BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

The Development Of eSports Arenas Makes Economic Sense

Following
This article is more than 8 years old.

An estimated 134 million people will watch some form of eSports competition in 2015.  It is a great sign for the exciting eSports industry and is particularly fascinating for those companies that seek to satisfy the cravings of participants and spectators alike, especially when there is guaranteed money on the line.  Major sporting events need arenas to host games in order to derive economic advantage.  Now that eSports is recognized as a real, growing industry, it too has reason to develop arenas to exploit economic opportunities.

Enter Skillz, which creates the backbone that allows for games to provide multiplayer networks to eSports participants.   Skillz has partnered with more than 1,100 game studios, helped launch roughly 550 games (about 100 of which are running cash competitions), hosts over 150,000 daily tournaments across over 180 countries and has paid out in excess of $13 million to players .  One player from Staten Island was recently cut a $22,000 check for winning a mobile bowling game on the platform.  The money is real and it is growing at a rapid pace.

"What Skillz does is build a tournament system that can be injected into any game very quickly," explained Skillz CEO Andrew Paradise.  "If video game studios want to build a game out to be an electronic sport, they need to have an arena.  League of Legends and StarCraft made those investments -- pretty huge investments.  We build this software as a service platform to give each game a tournament system."

Skillz has about 800 games in various stages of integration into its system.  Its hope is to convert many of the free-to-play games into cash competitions, as its revenue is derived strictly from a 50/50 revenue share with those games that allow for the distribution of cash prizes.  However, Skillz actively promotes it self-service developer portal, where anyone can sign up, drop the Skillz platform into an existing game and use the portal to configure a tournament system, whether there exists cash consideration or merely virtual currency.

The competitive gaming space has been around for almost 15 years.  Yet, eSports in the popularized sense has become a phenomenon in the past 5 years.  Skillz is not the only company seeking to take advantage of the popularization of the space.  Its chief competitor is WorldWinner, a subsidiary of GSN (Game Show Network).  The main difference is that WorldWinner's strategy is to go to the gaming studios and broker deals to launch games and build up audiences on their own.

"WorldWinner, while having a profitable business, its business model doesn't lead studios to make tournament play a major emphasis in their strategy," said Paradise.

Skillz's business is backed by early stage venture capital firm Atlas Venture along with NextView Ventures and others.  It has announced $13.3 million in funding to date.  Paradise says he is running a multi-million dollar business net of prize pools.  The majority of Skillz players (roughly 6 million players are on the system) are playing virtual currency-based games, which is not optimal for the company.  However, it gives Paradise and his team an idea of how many people are interested in competing in eSports.

"We share some investors with the daily fantasy world," added Paradise.  "They view our opportunity as bigger than daily fantasy sports, although not as obvious.  Free mobile gaming is a 1.2 billion people daily industry.  The free-to-play fantasy sports universe is 50 million people."  Point taken.

Darren Heitner is a lawyer and the Founder of South Florida-based HEITNER LEGAL, P.L.L.C., which has a focus on Sports Law and Entertainment Law.