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Teams face off at the League of Legends Champions Korea tournament in Seoul on Feb. 1. (Photo by Koji Uema)
Cover Story

Esports: Why pro video gaming will be bigger than the NFL

Players of 'Dota 2' and 'League of Legends' reap millions

TOKYO -- For those above a certain age, sports are all about pushing the lungs, muscles and mind to the limit in the pursuit of victory. They are played in the open air on a track or field, or indoors on a court or in a pool. 

But for many people who have never known a world without the internet, that definition looks incomplete. For them, sports are just as likely to be played sitting in a comfortable chair in front of a glowing PC. Instead of a bat, racket or ball, they are equipped with bulky headphones, state-of-the-art keyboards and a lightning-fast mouse.

Han Ki-hoon, a 25-year-old from South Korea, is one of these new athletes. Sitting in a small room on the seventh floor of an apartment on the outskirts of Tokyo, curtains shut to block out the sunlight, Han quivers his mouse with his right hand, directing his character where to go next. On the screen his half-human, half-monster character faces off against other digital creatures, and a number pops up every time a character inflicts damage on another.

Han, whose gaming name is viviD, is one of the millions who play the online game "League of Legends," or LoL for short. What sets him apart from the rest is that he plays professionally, lending his talents to Japanese gaming team DetonatioN Gaming.

Han's esports career prompted his move to Japan two years ago. "I was playing for a South Korean team, but it ran into operational difficulties," Han recalled. "I declared myself a free agent, and DetonatioN Gaming came calling."

South Korean esports pro Han Ki-hoon came to Japan on an athletic visa. (Photo by Ken Kobayashi)

LoL is a strategy game that pits teams of three or five players against each other. Good communication among teammates is essential -- so much so that Han lives, eats, sleeps and trains with four other DetonatioN LoL players and a coach in room 701 of their apartment building. They call it "The Gaming House."

It is easy to dismiss the idea that playing video games, even at a high level, is the same thing as athletics. But esports players argue that the act of professionally competing in top titles such as LoL, which require quick thinking, fast reflexes and dedication, is as demanding as standard sports. When Han is not playing the game, he is either eating or sleeping. "I don't play any other games," he said, not even for fun.

Whatever the purists may say, Han has some important supporters who have little doubt that he is an athlete -- including the Japanese government. Han was one of the first esports players to be granted an athletic visa by Japan.

Japan is just one of the countries seeking to catch up with the more developed esports markets -- South Korea, China and the U.S. -- in the hope of nurturing a new, fast-growing industry. The Hong Kong government recently vowed to invest HK$100 million ($12.7 million) to develop the Cyberport business park as an esports training and competition venue.

Such official support is understandable, given projections that the industry will generate around $1 billion a year by 2021. For Japan, nurturing the esports scene should pay off later by boosting tourism and helping its domestic gaming companies, like Nintendo and Capcom.

Han said when he declared himself a free agent, he did not think about joining other South Korean teams because he wanted to "try out" in other countries. "Besides," Han said, "it is so competitive in South Korea."

In the world of esports, South Korea is what England's Premier League is to soccer fans. South Korean players thrive in global esports tournaments, where prize pools top tens of millions of dollars. Professional players are treated like pop idols, with queues of young women forming in front of players after tournaments. Seoul has several stadiums dedicated to esports.

"Basically the reason why [South] Koreans ... are very good is because of these PC bang [internet cafe] cultures," explained Leopold Chung, acting secretary-general of the International e-Sports Federation, an international organization for promoting esports. "It is like an everyday activity. After school, you go with some of the friends and say, 'Let's play LoL.' This is very common." An estimated 1 million South Koreans play esports games every day in PC cafes.

The hypercompetitive climate in South Korea has led players like Han to look to overseas teams, where they are more likely to stand out. This is a win-win for the teams, as it gives them a chance to bolster their ranks with top-notch players, boosting their chances of winning tournaments or leagues. In the recently launched professional league for the popular first-person shooting game "Overwatch," a team called London Spitfire is, despite its name, composed only of South Korean players.

Fans pose for selfies with professional gamers at the League of Legends Champions Korea tournament in Seoul in February. (Photo by Koji Uema)

Sixteen games into its first season, London Spitfire, owned by a U.S. esports organization called Cloud9, is in third place with 11 wins and five losses. Occupying the top spot is New York Excelsior, a team owned by Jeff Wilpon, chief operating officer of the New York Mets baseball team. Its members are all South Korean, too.

A win for the sponsors

The global esports market was worth $327 million in 2016 according to PwC, significantly smaller than billion-dollar industries like the National Football League, National Basketball Association or Major League Baseball. This is because esports is a collection of different game titles across different game genres, with different intellectual property holders who do not collectively bargain for TV rights or sponsorship deals.

But with esports' addition as a medal event at the 2022 Asian Games and -- if the industry's backers are successful -- in future Olympics, interest in the sport will only grow. PwC estimates that the esports industry will grow by a compound annual growth rate of 21.7% through 2021 into a $874 million industry. A more bullish outlook by the Dutch research company Newzoo puts the esports industry at $1.6 billion in 2021.

Of the three major esports countries -- South Korea, China and the U.S. -- PwC expects China to grow the fastest, at 26.3%, with the industry set to reach $182 million in 2021. Chinese IT giant Tencent Holdings, itself a game developer, agreed with the eastern city of Wuhu in May 2017 to transform the city into an esports hub, with a dedicated stadium to host international tournaments and an esports university to train the next generation of players. E-commerce powerhouse Alibaba Group Holding is already deeply embedded in the industry through its subsidiary Alisports, operating the World Electronic Sports Games international tournament.

The next-fastest growth is projected to come from the U.S., the global entertainment capital, at 22.6% through 2021, while South Korea is forecast to expand by 13.9%. Notably absent from the scene thus far is Japan, the gaming power that is home to Nintendo, Sony and many other video game companies. Although PwC estimates show Japan's esports revenue will grow by 36.2% in the same period, that is from a very low base; the country's esports industry was worth only $5 million in 2016.

One reason esports has failed to take off in Japan is the country's restrictive marketing laws. An act "against unjustifiable premiums and misleading representations" caps cash prizes for tournaments deemed to be selling a specific product at 100,000 yen ($934). This has stifled the growth of the professional competitions that draw large crowds in China, South Korea, the U.S. and elsewhere. In Japan, tournaments sponsored by game publishers -- a common format across the world -- are treated as promotional events aimed at selling games.

Spectators pack Poland's Spodek Arena on March 3 to watch the Intel Extreme Masters World Championship.   © Reuters

Determined to change the situation, Japan's three esports organizations merged into a single entity, the Japan esports Union, or JeSU, in early February, backed by the Computer Entertainment Supplier's Association, the industrial body for game publishers. The new entity is tasked with promoting the growth of esports in Japan, including nurturing talent.

The prime function of JeSU is to issue professional licenses to competitive gamers in Japan. The organization claims this will allow esports players to circumvent the legal hurdle: Because professionals need to buy games to ply their trade, the tournaments they compete in do not have to be seen as promotional events. Some dispute the need for licenses, but the organization hopes that will clear the way for esports tournaments with large cash prizes in Japan, drawing in more fans and competitors.

Japan's move comes just in time to capture the growth of the industry. The investment bank Goldman Sachs estimates that the global monthly audience for esports will reach 385 million by 2022, surpassing even the NFL in the U.S.

Amazon bought into the growth story in 2014 when it acquired Twitch, a popular livestreaming platform for gamers, for $970 million. In a similar fashion, BAMTech, Major League Baseball's video streaming company and a subsidiary of the Walt Disney Co., in 2016 agreed to pay Los Angeles-based Riot Games, the publisher of LoL, $300 million over six years for the "exclusive rights to stream and monetize" LoL competitions.

"We expect sponsorship will be one of the largest revenue opportunities for esports," said Christopher Merwin, an analyst at Goldman Sachs. This is because nearly 80% of esports viewers are between the ages of 10 and 35, a coveted demographic.

A change in the esports league structure, Merwin noted, is also a bonus. In the past, teams that did not perform well in a given league were omitted, posing a risk for team sponsors, but leagues are now starting to introduce permanent teams.

"As a result, Geico, Nissan and Axe are all sponsors of the North American League of Legends league, while Coca-Cola sponsored last year's finals," said Merwin. "Likewise, Activision recently announced that HP and Intel agreed to sponsor the Overwatch League."

Industry insiders, however, are well aware that an uphill battle awaits as esports tries to live up to the high expectations -- and become accepted by the general public.

German pro Kuro Salehi Takhasomi raked in $2.4 million last year playing "Dota 2."   © AP

Part of that challenge is structural. "At the moment, we have seen a rapid emergence of very vertical markets owned and operated by publishers," said James Sherston-Baker, senior vice president of eGames Group, a U.K.-based organization set up to host esports events. While there are tournaments that cover multiple titles owned by different publishers, it is leagues or tournaments that focus specifically on a single title like LoL or "Dota 2" that are garnering a dedicated following -- and large sums of money.

"What needs to happen in my opinion is to lift those interests out of those subcultures and bring it into mainstream acceptance. ... [But] each publisher is the federation for their own sport, and to bring them all together will be an incredibly difficult task," he added.

Masumi Fukuda, editor-in-chief of the free esports magazine Game Star and himself a former esports competitor, said a major obstacle to mainstream acceptance is that most people simply do not understand what is happening in the games.

"There tend to be instances [during the games] that only those who play the game can understand," he said. For an industry whose growth relies on increasing viewership, that poses a problem. "This is a challenge facing the tournament organizers: how to make those instances accessible, to clearly show that it was a game-changing move. Those efforts are lacking."

Esports have also come under fire for illegal match fixing. The South Korean professional league for a popular game called "StarCraft" was discontinued in 2016 by the Korea e-Sports Association after South Korean authorities charged two professional players -- one a world champion -- with the offense and a further eight people in connection with the case. This could become a major problem for the industry, as the worldwide esports betting industry is forecast to exceed $23 billion by 2020, according to a 2015 report from Eilers Research.

A Street Fighter's trademark move

For the top players, esports can be lucrative. The biggest earner last year was a German player named Kuro Salehi Takhasomi, who won $2,436,667 playing "Dota 2," according to esportsearnings.com. For most, however, the winnings are far more modest. 

Japanese esports star Hajime "Tokido" Taniguchi is known for measuring the distance from his face to the screen before matches. (Photo by Ken Kobayashi)

But it is hard to put a monetary value on glory. When Hajime "Tokido" Taniguchi, a popular Japanese pro esports player, took the stage at a competition in Tokyo's Akihabara subculture capital in late January, some 1,000 people had squeezed into the darkened venue to watch him play "Street Fighter." Millions more were watching online.

The audience, mostly made up of young men, erupted when Tokido showed off his signature move: pulling out a measuring tape to gauge the exact distance from his face to the screen. This bit of showmanship has a purpose. Keeping a set distance from the screen apparently helps him remain consistent when the action heats up.

This would not turn out to be his night, though. Tokido lost in the semifinals of the losers bracket, ending the tournament in fourth place.

But his fans seemed happy just to be there, soaking up the scene. Among those cheering Tokido on were Aaron and Arioni, brothers in their 30s who had traveled from Guatemala to witness the event live.

"You know, when I was a child, playing games was considered childish," Aaron said. "But now, it is so big! I long for the day when esports becomes as big as NBA or the NFL."

Nikkei staff photographer Koji Uema contributed to this report.

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