Rights fees for sporting events have steadily escalated, as live sports are one of the few television properties seen as DVR-proof. Now the search for programming that people will watch in real time has led major broadcasters -- including Walt Disney's (NYSE:DIS)
ESPN -- to video games.(NYSE:DIS)
Previously the domain of online-only broadcasters like Twitch.TV, live video game tournaments made the jump to a more traditional platform when ESPN aired The International 4, the world championship of the popular game Dota 2, on its digital ESPN3 service. ESPN treated the tournament the same way it would a traditional sporting event. There was an anchor desk, commentators, and all the trappings of big-time sports.
The move suggests that the Worldwide Leader in Sports sees that e-sports may be the next big thing. Twitch, which is in the process of being bought out by Google (NASDAQ:GOOG)(NASDAQ:GOOGL) for a reported $1 billion, is the fourth-leading website in peak Internet traffic in the United States, according to stats shared by the company. The site regularly attracts hundreds of thousands of viewers for major events -- not NFL or NBA numbers, but above the average Major League Soccer telecast.
MLS recently renewed its TV deal in the United States for $90 million a year.
It's possible that rights to televising the most popular video game tournaments and championships may be worth even more than the soccer league's. One of the top events of the year, the League of Legends season three world championship, was watched by more people than the NBA finals, MLB World Series, and BCS national championship, according to USA Today.
How many people are watching other people play video games?
Twitch offers everything from small-time players sharing gameplay video to high-end tournaments featuring the top players in the world. This has made the site incredibly popular, placing it behind only Netflix (NASDAQ: NFLX), which has 32% of U.S. peak Internet traffic, Google(NASDAQ:GOOG), with 22%, and Apple, which has 4.3%. Twitch's 1.7% puts it ahead of Hulu, Facebook, and Amazon, among others.
While it may seem silly to some folks, video games are big business, and Millenials watch them in the same way Baby Boomers watch baseball. As traditional sports fans die off and more young gamers come of age, the audience for e-sports should continue to grow. That might mean starting on platforms like Twitch.TV and ESPN3, but eventually, e-sports highlights may appear on ESPN's flagship alongside traditional sports. It sounds crazy, but the same might have been said of poker not so long ago.
There is big money here
The team that won The International 4 took home more than $5 million in prize money, four times the $1.6 million Rory McIlroy earned by winning the British Open, USA Today reported.
Until now, rights fees have been done on ad-share-based deals. But going forward, it seems likely that there will be multiple suitors, leading to escalating prices for rights to the most popular tournaments.
"ESports is about to leave its niche surrounding," Jong Hwan Lee, CEO of Clauf, which owns new eSports platforms ESGN and ESGN TV, was quoted in MCV. "The day will come when eSports will be a widely accepted sport."
It might be a few years before e-sports prove they have as much market value as some traditional sports, but it seems like that day is coming eventually. It's likely also helped by the fact that the current digital outlets for electronic sports understand their audience in a way that few traditional sports do. While the recent World Cup telecasts did little to explain the complexities of the game to newcomers, a separate stream for new watchers aired for The International. That could help bring in new fans, increasing the audience and the value of rights going forward.
As TV networks and online broadcasters keep searching for ways to get people watching in real time -- where they actually see commercials -- it seems likely that e-sports will grow as a spectator event and a television property. The value of rights fees may not rise to National Football League levels, but they should steadily increase as audiences grow.
Daniel Kline has no position in any stocks mentioned. Jake Mann has no position in any stocks mentioned. The Motley Fool recommends Google (C shares), Netflix, and Walt Disney. The Motley Fool owns shares of Google (C shares), Netflix, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.