Slingshot’s Andrew Kim caught up with Ari Segal, the newly-appointed COO of Immortals. They discussed his entry into the industry, his goals for the organization and whether or not esports is in a bubble.
Andrew Kim: How familiar are you with esports and how did you decide to jump into the industry?
Ari Segal: I think I’m more familiar with the business than the fan experience and the gaming side. I first started taking a look at it basically four, five years ago when I was at McKinsey and I was working for a guy who owns the global sports and gaming practice at McKinsey. Gaming, by the way, in that context means gambling, not necessarily competitive video gaming. He said to me and a colleague, there’s a lot of stuff happening in esports right now. It was right around the time when Twitch was taking off, might have been right around the time of the acquisition, actually. And he said, “Could you just take a look at this and tell me what’s going on?” So we took a look over the course of a week or two and we reported back wow, the numbers here, the engagement here, the reach here, there’s really something to it. My knowledge didn’t really go much further at that point, but when I started working for teams in San Diego and in Arizona for two completely different reasons, I started to evaluate esports as a content vehicle. So for San Diego, I was working with a team with an anchor tenant in a building that was owned, managed I should say, by AEG. AEG were great partners. They happened to be investors and partners for here at Immortals, which is fantastic. They’re the best globally at what they do, but we would collaborate and try to figure out what can we do together to try to bring more people into this building.
So me as a tenant, why did I have an incentive to bring people into the building? No. 1 it offered incremental content opportunities for our fans, so if we were working hand-in-hand with the building, we could offer early access, or events tickets, or merchandise discounts, or food and beverages discounts for fans who were already coming into the building. That would increase the value they would be getting from us as being fans of season ticket holders. Second, from the building’s perspective, if they could fill an additional night or multiple nights with content and get new people with differentiated content, they could get all types of people to come through those doors. That would be good for us as a team because even though we might not participate in the revenue of that event, our brand was all over the arena. Any fan that would come into that arena would see our merchandise, see our logo, see our schedule, and all sorts of opportunities to interact with our staff, the building staff, and have a good experience, and think about what would be the other opportunities to come back to this great place and have fun with my friends and family. So we thought of esports as a really interesting opportunity to explore, and ultimately that never went anywhere, but we were certainly researching what was going on in the space.
In Arizona, completely different context. There, the Coyotes’ players are also managed by AEG, but the city of Glendale terminated the Coyotes’ lease on the building and the Coyotes have been looking for an arena solution in that market. We were thinking about whether it was about designs or kind of different structures or districts we could create would not only have Coyotes but other entities and other types of content as well. We thought about esports as a really great opportunity to engage a really different market and fill an arena that we were going to be a heavy investor in with additional nights or days of compelling programming. That was from the perspective of not a esports operator, but as a business in the sports and entertainment space, I came to see esports as a very interesting opportunity with a very large market and a type of content that can be used to solve a lot of different problems.
AA: What facet of esports intrigued you as a person outside of the space?
AS: A lot. First of all, there’s global reach with essentially limitless distribution. If I’m the Coyotes, I own my content, I can sell or distribute my content locally in a pretty narrowly defined market: Arizona. To consume Arizona Coyotes content outside of the market is very difficult. Esports is consumed globally and that is just a scale of consumption and a market opportunity that is really the envy of the traditional sports world. The traditional sports world would love to have the global engagement that esports has in respect to content.
Something else that was really interesting to me was the combination of an over-the-top content distribution mechanism with an inherently social experience. So if I was watching the Coyotes or the Ducks on TV or streaming their games live, I’m watching the game very passively. The esports consumption experience is much more active, and that activity is expressed in all sorts of different ways. There’s participation in Twitch chat actively, but you don’t have to be posting your own thought every five seconds to feel like you’re an active participant, because it’s an ongoing dialogue that is a part of your consumption experience. You can express yourself in badges, emotions, words, or even just to be part of that as a passive viewer in a very active community is a differentiated consumer experience and fan experience that I’ve experienced in traditional sports. I suspect that’s where traditional sports will ultimately need to go.
If I’m with friends who have children in the 8- to 12 year-old range, when we’re watching a football game and the play stops, the first thing the kids do is look for their phone or look for their iPad. That’s the same thing I do too. There is nothing social for them about watching football. It’s a seesaw experience; they watch a play, they watch something else. They watch a play, they something else. Whereas esports is a flow sport, more similar to soccer. The action is ongoing but it’s different in the sense that as the action is ongoing, you’re encouraged to participate actively. I think that if traditional sports wants to continue to grow as a hub, they need to figure out a way to integrate a social experience into their kind of consumption model.
AK: What are your responsibilities at Immortals?
AS: As far as the stuff I oversee it’s sales, marketing, creative, community engagement, our events business, our finance and HR functions, and all of the things that go into our actual business outside of the gaming context. Our competitive gaming falls under our GM, Nick Phan, and he and I report to Noah.
Obviously Noah remains the visionary leader behind Immortals and will remain absolutely involved and engaged in critical decisions across every department. What he’ll hopefully have time to do now is, No. 1, spend a lot of time with our fans and that’s time in person at live events. It’s time traveling the country to build out our collegiate program to connect with students. It’s time engaging with our fans online, communicating to them via Noah’s Notes and other mediums, and really making sure that we are being accessible and accountable, transparent even as we grow, and even as we embark on all sorts of new challenges like with the Overwatch League.
I also think and hope that he’ll have time to continue to refine the competitive philosophy that’s made Immortals very successful. Hopefully he’ll able to institutionalize some of the learning and philosophy so that we remain competitive in all of our games and all the games we participate in the future.
Finally what I hope he has time to do is really focus on long term vision and strategy. If you think about Noah and the way that he’s built Immortals, where he’s positioned the brand in the market, and the steps that he’s taken since starting the team two years ago as a rising college senior, I think what an honest observer would say is he’s been pretty out and front with most things. He knows how pick players, he knows how to spot trends, and when you’re spending a lot of your time on the mechanics of the business, you can miss things as they’re evolving over time. Now I think he’ll really have time to be on top of the market, what’s really going on in the broader sports landscape, and help us to be in a position to take advantage of trends or side-stepping landmines.
AK: A hot topic is the franchising model in esports. Based on your experience in traditional sports, is franchising the future of esports and what are some land mines that it’ll have to avoid along the way?
AS: One thing I think is a little bit of a misnomer is that while esports is a simplifying term, if you unpack it it’s not one thing. For example there’s room in esports and there’s room in the sports and entertainment global market for there to be decentralized models like Dota and the other Valve games and also some of the more structured traditional sports style models like Overwatch League. The great thing is we as an organization can participate in both, and fans can opt into one or more structures based on what suits them. The English Premier League, a system of promotion and relegation, was completely foreign to the US system where all the teams at the major league level remain at that level regardless of performance. If you ask a US person about the English model or vise versa, both’ll think the other is crazy.
The good thing about esports is that we get to do both. I think the major land mine would be trying to change that really interesting and advantageous aspect of esports because it’s easy to do it, saying everything has to be one way when it doesn’t have to be. That would be the biggest land mine.
AK: There seems to be a perception that there is a bubble of sorts for esports right now. What are your thoughts on a future bubble pop?
AS: Any time you get rapidly growing market places, there’s always going to be the question of is there a bubble. I guess the question is when people are referring to a bubble, what are the indicators that suggest there is a bubble? Participation, consumption, viewer interest, all of those things are continuing on the essentially the same trajectory that they’ve been on for many years. The demographic mix just expands as people who were 20 to 34 are now 30 to 44 but people people 13 to 18 are coming into that kind of core of the demographic. So it’s not that, so it must be franchise values.
I assume that when people are afraid of an esports bubble, they’re thinking are these team just being massively overpriced? If that’s the fear, using my background and experiences, I would say no and here’s why. There are two things more than anything else that have driven franchise value appreciation in traditional sports. One is rights fees and two is scarcity. If I want to buy an NFL team, there’s only one way to do it: buy one of the 32 out there. If I wanted to buy a hockey team, there’s only one way to do it: buy one of the 31 out there. On the other side the media rights associated with — with exception to the other leagues except the NFL — your local rights and your international rights for all the leagues that have been growing at exponential rates for many years.
In esports, we have not enjoyed either of those two things yet. Until Overwatch League, there wasn’t some form of scarcity because there was no fixed supply in the traditional sense. But now if you want to get into Overwatch League, you have to buy a city franchise, and Blizzard will have to expand. that is going to lead to an increase of asset appreciation because there is strong demand and we are now in the first in esports, restricting supply and that suggests that the prices should increase. Another part is, I think we’re in the very early stages of figuring out on how to monetize content rights. It’s not like teams have local TV deals in esports or content licensing beyond one to three year deals with Twitch or Facebook or maybe YouTube. I think the teams and the licensees of that content are still trying to sort through how that’s structured.
So the two things that have propelled traditional sports evaluation, I don’t think esports is really benefitting from those yet, and I don’t really see the bubble people are talking about.
AK: Do you think esports will develop a unique kind of revenue stream to maintain its status?
AS: I think the vibrancy of the Twitch community is an example of that already happening. I think that the growth of The International is an example of that’s already happening. The fact that there are in-game economies is evidence that that’s already happening. So across several dimensions I think esports is doing things that traditional sports are taking notice of, trying to learn from, and trying to integrate into their own content offering or revenue models or other things. Because esports has done that so consistently across multiple titles and over a long period of time at this point, I expect that the trend will continue. There are will be additional ways that esports teams and publishers, monetized content distributors think that traditional sports and certainly the venture capitalists will continue to notice.
AK: What is a lesson from traditional sports that you want to bring to esports?
AS: I would say that No. 1, I believe very sincerely that there is something different and special about real in-person social interaction. Sometimes when people say that, there’s this sense that by that they mean that there’s something inauthentic about online interaction and that’s not true. I think there’s room for both. I just think that humans are inherently social beings and taking some of these learnings of how to execute in a professional, repeatable way, live events and create a branded live event experience. For instance, if you see our team at our venue, it should be different from seeing the Boston team at its venue. I think delivering that experience to our fans and esports fans on their terms is something that I can help out a lot with.
Something else I would say is a real spirit of collaboration among teams. The NFL owners are partners with each other, and they don’t even have local rights to their television content. They pooled all of their content together regardless of market size because they realized that by bundling those rights together, everybody would make more and everybody would do better. As we embark on our Overwatch League journey or we think about what might happen with the LCS if we are fortunate enough to be part of that league, I think bringing a real spirit of partnership and collaboration at the league level will be a benefit not just to us and our fans, but everyone. Our board is absolutely committed to that because they’ve seen how when you embrace governments from a partnership perspective, everyone is better off and when you approach it from a competitive zero-sum perspective, it can often be to your own detriment.
AK: If you have any personal pet project or goal that you want to achieve, what would it be?
AS: My first project was picking out my gamertag, which was really a lot of fun. But I would say that my pet project would be investing in your own people to ensure that your own customers will be treated with the best service and the best products and the best customer experience. What I want to make sure that the experience that we deliver to our employees is something that they find is a good place to professionally develop and enjoy career growth. If we’re executing in that realm, I think we’re going to recruit great people and that’s the best way to continue to deliver value to our fans. That would be kind of our pet project; how do we make working for Immortals the best professional experience not only in esports but the best possible it can be in any space.