Take-Two Interactive Software's (NASDAQ:TTWO) NBA 2K franchise has sold over 68 million units worldwide dating back to its launch in 1999. The latest installment, NBA 2K17, is the highest-rated title in the franchise's history and was one of the key drivers for growth in Take-Two's recent quarterly earnings report.
Now, Take-Two is taking a step to extend the franchise's market opportunity by announcing the NBA 2K eLeague.
The NBA and Take-Two team up
The NBA 2K eLeague will work similarly to the actual NBA with teams that compete against each other through a regular season, playoff, and championship match. Each team in the league will have five players, and each player will use their own user-created avatars from the NBA 2K17 game. Think of it as a virtual NBA league.
The most important highlight from the press release is that each team in the NBA 2K eLeague will be operated by an NBA franchise. This is the first time a professional sports league has operated an eSports league.
More details will come in the weeks and months ahead, but this follows Activision Blizzard's (NASDAQ:ATVI) recent plans to start a professional gaming league based on its hit game Overwatch. Whereas Overwatch League is an ambitious effort for Activision Blizzard to become the leading worldwide eSport event, the NBA 2K eLeague will likely be more limited in its reach. Overwatch has 25 million registered players and is specifically designed for a mass audience, while Take-Two's NBA game has a narrower audience by virtue of its NBA focus.
eSports is gaining mainstream status
While eSports has been around for years, it has only recently begun to show signs of going mainstream and demonstrated sustainable, long-term growth. The rise of mobile gaming, high speed internet connections, and advancements in graphics technology have opened up new audiences to competitive gaming.
To understand the opportunity in eSports, we only have to look at viewership. The most popular eSports tournament, League of Legends, reached 43 million unique viewers for the 2016 championship match, an increase from 27 million in 2014. This places the League of Legends tournament on par with the World Series and NBA Finals, and only second to the NFL Super Bowl, which can draw over 100 million viewers in the United States.
eSports is a fast-growing opportunity for the gaming industry
Where there are viewers of this magnitude, there is a tremendous business opportunity. The Coca Cola Co., Walt Disney Co's ESPN, and Amazon.com have each made some form of investment in eSports. ESPN has set up a section on its website devoted to eSports news coverage, and Amazon paid nearly $1 billion in 2014 to acquire Twitch -- the popular game-streaming service.
According to market researcher Newzoo, the eSports market is expected to grow 43% to $463 million in 2016, and by 2019, eSports is expected to cross the $1 billion mark. These numbers are derived from total revenue earned from ticket sales, merchandise, media rights, etc. North America is the largest market in terms of revenue, making up 38% of the global eSports market.
These numbers are small compared to the total revenue generated by the three largest game publishers, but eSports is growing very quickly, and it should continue growing as it attracts new investments from the largest game publishers. Electronic Arts (NASDAQ:EA), Activision Blizzard, and Take-Two are all invested in eSports at this point, and all stand to create a new, growing revenue channel as eSports continues to increase in popularity around the world.