitors a month. A majority of those viewers are males who enjoy watching video-game competitions, also known as e-sports. The most popular titles according to Sharpe are “League of Legends” and “DotA 2,” both real-time strategy multiplayer online battle arena games, with “Call of Duty” and “Grand Theft Auto 5” among the other well-known competitive titles. “‘League of Legends’ continues to drive massive audiences around the world,” said Sharpe, whose background includes working in the London headquarters of sports management and event producer IMG and for EA Sports in Vancouver, a brand owned by game publisher Electronic Arts Inc. of Redwood City. Competitive leagues organize the game tournaments and work out financial arrangements with Azubu for streaming them. The tournaments tend to be weekendlong affairs, with commentators detailing the action and chat functions allowing for discussion of gameplay among viewers. Azubu derives its revenue from a combination of video and display advertising as well as a cut of the subscriptions paid by participants in the 46 individual player or team channels that the company runs. A subscription price for a channel costs $4.99 a month, with Sharpe comparing it to being part of a fan club and establishing a personal association with the game players. He noted that going forward it is important the company find other sources of revenue. “We want to treat each of our broadcasters as a small business in their own right, and that means supporting them with everything from microtransactions to sponsorships and creating an e-commerce platform to drive their brand, audience and revenue streams,” he said. A report prepared for an e-sports conference in September year by Newzoo, a market research firm for the video-game industry, estimated that the North American market would bring in $93.2 million in revenue in 2015, a 32 percent increase from a year earlier. Globally, the market’s revenue would be $252 million. The global audience for e-sports numbers about 113 million, according to the Newzoo report, with a whopping 70 million as regular viewers who tune in at least once a month to their favorite game competitions. Fifty-five percent are between the ages of 21 and 35, with 30 percent falling in the high-income bracket. Newzoo Chief Executive Peter Warman said that videos using games as a focus on YouTube are second in popularity behind music videos. Video streaming tools and platforms, such as Azubu, now give every gamer an opportunity to broadcast to a global audience, Warman said. “E-sports is the ultimate proof that games are evolving into a spectator sport and game fans can now enjoy their favorite games whenever and wherever they want, not by playing but by viewing,” he said. Stiff competition While Azubu might be new to the world of video-game competitions, team play has been around for years. Only recently, with its numbers growing, have entrepreneurs, investors and the large video-game and technology companies begun to pay attention. Amazon.com Inc. shelled out nearly $1 billion in August 2014 to acquire Twitch.tv, a service similar to Azubu in that it streams live video-game competitions. Its viewership, however, is 10 times that of its smaller rival, Sharpe said. YouTube, the video-sharing subsidiary of Google Inc., also has video game-related content, including competitions. Hitbox.tv is another startup that streams gaming competitions. Azubu competes against the larger companies by focusing exclusively on e-sports on a global basis, Sharpe said. Twitch has started to diversify its offerings with other content and has been traditionally strong in the U.S. market, he added. “It’s the same with YouTube,” he continued. “They are interested in covering all types of gaming, which is a big sector in itself. We want to focus on e-sports.” With the numbers rising, other players are moving into the e-sports segment of video gaming. In October, Santa Monica’s Activision Blizzard Inc., publisher of the popular “Call of Duty” game franchise, announced a new e-sports division to be headed up by a former chief executive from ESPN. In December, Electronic Arts jumped into e-sports with a new division to develop live competitions around its games, including “Madden NFL” and “Battlefield.” Activision upped its ante in the e-sports sector this month by acquiring professional organization Major League Gaming for $46 million with plans to make it the ESPN of eSports. And starting this year, cable network TBS will air video-game competitions on Friday nights. “When the two big titans in the space (Activision and Electronic Arts) are putting all their bets on e-sports, you can only see it continue to grow as people shift their resources into what is clearly a compelling space,” Sharpe said. As in any industry, going up against a competitor with a $1 billion valuation is going to be a challenge but that does not mean it cannot be done, according to Ben McDougal, chief executive of Jet Set Studio in Des Moines, Iowa. His firm operates TournamentSeeker.com, a website promoting video-game competitions as well as managing video-game events. For viewers of such gaming tournaments, it is the interactive experience of checking out the best players, seeing their strategies for a favorite game and listening to the commentators paired with the entertainment that keeps them coming back, he said. “Figuring out ways to make streaming easier while bringing the (gaming) community together with the right technology, there is room for success,” he said. Valid potential The $60 million investment that Azubu received from Sapinda with contributions from Sallfort Privatbank of Switzerland has validated the company’s strategy and potential for growth, Sharpe said. “The plan for the money now is to double down on the innovation, finding ways to drive monetization in this space and for us to get new content,” he added. In addition to the $60 million received in December, the company raised $34.5 million in 2014 by selling shares to wealthy individuals. According to Sharpe, investors are attracted to a company such as Azubu because they see there is a lot happening in the e-sports space and most of the competitors are owned by large media and tech companies. “As an independent company, there is clearly value in the company’s growth and the audience engagement,” he said. “That value may well be worthwhile for someone in a potential future liquidity event, be it IPO or acquisition.” With e-sports in its infancy, the business models are still evolving and Sharpe recognizes that partnerships are critical to Azubu’s success. One recent deal brought Azubu exclusive streaming rights in Brazil to the e-sports content of UOL BoaCompra, a Portuguese firm that monetizes online games. That deal includes content from XLG League, joint ad sales in Brazil and creating content between Azubu and UOL. “We have had success with our Brazilian strategy, for example, and we are going to replicate that around the world,” Sharpe said. Newzoo’s Warman, however, said it will be interesting to see if Azubu’s use of traditional media will help it score points with gamers. “E-sports enthusiasts are not particularly fans of the traditional media approach and it will be interesting how this pans out as Azubu starts to spend its recently raised $60 million to acquire content rights and extend its platform,” Warman said.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.

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