The Philadelphia 76ers and venture firm NextEquity have purchased a majority stake in leading esports franchises Team Dignitas and Team Apex, making the Sixers the first U.S. sports organization to control a professional gaming outfit.
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Team Dignitas
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The two esports franchises will be combined under the Team Dignitas name and will be run separately from the basketball team. Sixers executives believe the esports investment will give them an entry for sponsors into a younger, male-dominated demographic that defines the white-hot esports industry. Sixers executives also are betting that Dignitas will rapidly appreciate with access to the 76ers’ deep pockets and its business and sales infrastructure.
“This is a really fun property that we think has a really big upside,” Sixers CEO Scott O’Neil said.
Financial terms were not disclosed, but an industry source estimated Team Dignitas to be valued in the mid-to-high seven figures. Terms of the partnership between the Sixers and Silicon Valley-based NextEquity are not known.
The gamers will retain their separate identity from the Sixers and won’t be integrated into NBA marketing, except for possibly some minor cross-promotions involving interested players, O’Neil said.
Along with sponsorship sales and resources for player development, the Sixers will focus on helping Dignitas create and distribute social media and digital content. Esports players often practice in front of live fans watching remotely, and content creation and advertising is a key revenue stream for many teams.
“I think that an organization that has an operating relationship with an NBA team has a distinct competitive advantage in terms of resources, access to corporate partners, and database brand experience,” O’Neil said.
The prospect of esports ownership for Sixers owners Josh Harris and David Blitzer began nine months ago when NBA Commissioner Adam Silver spoke to owners of the growing esports business, sparking the team’s interest.
“Commissioner Silver was talking about the power of esports, and when you work for guys like Josh Harris and David Blitzer and they hear some on the incredible numbers and just sheer eyeballs, they turned and said we should take a look at this,” O’Neil said.
Veteran digital media executive Greg Richardson will serve as chairman of Team Dignitas. He founded free mobile video game developer Rumble Entertainment, where he is executive chairman, and was formerly a partner at Elevation Partners, a digital media-focused private equity fund.
Team Dignitas managing director Michael “ODEE” O’Dell and Apex’s leaders David and Michael Slan will remain as large minority shareholders and will focus on competitive excellence, Richardson said. The Sixers will hire a CEO and staff for the video game division.
“For the Sixers to get actively involved with ownership of a class of ‘ODEE’ and the Slans, it’s just unprecedented and indicative of how big and interesting an opportunity this is,” Richardson said.
Tobias Sherman, head of esports for WME-IMG, helped facilitate the deal.
The Sixers aren’t the only NBA team to be spurred into action by Silver’s words.
Buzz of several similar pending deals is rampant in esports circles. Amish Shah, partner at the venture firm Sierra Maya 360, which invested in Team EnVyUs earlier this year, said he’s in talks with “a majority NBA owner who also has a venture arm focused in sports media.”
Some owners have already joined the fray in a limited fashion, including Boston Celtics co-owner Jim Pallotta’s Raptor Group investing in Fnatic and Memphis Grizzlies co-owner Steve Kaplan holding a share in the ownership group behind Immortals.
Part of the enthusiasm for buying into esports teams is the belief that big media rights packages are coming eventually. Richardson said the Sixers aren’t counting on a specific, NFL-style deal to make this acquisition work but believe the massive numbers of viewers can be monetized. This year, more than 213 million people worldwide watched esports, most of them online, according to benchmarker SuperData.
The Sixers’ consolidated esports team will field rosters in five popular game titles: “Counter-Strike: Global Offensive,” “Overwatch,” “Heroes of the Storm,” “Smite” and “League of Legends,” which is Apex’s speciality. The five range from easily digested first-person shooter games to complex strategy-based games, and executives hope to expand into additional titles. Before the deal, Dignitas divested some teams in less prominent titles.
As of Sept. 22, Dignitas teams ranked 10th worldwide in “Counter-Strike,” 10th in “Overwatch” and second in “Heroes of the Storm,” while Apex ranked 37th in “League of Legends,” according to gosugamers.net.
“It is an opportunity to leverage what we know and what we do at a high level,” O’Neil said. “We have big eyes and aspiration designs to be fan friendly and to be an elite franchise.”
