We're talking about the past and the future of Esports in Nevada.

That's this week on Nevada Week.

♪♪♪ Support for Nevada Week is provided by Senator William H. Hernstadt and additional supporting sponsors.

(Kipp Ortenburger) In an ongoing look at Nevada's post-pandemic efforts to diversify and strengthen our economy, we're exploring subsets within key industries.

Well, Esports, or competitive, organized video game playing, is one such industry.

Las Vegas has invested heavily in this new form of sports entertainment, driven by more than 450 million fans from all over the world who attend live events or tune in on TV or via streaming services.

Now, revenue tops just over $1 billion, and though there may have been hints that the Esports market was slowing down, enter the COVID-19 pandemic.

Traditional live sports paused and left a void that Esports filled with a new and record-breaking audience.

So post-pandemic, what is the future of Esports and how might a state like Nevada or even a city like Las Vegas capitalize on this growth?

We're going to explore the economic implications and potential for Las Vegas or the entire state to be an Esports hub.

Also, new legislation at the state level is being proposed as we speak to establish a statewide Esports commission in Nevada, similar to how boxing and mixed martial arts are regulated.

We're going to talk with the senator who has sponsored that bill and get our panel's perspectives on what's needed to grow this industry in our state.

Please welcome Ben Kieckhefer, Nevada State Senator; Brett Abarbanel, director of research at UNLV's International Gaming Institute and also the director of the Nevada Esports Alliance; Jud Hannigan, CEO of Allied Esports, and Milo Ocampo, founder of 8-bit Esports.

Well, thank you so much for being here.

We really appreciate it.

I want to get right into the discussion.

Esports, where has it been and where is it going and of course bookended by the COVID-19 pandemic.

Brett, I want to go to you first and maybe take us back to a year from now.

When competitive entertainment, traditional league sports were ending, you have mentioned that probably brought Esports five years ahead of where it was, and I wanted to give you the opportunity.

I know you're more evidence-based, you love the data here.

Can you give us some context on what you mean by what has been advanced by five years because of the pandemic?

(Brett Abarbanel) Sure.

Going into the pandemic, Esports was already one of the fastest-growing sports in the world.

Worldwide, there are over 600 million Esports fans, and over 3 billion people on this planet play video games.

During the pandemic especially, Esports really grew as consumer entertainment.

It managed to fill a gap that was left when sports started shutting down around the world.

So NASCAR, for example, launched the eNASCAR iRacing Pro Invitational Series-- a nice long name-- to fill that space soon after motorsport was postponed, and that was about a year ago, March 2020.

That featured their professional live drivers on a simulated track, and then they would stream that all around the world.

Similarly, Formula One set up that same thing in their sim racing series.

They used the exact same rigs that drivers use to train to actually drive the F1 cars, and they managed to take those rigs and use those for simulated races, which again streamed all around the world so fans could continue to stay engaged.

The same thing happened with other more traditional Esports titles, things like League of Legends or Overwatch or Valorant.

All of these different games became that much more popular during the pandemic as people started to spend more time staying home and they were able to play the games more.

They were able to watch the games more, and the ability for Esports, which really has been resistant to some of these COVID-19 economic pressures too, really helped catapult that growth.

The games are played on a network.

Competitors with any sort of stable internet connection and adequate equipment, so more than just-- I mean, I can play on my laptop.

I can play on my smartphone.

You can easily meet physical distancing requirements.

I can be thousands of miles away from somebody while playing a game with them.

There's realtime streaming of gameplay, and these streams can be watched at home or over a number of different streaming services, and this really made for a very durable industry for spectatorship of video games during the pandemic.

-I want to get back to what you were first talking about there, because maybe the assumption is is that you have an audience already of Esports, and that audience are what we might call enthusiasts or people that are already engaged in gaming.

But you're talking about NASCAR.

I don't want to make too much of a stereotype or an assumption here that NASCAR fans aren't necessarily playing video games, but Formula One, NASCAR in particular, seem like they could be brand-new audiences to watching games, video games, Esports online; is that true?

-That is certainly something that we saw translating into new fans, especially with video games that are sort of a simulated sports game, something like FIFA, which is a simulation of soccer, or the NASCAR E series, which is simulation of NASCAR driving.

These are games that mimic and reflect the sport that somebody is used to seeing, so it's a much more smooth transition for a fan to watch one and watch the other and see similarities and familiarity and enjoy both of them.

-Jud, I want to get your perspective on this too.

Of course you're a business owner in the Esports entertainment side of things, and of course HyperX is an in-person facility, but that's not to say that's the only business that you are in.

Can you give us an idea, and maybe let's focus now on kind of the transition out of the post-COVID era right now where you particularly are seeing the most market growth.

(Jud Hannigan) Absolutely.

So at Allied Esports, our business, we have this tremendous infrastructure-- that's one of the things that makes us unique-- led by our flagship in Las Vegas, the HyperX Esports Arena.

I think that the pandemic has brought, to Brett's point here, people are playing more, they're watching more, and they're spending more, right?

So 82% of that 3 billion gamers around the world are playing more than five hours a week; 27 billion hours of livestream gaming content was watched on platforms like Twitch, YouTube and Facebook in 2020.

That's up 72% year on year, and again-- and a lot of that came at a time when traditional, competitive entertainment, traditional sports actually came back.

So that surge in Q2 and early Q3 when we were under lockdown only continued when traditional forms of competitive entertainment came back.

So that lends to the stickiness there of it.

The other side of it is Esports today is about a billion-dollar industry.

Gaming, the greater industry on top that Esports kind of resides in, that ballooned to $175 billion in 2020, so that was up 30-odd percent with projections for that to continue.

So what we're excited about and having these live venues around the world and our content creation hubs is a world where, you know, the effect for us on the pandemic was we really dove deep into content, which we're kind of becoming more of a media company where we're creating content for the industry as well as growing our own online offering, which really wasn't as big a priority for us, having all this infrastructure pre-pandemic.

So what we're excited about is seeing the world come back, live events resurge, and marrying that up with this new, growing, burgeoning business of online with respect to our business and how we operate.

-All that sounds really good, really positive.

Milo, I want to go to you.

Again, another business owner here, a business owner more focused on the team aspect, the players here.

I don't want to just, you know, kind of pigeonhole you with that.

I know your business is growing in other areas.

Can you give us some perspective though from that perspective, the team side of things and what the future looks like here.

The future looks very bright, it seems.

(Milo Ocampo) Yes.

So when COVID first started, we had to pivot from just being an events company because live events didn't exist anymore, and it did take months or a few weeks of strategizing.

But when I realized that my collegiate team was actually winning the events that people kept posting, I thought all right, we have an opportunity here right now while the entire world is on pause to really build up talent, create content and ensure that we are ready in a post-COVID world to become, you know, the Golden Knights or the Raiders, because back then the Raiders still weren't here.

So since Vegas was already transitioning to becoming a sports hub and the rise of Esports through COVID was happening at an exponential rate, it was a very good opportunity for us.

-Brett, can you give us a little more context on that market itself?

I was looking at some of the data, and Asian Pacific region, 57% of the global Esports viewership comes out of that area, but North America and Europe are both big markets as well.

Where does North America fit, and where potentially could North America grow over the next five to ten years?

-Well, North America is one of the biggest.

This is where most of the game developers exist.

As Milo has mentioned, the game developers support this Esports ecosystem, though they're not necessarily the only player in the game.

But having them in North America makes this a central hub simply by the nature of being the place where these developers exist.

They're the ones often who are driving a lot of this Esports interest.

With most of the biggest Esports titles, you're going to see the game developers highly involved with the Esports scene.

So again having them local makes a big difference.

They do typically, especially the very large developers, also have a global presence.

They'll have offices all over the world to ensure that they can support the game play across the world.

They'll have different sorts of tournaments all over the world.

But when it comes to North America, this is a place where there's tons of interest, and there will continue to be interest in this space.

A number of the major tournaments, the major gatherings like DreamHack, which is both a tournament and really a fan-driven and gamer-driven event, many of those events as well also come to North America because this is where there is such a huge hub, and looking forward, I think it will continue to be.

This is where you're seeing a big kind of interest in the development of different types of Esports scenes.

So for example when Overwatch League launched, unlike previous Esports leagues which perhaps were centered in one location, so for example the League of Legends championship series has specific hubs.

So there's a European hub, then there was the North America hub which really was West Los Angeles.

With Overwatch League, they created teams across the United States in a way that mimics something like say the NFL or the MLB.

You have teams in different cities all over the United States and that has also helped spread some of that interest.

-Interesting.

Let's talk a little bit more about the economic impact here.

Senator Kieckhefer, I want to come to you.

First off, thank you for being on the show.

I know we're in the middle of the legislative session here.

We appreciate you being here.

I want to talk specifically about the state here, and of course the big state charge post-COVID is to diversify and grow our economy.

You are a member of the finance and the revenue and economic development committees, particularly the revenue and economic development committee.

I'm wondering, does Esports come up in conversations at the state level as being a way that we can really diversify and grow our economy?

(Ben Kieckhefer) Absolutely, Kipp.

It is on the top of mind, I think, for everybody from the governor's office to the Governor's Office of Economic Development, and I'm certainly trying to make sure we're talking about that here in the legislature.

Esports can support multiple lanes of economic development for our state.

First, in supporting our existing industry, right, our single largest and most important industry is the gaming and hospitality industry, and Esports offers immense opportunity to grow our customer base for Las Vegas and the state as a whole.

It can also provide opportunities to develop niche technology sectors, for corporate development, and for technology jobs in our state.

And then finally along the third path of remote work that the governor focused on in the State of the State and his economic development plan to make Nevada a destination for remote workers who want to come to a lower-cost state that provides the opportunities that they're looking for.

I think that Esports fits all of those lanes very tightly.

-Jud, I want to go to you.

Steven Bornstein, chairman of Activision Blizzard's Esports division and the former CEO of ESPN and the NFL Network said, "I believe Esports will rival "the biggest traditional sports leagues "in terms of future opportunities here."

That sounds kind of hyperbolic, but as we're talking about kind of where our growth is, maybe it's not.

I wanted to get your perspective.

When we're talking specifically about those future opportunities with relation to revenue growth, what are some of the biggest revenue streams in Esports?

-Well, I think to build on that point, I think the knowledge there, when people think about Esports, if you're somewhat not in the game, you're thinking about it.

It's kind of singular, right?

But it's really quite plural, right?

It's almost like saying sports because there's so many different games, and every game has its own competitive scene and its own unique community that's driving that competitive scene with the publishers.

So there's that angle to it, but the biggest piece of the pie right now is through sponsorship and advertising in and around the Esports sector when it comes to Esports revenue, how that billion dollars of revenue today is carved up.

It's really driven by sponsorship and with other forms of monetization like media rights, ticketing and the like, being supportive partners to that.

-I'm going to throw in a big "what if" here.

Milo, what if we had sports betting infused in Esports?

What might that do, particularly for your business itself, but what do you think that would do just for Esports in general in a city like Las Vegas?

-So the only statistic that can be pulled up from live events in terms of economic impact would be MomoCon, which is held in Atlanta, Georgia.

MomoCon gets about 30,000 people, and it's this huge Esports and pop culture event, kind of like Comic-Con, and the economic impact of that three-day event for Georgia is about 12.5 million.

So if we factor 12.5 as our baseline, add Esports betting, add the casinos, add hospitality, add the restaurants, really it's limitless as an economic driver when live events come back.

-Jud, I want to get your perspective on that, too.

If we were able to infuse sports betting into the Esports market here, what kind of revenue generation would that mean for a business like yourself?

-You know, what we look at from a sports betting perspective is we're not a licensed book.

We don't plan to go on and become one, but we are-- absolutely we see ourselves as a content engine that fuels that growth, and from what we know, this is the fastest-growing vertical on a lot of online sport books and sports books in Europe and Asia.

So, you know, we see ourselves as very much the fuel to that fire, and for us the opportunity is, as the tournament organizer, to license the data and video rights behind those events to those sports books to create the offerings on their platform.

So we see this as a very strong opportunity for growth with respect to our business and our continued quest to continue to monetize the content that we create all through the infrastructure that we have.

-You mentioned video rights and data.

In this case what is the data then used for?

-When you look at a game like Counter-Strike, right, that's a server-based game and the tournament organizer gets to really control the server and operate that server.

That data can be used to create in-game betting, which is quite popular and growing in the world today, much more so than just the traditional win and loss.

There's the different-- having that access to that data in realtime allows us to create more dynamic offerings for these books.

-Brett, what other areas of economic growth, of revenue should we be looking at here?

We've already mentioned a couple of them.

Anything else you see that's really emerging?

-There's so many different ways in which Esports can help drive this.

Jud has mentioned data, and you've dug a little bit more into that.

Well, when we think about Nevada and its economic development, Nevada is home to half of Switch's data centers.

Switch is the most advanced data center on the planet and their two western half of the United States hubs are in Nevada; they're in Reno and they're in Las Vegas.

So in some ways, this is an industry that lives in a digital world.

Esports has a natural massive home in this state.

Nevada has grown into a safe haven for tech companies that are looking to escape some of the more tax-heavy locations and in some ways, this makes us a competitor for business in and of itself.

Esports and video games have long been a driver of new technologies like blockchain and crypto-currencies.

This is a place where use of things like blockchain technologies has allowed things like Esports tournaments to establish provably fair events.

There's all sorts of different testing grounds for things like alternative payment technologies in a space that is so driven by a digital existence.

At the same time, there's massive tourism infrastructure that's required for huge in-person events, and that's something this state has thrived on for decades, and we continue to do so.

There's huge opportunity here to use games and Esports for education and learning, and UNLV, where I am housed, is one of the new hubs where we continue to drive on that front as well.

So there's a lot of different ways in which this is something that-- in some ways is very new, and then otherwise will continue to boost all of the different things that permeate our digital lives.

-And what a great segue, Senator Kieckhefer, to talk specifically about the need for an Esports commission here.

Of course you are the primary sponsor of a bill, SB165, to bring an Esports commission to our state.

An Esports commission would sanction and regulate Esports competitions within the state.

Per what Brett is saying, so much infrastructure we already have available, so many opportunities.

Why is an Esports commission then so important to the growth of this sector?

-I appreciate the question, Kipp.

I think creating an Esports commission sort of commensurate with what the athletic commission does in the state for unarmed combat, for mixed martial arts and boxing, would create a system whereby the public would create an entity that can ensure integrity and enforcement of standards aligned with Esports competitions to create the consumer confidence that is going to be necessary to continue driving success going forward as well as investor confidence I think in new products and new companies.

And I think that when you get the imprimatur of a government placed upon something, it sort of elevates the status of that entity into a new realm.

So, you know, working with all the various sectors of the ecosystem to ensure they see value in doing this, and I think we're making tremendous progress.

We had our first hearing yesterday, it went very well, and I look forward to continuing to work on it.

-And what do we think, is there any potential?

You think there's pretty good potential to potentially get this bill to pass during this session?

-I remain optimistic.

I think that there is broad support for it.

We've got some challenges we're going to need to overcome and ensure that people feel comfortable with what's being proposed.

I mean, you know, people don't usually like it when I say I'm from the government and I'm here to help, so we need to make sure that people understand what I'm proposing, and what this bill does is create a partnership between industry and government to try to help prevent problems from starting, solve problems that may already exist, and potentially take some of the burden off publishers and event organizers that the state could potentially pick up and carry for them.

So hopefully everyone can see value in what we're talking about, and it'll accelerate the growth of this industry in the state of Nevada.

-Milo, I want to come to you.

The partnership between government and industry, of course you being part of that industry, I know you've been very supportive of having an Esports commission.

Why?

What are some of the pros you see?

-Well, it was inevitable.

With the growth of Esports, the involvement of everyone, especially the government, has to happen because the biggest concerns within the industry, especially over the last few years and especially now during COVID, is the integrity of the game.

In order for Esports to advance, the entire-- I guess the entire consumer side does have to trust that these events, especially digital when we can't see their face, when we have no ability to standardize and check the machines beforehand, which they can do during live events, is really important and I told this to the senator.

Like the way to do this right, the way to gain the trust is really through listening to the people that are in the industry, both consumer and publisher side because Esports is a very passion-based-- I guess-- people are very passionate about Esports and people really don't like predatory entities coming in, and I feel like the government would be the biggest on that list.

But the way the senator has been-- the way the senator has been presenting and representing us has been amazing.

-Jud, I want to get your perspective too.

Of course we have no commission, and the senator mentioned this in his presentation to the judiciary committee yesterday.

We don't have a commission in any other state.

What's your take on this, particularly in your sector of the business?

-Sure, and I think we come at it as a tournament organizer, right, which is clearly stated in the bill, and that's one of the things it's looking to, you know, have collaboration with.

So my sentiment on it is this isn't easy, right, and I'm sure-- I imagine it's not been easy to get to this point.

But Esports in general is quite fragmented when you peel back the onion, and you get to this wide variety of game publishers who all have a different interest and different folks, and we navigate that landscape and that minefield really every day because we're running tournaments with different games all the time and have to kind of abide by different guidelines and sort of implied regulations that the game publishers, the IP owners in this space provide, right?

So that's something that, you know, traditional sports lacks is somebody that actually owns the IP.

There's a lot of buy-in that needs to occur there.

I think that's been challenging to other folks who have tried to do that in the past, and I think without necessarily publisher support, it gets really challenging.

So I would urge some consideration and certainly some conversation with the game publisher side to see what-- because I think the worst thing that could happen is this ends up having an adverse effect, which is hey, we don't necessarily want to go where-- you know, publishers don't want to necessarily bring their events to the space.

The other side of it is, you know, I think if it's baked in trying to create a more favorable opportunity to bring events and welcome more players, we're 100% in support of that, and we would love to be an active participant in the conversation to getting that out on the right foot.

Today we do some of the stuff that I've kind of read about loosely and we do some of that today, but largely because we operate in the casino.

We register our events and prize money and our tournament rules and regulations with the Gaming Control Board.

We're also a member of the Esports Integrity Commission which is a global commission that governs integrity in Esports and goes out and actually, you know, certainly with some of the games we operate in, governs that space a bit, and we'll identify areas that need addressing and that bans players, et cetera.

We all subscribe to their decrees, so I think there's some collaboration with some folks that are out there today to learn best practices and how that could resonate well within the borders of Nevada.

-Well, Jud, Milo, Brett and Senator, thank you so much.

We're out of time, but we really appreciate it.

Thank you.

(all) Thank you.

Well, thank you as always for joining us this week on Nevada Week.

Now, for any of the resources discussed on this show, please visit our website at vegaspbs.org/nevada-week.

You can also always find us on social media at @nevadaweek.

Thanks again, and we'll see you next week.

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