Written on behalf of Feigenbaum Consulting
While video games have always been popular amongst younger generations, it’s also become big business. Prior to COVID-19, it was not uncommon for arenas around the world to be packed with people watching professional gamers battle for supremacy on the game of their choice. The best players in the world are able to make a fantastic living as gamers, and where there’s money to be made you can be sure there are large corporations looking to be a part of the action. That’s why it was big news this month when IBM announced it was getting involved in esports.
What are E-sports?
Those who follow e-sports might look at this as a silly question, but there are plenty of people who don’t know about e-sports or may not be aware about how video games have transitioned from a hobby to big business.
People have been competing in video games ever since multi-player games were invented. Even before that, players would compete to get the highest scores on single-player games. Back before arenas were full of gamers, people used to play on a single TV together, with technology eventually allowing computers to be connected as local area networks (“LAN”). Of course, the internet made it so that people didn’t have to be in the same building or even the same country to play together.
E-sports as we know it today is a natural extension of this. There are leagues for the most popular video games, and teams can try to earn their place in the top leagues. There are a number of places for casual players to join a league, but colleges have even begun to enter the e-sports industry, starting in 2014 when Robert Morris University in Illinois announced scholarships for a league that played the game League of Legends. ESPN currently tracks the number of varsity e-sports programs in North America, with a listing of over a hundred colleges, including powerhouses in traditional sports. There are also a number of professional leagues where teams play tournaments to crown champions for specific games.
When IBM announced last week that it was partnering with video game company Activision Blizzard to manage tech for their Overwatch league, it made headlines because it signalled traditional tech powerhouses were ready to get involved in this growing industry, which is currently estimated to be a 950 million dollar industry. IBM isn’t sponsoring a team, but it is partnering to provide technological developments for the league itself.
If you’re looking to purchase a franchise in the Overwatch League, you can expect to pony up big bucks. Franchises have been sold by Activision Blizzard for $20 million each. It hasn’t scared away those with the money to enter, though. The New York Yankees, Houston Rockets, Robert Kraft, and Magic Johnson have all bought in according to Forbes.
Nearly all of the avenues to monetize traditional sports have been incorporated into e-sports, including sponsorship, ticket sales, and media rights. In fact, the current Overwatch tournament is being streamed by Disney-owned ESPN.
Those involved in the entertainment and sports landscapes would be shortsighted to ignore the growing impact that e-sports is having. E-sports professionals will soon demand the same services and support that traditional sports professionals have required. At Feigenbaum Consulting, we are positioned to assist sports and entertainment clients across a broad range of areas, including taxes, endorsements, intellectual property, immigration, and real estate closings on both sides of the border.
We have a wealth of experience in international tax law, particularly when it comes to US/Canada issues. Contact us for assistance with your tax matters and learn how our knowledge of jurisdictional laws and regulations can help lower your overall tax risk and yield sizable tax benefits. We offer services to clients in the US, Canada and around the world. Contact us to learn more about how we can help or call us at (905) 695-1269 or toll-free at (877) 275-4792.