Iconic Tour

Why A-Rod and Shaq is betting big on their own eSports team

Bob Woods, special to CNBC.com

So what's Alex Rodriguez up to these days? Well, among other things, he's become a part owner of several sports teams … sort of. A-Rod's in eSports.

Former pro athletes Shaquille O'Neal (left) and Alex Rodriguez purchased equity in NRG eSports.
Johnny Nunez | WireImage | Getty Images

The superstar's 22-year Major League Baseball career ended in August, when the New York Yankees released him and reworked the remaining $27 million of his 10-year, $275 million contract, designating him as a team adviser. Right now, during the World Series, A-Rod is gaining rave reviews as a studio analyst for Fox Sports, reprising a role he played last fall for the network's postseason coverage. Through A-Rod Corp., he's dabbling in real estate construction and management, fitness centers and auto dealerships.

But last March 17, flying under the media radar that normally tracks his every move, Rodriguez quietly purchased equity in NRG eSports, based in Los Angeles. He joins an ownership group that includes Shaquille O'Neal and MLB's Jimmy Rollins. NRG was formed last year by Mark Mastrov and Andy Miller, part owners of the NBA's Sacramento Kings.

Essentially, NRG is an ownership group that recruits, manages and finances teams of mostly 20-something video game players, who compete year-round in game-specific tournaments, vying not only for supremacy but also millions of dollars in prize money. And while they used to play video games in relative anonymity, today these teams square off in front of massive worldwide audiences — not unlike traditional athletes.

Mastrov, who already had a professional relationship with A-Rod, "gave me a list of people who I thought would be appropriate as investors," said Gerard Kelly, NRG's president of gaming operations. "Alex was pretty high up on the list. From a young age, he has been a star most of his life. That's very similar to what these kids are going through."

The eSports phenomenon

Kelly's referring to the millennial roster of video game players on NRG's eSports teams, part of the fast-growing global phenomenon that's made gaming a spectator sport. Sold-out arenas, from Madison Square Garden in New York to LA's Staples Center, host multiday tournaments where five-player teams — armed with digital guns, knives and other lethal weaponry — battle head-to-head in such best-selling games as "League of Legends," "Counter Strike: Global Offensive," "Dota 2," "Call of Duty," "Halo," "Smite," "Heroes of the Storm" and "StarCraft 2."

A July report from SuperData Research, a New York firm that covers the video game sector, values the global eSports market at just under $900 million, with worldwide viewership — online and during TBS's "ELeague Counter: Strike" competition broadcasts — at around 214 million. By 2019 the industry will be worth more than $1.2 billion, with nearly 303 million eyeballs popping.

Billionaire investors in eSports include Wang Jianlin, China's richest man; his Russian counterpart, Vladimir Potanin; and Amazon's Jeff Bezos, who acquired Twitch, the premiere eSports live-streaming service, for $970 million in 2014. Mainstream corporate sponsors such as Coca-Cola, HTC, Geico and Arby's are among those in on the action.

"They're all looking at the data and seeing a massively popular spectator-sport industry that is growing at an alarming rate and has barely scratched the surface in terms of monetization," said attorney Bryce Blum, co-founder of Seattle-based Interactive Media and Entertainment Law. "The League of Legends 2015 world championship finals had 36 million viewers." By contrast, Nielsen reported that the 2015 NBA Finals averaged 19.9 million viewers over the six-games series.

Sports stars get in the game

A-Rod is among a growing number of traditional sports figures and groups that are clamoring onto the eSports bandwagon. Former NBA player Rick Fox has reportedly invested around $1 million in a couple of big-name teams to form Echo Fox. Boston Celtics forward Jonas Jerebko purchased the eSports organization Renegades in August. New Jersey Nets point guard Jeremy Lin, a noted gamer, is partnering with the China Digital Group and Vici Gaming, a Chinese eSports organization, to endorse a Dota 2 team called Team VGJ.

"I'm looking into these opportunities, and it's authentic, because I play the game three to four times a week and I have since I was 16 years old," Lin told ESPN.

In September, Team Liquid, which fields numerous eSports squads, sold controlling interest to aXiomatic eSports, an alliance that includes Golden State Warriors co-owner Peter Guber, entrepreneur Ted Leonsis, Magic Johnson, and AOL co-founder Steve Case. Around the same time, owners of the NBA's Philadelphia 76ers made headlines as the first pro sports franchise to invest in eSports, purchasing and merging marquee teams Dignitas and Apex.

The League of Legends World Championship 2015 finals had 36 million viewers.
Bryce Blum
co-founder of Interactive Media and Entertainment Law

"There are different people entering the space, which I think will add a lot of value and celebrity appeal," said Sixers CEO Scott O'Neil. "I think what's a little bit different about us is we're bringing the weight of an organization that understands how to build real brands." The Sixers also own the NHL's New Jersey Devils and the Crystal Palace of soccer's English Premier League.

Pro athletes' second act

Once Rodriguez wraps up his World Series gig, Kelly suggested that he'll get involved with the NRG players, many of whom earn six-figure salaries and work out with trainers, psychologists and nutritionists throughout the eSports season. "He'll be able to show us how to make a program for these kids," Kelly said. "They need to be focusing on more aspects of their lives than just playing video games 16 hours a day. They need to look forward to their futures and how to manage the celebrity, everything from their schedules to stress. He's got a lot of valuable information to hand over."

O'Neal, known to be an avid gamer, said his role with NRG "keeps growing as this thing keeps blowing up. I help with recruiting of teams and streamers, working with sponsors and social-media outreach. I am also starting to guide them on content creation as NRG gets into original content development."

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Shaq foresees other pro athletes, especially fellow gamers, delving in the ownership game. "It is high-profile and competitive," said O'Neal, who's already invested in the NBA's Kings, owns multiple fast-food franchises and is a highly visible product pitchman. He added: "eSports is a natural extension of their interests and competitive nature."