How Adam Silver made his mark on esports in North America

NEW YORK -- Adam Silver has seen some of the NBA's greatest stars deliver epic performances and watched some of the world's biggest musicians shine at Madison Square Garden.

But three summers ago on a steamy August night, Silver felt the urge to go to the Garden, on his own, to catch some fresh-faced artists who sold out The World's Most Famous Arena. The oohs and ahhs echoing throughout the building that night were the kind Michael Jordan and Kobe Bryant used to draw while putting on a show at the mecca of basketball.

The sound that Silver heard, the electricity he felt in the air, was all familiar. Yet the NBA commissioner had never seen Madison Square Garden quite like this, nor had he seen athletes quite like these rock the historic venue.

For two straight August nights in 2015, the only thing hotter than the sweltering concrete in Manhattan was the esports action that filled Jim Dolan's Garden. The North American League of Legends Championship Series Finals drew a total of 22,000 feverish fans, including one wide-eyed NBA commissioner who soaked everything in. Millions more watched and chatted about the action online live.

If this is the future of how sports will be consumed, as so many had suggested to Silver, then professional sports' most progressive commissioner had to see for himself what all the fuss was about.

"I remember thinking, it was a hot summer night in August, who in the world would be at Madison Square Garden for this competition?" Silver told ESPN. "I knew it had sold out, but I wasn't sure what to expect in terms of an audience."

Silver saw plenty that night to start a thorough process that has led to the creation of what Silver refers to as the NBA's "fourth league." Less than three years after getting his first taste of esports live, Silver will be back at Madison Square Garden on Wednesday to announce the first draft pick of the NBA 2K League Draft at the MSG Theater. Seventeen NBA franchises are participating, with more likely to join in the future.

"There is something going on here"

Two months after he watched League of Legends for the first time, Silver and the NBA took their first baby steps toward an esports league of their own. In October 2015, the most progressive commissioner in professional sports -- one who constantly has his eyes and fingers on technology and the future -- delivered a pivotal esports presentation along with some of his colleagues at a board of governors meeting.

Silver let the entire group of NBA owners and their governors know that the NBA, as a league, had been studying esports intensively with a group he commissioned to examine every angle. He shared what it had learned and that some owners were already making individual investments, further laying the groundwork for an unofficial partnership that would lead to tens of millions of dollars spent and an undeniable synergy between esports and professional basketball.

Silver put up a slide comparing the number of viewers for the League of Legends World Championship to the viewership for the college football national championship game.

"That's when we kind of looked at each other and said, 'This is something we need to look at,'"  Philadelphia 76ers CEO Scott O'Neil said. "When you have or are able to aggregate that kind of audience, I think there's a business certainly to be had. In a nutshell, we have an organization that looks to be innovative and progressive. We have an ownership group that always likes to explore new and exciting opportunities. Then you have a business in its embryonic stages with incredible viewership numbers with seemingly a business to follow."

The first NBA owner to dip into co-owning an esports team was Memphis co-owner Stephen Kaplan, who was part of an investment group that helped purchase a League of Legends spot for Immortals in September 2015, a month before the October governors meeting.

Silver told the other owners that the NBA would help any owners and franchises looking to get into esports and was exploring what role it could play in the gaming business.

"There was no call to action," Silver said of the presentation. "I think I was passionate in saying that there is something going on here and also passionate in saying to our owners that this is something that those of you are who in the team-operating business -- and many of our owners own multiple teams, they run arenas and are, to me, the very best operators in the sports business -- I was saying to them, reaffirming to them, that we should be operating on parallel tracks, that don't let me hold you back from making individual investments, reminding them that the league can act as a resource but also saying that we are studying very hard if there is an opportunity at the league level."

During breaks in the presentation, there was a buzz in the hotel hallways. The conversation about esports was "pretty robust" amongst owners and governors.

"The meeting was very powerful and very impactful, and the presentation was as well," O'Neil said. "And then pretty quickly, several teams were out in the market poking around."

Since that meeting, 13 NBA teams' ownership groups have invested in or acquired businesses around esports. The North American League of Legends Championship Series welcomed three new NBA team affiliates into their league in October; that 10-team league features eight teams that have partial or complete ownership from parties that are or have been affiliated with the NBA. The Overwatch League, a 12-team league that has become the costliest in esports, has five teams with some form of NBA ownership investment.

Comparatively, six teams in MLB and another three in the NFL share ownership with esports teams. The NBA, more than any other professional sports league, has set its flag in a burgeoning industry with $1 billion in revenue projections over the next three years, according to current team valuations and several studies on the industry.

"What the hell is this?"

The night that Silver stood at the Garden, the NBA commissioner quickly discovered that he wasn't alone. Valued business partners such as Turner president David Levy, NBA owners such as Milwaukee co-owner Wes Edens and former players such as  Rick Fox were there. Edens and Washington Wizards owner Ted Leonsis were among the first, even before that October 2015 board of governors meeting, to share their insight on esports with their peers.

"The passion of the fans there ... I was very impressed," Silver said of what he saw. "I had once been to watch a chess match when I was younger, and I thought the spectators would be quieter and more introspective. But there was a lot more rah-rah, boisterous cheering going on than I had anticipated."

It's happening all around the world.

"When you see 200 million-plus esports viewers worldwide, if that doesn't get your attention, you should go into another business; maybe the Salvation Army, Kris Kringle at Christmas ringing a bell on a corner," Peter Guber, co-owner of the Golden State Warriors, told ESPN. The Warriors started a League of Legends team in October, in addition to Guber's personal investment in endemic esports organization Team Liquid. "Because this is not an alarm bell but a clarion call to recognize that an audience is engaged deeply with esports, and a large portion of that audience are people who are interested in basketball and potentially vice versa."

From Magic to Shaq to Mark Cuban, some of the NBA's biggest names have invested in esports, with other owners plotting to do so.

"I took my son [to an esports competition], I think it was at the Staples Center, and we were sitting on the floor, close to the stage, and the noise was similar to a Game 7," Shaquille O'Neal told ESPN about his first esports experience. "It was crazy ... I was like, 'What the hell is this?'"

Many still might not know a lot about esports, but Silver is banking on changing that with his NBA audience with the NBA 2K League. Esports is an industry that generated more than $655 million in revenue with a global audience of 335 million in 2017. Forecasters predict it will generate more than $1 billion in global revenue and double its audience by 2020, according to data company Newzoo.

"I was so impressed with myself that I am an early adopter to [esports] but then realizing everyone else is here as well," Silver said.

However, Silver was looking forward, toward perhaps a new future for the NBA and its fans.

What if the NBA could somehow duplicate this someday and draw in the next generation of fans through its own esports league? The commissioner, who can't live without his iPhone, who is more tied to the esports generation than many would expect, decided to give it a shot.

Esports just might be a game-changer, not only for Silver and his owners but also for traditional sports worldwide. The NBA is checking into the game early in the first quarter.

"First inning," Strauss Zelnick, chairman and CEO of NBA 2K's developer, Take-Two Interactive, said of where competitive gaming is at right now. "It's the first inning. What do you call 100 lawyers in a fiery pit? A good start. And I am a lawyer. Just scratching the surface. Just the beginning."

"It's not like just picking food from the low ends of the tree," Guber said. "We're planting the trees now. We're not even picking the fruit yet."

"I love s---- like this"

Ted and Zach Leonsis sat in a coffee shop inside the upscale New Orleans' Roosevelt Hotel while the 61-year-old billionaire and his son ordered cappuccinos. A long day was getting late, with more networking to take place that night.

"Caffeine ... like esports," Ted Leonsis said.

The Wizards and Washington Capitals owner hadn't taken his first sip yet, and already he was giddy. Ted wanted to share how he got into esports.

"Are you really going to share this story?" Zach Leonsis, the VP and GM of Monumental Sports Network who played a key role in Leonsis' venture into esports, asked in that tone a son uses when a proud parent is about to reveal a story that is going to embarrass him.

Yes, he was.

The father and son were at the NBA Technology Summit during All-Star Weekend two years ago in Toronto. The summit was started by Silver 18 years ago. It draws luminaries not only from the basketball community but also from the business, news, tech and entertainment worlds. Panelists at the 2017 Summit included the COOs of Instagram and Twitter, Gen. Martin Dempsey and rapper DJ Khaled.

In the past two Summits, esports has been a large topic of discussion, with its own panel.

Ted already had esports on his mind in 2016. He was talking to Turner's Levy about the network's "ELeague," a professional esports league broadcast on TBS that premiered earlier that summer.

"It is a lot of work in thinking it through," Ted Leonsis said. "And it has scared off a lot of people that basically go, 'My head hurts.'

"But I love s--- like this. I like the start-up more than I do like the big, established thing."

Six months prior to the summit, the Leonsis duo had Team Liquid co-owner Steve "Liquid112" Arhancet in for a visit in Washington, D.C. They hit it off and made an offer. But not long after, Arhancet went "silent" and stopped responding to emails or calls.

Baffled and jilted, the personable Wizards owner was in the dark. That is, until he was with Guber at the Tech Summit in Toronto.

"This is a true story," the son interjected. "I swear to God, this is a true story."

In that moment, his dad had an epiphany. He looked at Guber and whispered to him, "Fredo, I knew it was you. You broke my heart."

"It's a famous line from 'The Godfather,'" Ted said. "And he looked and said, 'What are you talking about?' And I said, 'It was you. You bought Team Liquid.'

"I looked in his brain. I swear to God! I looked in his brain. And a couple of hours later, he called my phone and said, 'That was the scariest thing I have ever experienced. How did you know?' I said, 'I didn't know. I swear, Peter, I looked in your ears and saw the answer scrolling.'"

The two later joined forces and invested in Team Liquid together, creating a bicoastal esports ownership group that now includes Magic Johnson, AOL co-founder Steve Case, Tampa Bay Lightning owner Jeff Vinik and Disney Accelerator, among others. Disney is the parent company of ESPN.

But as Guber and Leonsis discovered, prime real estate in North American esports is highly competitive. The 11 other NBA owners who invested the past few years shirked the wait-and-see approach of other professional sports owners.

At Sacramento Kings home games, co-owners Mark Mastrov and Andy Miller found their courtside conversations turning more and more toward esports. Even before they created NRG Esports -- which later received investment from O'Neal, former New York Yankees star Alex Rodriguez and award-winning musician and actress Jennifer Lopez -- the topic came up.

"Our kids are young. They're all playing it," said Mastrov, who is the founder of 24 Hour Fitness. "I started realizing this thing was really hitting the millennial population in a big way. Andy and I got talking ... He said, 'You know, I think this might be a fun thing for us to invest in.' We began scouting a little bit, and next thing you know, one thing led to another, and we put some money together and attracted some of our friends, and off we went."

On the opposite coast, Sixers co-owner David Blitzer took his kids to an esports competition and was in awe of what he saw, much like Silver and Shaq were. The Sixers became the first North American professional sports team to own an esports team, acquiring Team Dignitas and Apex in September 2016.

Dallas Mavericks owner Mark Cuban first heard of esports years ago, when he saw it on one of his properties, AXS TV. He even competed in a League of Legends show match in San Jose in 2015. Although Cuban hasn't invested in an esports team, he is part of a group that poured a total of $38 million into a Seattle esports betting startup called "Unikrn."

"I wanted to own the plumbing, a company that covers the esports spectrum globally," Cuban said via email. "A team has to win to make money. With Unikrn, the house always wins."

Zelnick, who has been in the video game industry since 1993, believed so strongly that video games were going to be "the next huge entertainment business" that he left 20th Century Fox as its president and COO to start Crystal Dynamics.

"I have been wrong about plenty of things in my life," said Zelnick, who has worked in the TV and music industries. "But I was right about that. I made a bet a very long time ago that this would be big business to now it is a multi-billion-dollar business. The size of the video game market is bigger than theatrical motion pictures, and it is the most rapidly growing part of the entertainment business."

Zelnick also pointed out last year that people watching competitive gaming doesn't necessarily translate to people buying more games, rather than in-game microtransactions, and the bulk of revenue comes from live events and sponsorships. While the challenge for investors has been to try to find where they can strike it rich in what might feel like a 2K Gold Rush, Zelnick isn't too concerned about it. NBA owners who have invested did so more on the premise and promise of esports.

"Well, it's the wild, wild West without guns," Zelnick said of the esports industry, some of which has little structure. "And I'll take that. I hope it's the gold rush, with gold."

The NBA's "secret sauce"

To understand how and why the NBA dove headfirst into the esports pool like no other major professional sports league in America, you have to get a feel for the man who oversees the sport.

Silver prides himself on being prepared and informed on every topic surrounding his league, whether it be the current political climate and how it might impact pro sports gambling to societal issues that some of his players and coaches are actively trying to impact. He even keeps tabs on the weather and if the latest Nor'easter will come to fruition and impact games or fizzle out. He takes notes to his meetings, including our interview in March 2017 on the 15th floor of the NBA headquarters in the heart of Manhattan, even though he rarely needs them.

Staying connected is one of Silver's greatest attributes, but it is admittedly also his vice. His iPhone was not out during our interview, and it might have been one of the rare moments in the day that Silver was not glued to it.

"It's embarrassing," he said. "I think when people compliment me on how responsive I am on email, I am embarrassed because I am continually determined that I will set boundaries for myself in terms of spending more time reading and less time responding to emails."

Once upon a time, David Stern's vision was to expand into Europe, Asia and Africa and make the game global. Now, the next horizon looks as clear and vibrant as a 4K screen: one of Silver's missions is to bring the game to every fan's fingertips via smartphones, consoles and computers and reach every corner of the planet as easily as Giannis Antetokounmpo reaches the rim in one stride from the free throw line. The NBA isn't ready to start a franchise in Europe knowing how international travel would negatively impact players' rest and health. But perhaps it can bring the game -- and more importantly, the experience of being at a game -- virtually to fans across the world.

"He is not only forward-thinking but is instructive to the league from a business operations standpoint," Zach Leonsis said. "And I think its mandate down to a lot of the individual owners is that we can never get too comfortable. We got to be looking for what's next."

Silver deflected credit, though, and pointed to a new wave of NBA owners.

"The secret sauce here is the NBA owners," Silver said of the NBA's ability to identify and invest in trends in advance. "We have sort of next-generation owners who are forward-looking, are passionate about the sports business, enjoy being operators and love finding new opportunities."

As Cuban said, "we have a lot of geeks and love tech." And as he knows well -- he once had a PlayStation and TV screen installed in each Maverick's home locker stall -- the league is full of players who grew up on video games.

"When I first came into the league, that's all we did. We played games," said O'Neal, who debuted in 1992. "I would go in a room during the playoffs, and there would be guys having Madden tournaments in the room. I don't know about baseball or hockey, I don't know what they do in their pastime, but I know a lot of the NBA players are big into games. Esports is part of the gaming industry, so I'm sure the guys that are invested are really, really into games."

O'Neal and Fox, who won three consecutive NBA championships together with the Lakers in the early 2000s, are among former players who have invested in esports. Fox and his group purchased Gravity Gaming's League of Legends Championship Series spot for a reported $1 million. Among current players, the Utah Jazz's Jonas Jerebko purchased Renegades, an esports franchise that previously held a team in League of Legends and at the time of the purchase in September 2016 had a team in Counter-Strike: Global Offensive, the two most popular games in esports.

Boston's Gordon Hayward and Brooklyn's Jeremy Lin are avid gamers and esports enthusiasts, both doing previous advertising deals with IGN, Vici Gaming and HyperX, respectively. Now Fortnite is the latest video game to keep several NBA players, such as Minnesota's Karl-Anthony Towns, up all night. It could be another big esport in an already crowded field.

Silver said the NBA wasn't initially considering starting a league around its NBA 2K video game. But as he and Zelnick spoke more about a way for the NBA to enter the esports realm, the idea of an NBA 2K league grew more appealing.

It made sense for the NBA to promote the sport through its most popular video game. NBA 2K17 is the highest-rated annual sports game of the current console generation, selling nine million copies worldwide, with NBA 2K18 on pace to become the best-selling edition in franchise history, according to the NBA.

The NBA already has organizations that know how to run and operate teams as well as a model already in place for a league structure.

"I will say what I have learned is it is an incredibly passionate audience," Silver said of esports consumers. "If you look at the numbers that Amazon shared with us about their Twitch audience, the numbers that YouTube has shared with us about the enormous amount of their traffic that is due to gamers, it is in the hundreds of millions on a global basis. I think there is a reason, therefore, why all of us are focused on this potential audience.

"I realize that just because we have a popular global sports brand does not mean that those hundreds of millions of egaming fans will automatically convert over to be interested in an NBA league. But certainly [it] creates enormous opportunity."

"I don't think anyone knows how [this] is going to do"

On a Friday night during All-Star Weekend 2017 in New Orleans, Kevin Durant, Paul George, Kyrie Irving, CJ McCollum and Aaron Gordon were frustrated.

At a time when they were supposed to be out on the town enjoying themselves, the five NBA pros were getting whipped by five pros at NBA 2K17. After Team STILL TRILL won the NBA 2K All-Star Tournament Championship in New Orleans, the players collected their $250,000 prize check and a surprise reward -- the chance to play Durant, George, Irving, McCollum and Gordon on stage.

The NBA pros, using their virtual selves in the game, took on the winners, who were playing with their created and developed characters. The game was a mismatch, with Durant, George, Irving, McCollum and Gordon getting run off their flat-screen monitors.

Seconds into the start of the game, STILL TRILL blitzed the NBA players, hitting a 3 and stealing the inbounds before drilling another 3.

"They were incredible," Gordon said. "They didn't miss. They were all on the same page. They were tall. They were talented. They had a lot going for them."

The NBA pros tried -- seriously. Their competitive juices kicked in. At points during the no-contest, the five NBA players were talking to one another on their headsets desperately trying to figure out how to defend STILL TRILL.

"It's funny," Gordon said. "We were just talking like we were on the basketball court: where to be on defense, what we were going to try to do to get back in the game. Just stereotypical cliché NBA sayings.

"Offensively, it was impossible to guard them. Just their shot-making ability, one of the dudes [had] like 21 assists, 21 points and like 100 percent field goal percentage."

During the 95-52 thrashing, Durant, ever-competitive, shook his head and mumbled to himself. All the while, almost 2 million fans tuned into the live stream of the championship event on multiple digital channels, with 1 million watching on Twitter.

"I feel comfortable that this will be a good investment for us, that we can add some value, have a lot of fun, and that it is a long, long-term play," Ted Leonsis said of esports. "I am reminded quickly that in the NBA, Magic Johnson's rookie year [1979-'80], the NBA Game [6] championship was on tape delay. Now football games, basketball games, playoff games, they are like the No. 1 rated [program] every week on television.

"The reason is that it convenes people. It has aspiration. Every game, something could happen that you talk about."

Silver wants to make sure the NBA doesn't miss out on this big moment, either. He doesn't know whether the NBA will find gold with its investment in esports. But he and several of his owners are willing to find out, even if they might not know what exactly is going on and have to ask fans what they're cheering for, like that night Silver experienced esports for the first time at Madison Square Garden.

In some ways, things have come full-circle since then. Counter Logic Gaming, which won the 2015 League Championship Series summer season that Silver watched, sold the majority of its shares to Dolan and his Madison Square Garden Company in July. Add Dolan to the list of NBA owners who have become esports converts.

"I can't take credit for having sort of a crystal ball here," Silver said more than a year before the NBA 2K League would hold its first draft. "And the jury is still out. [But] I am incredibly excited -- I mean, you can tell right now -- about us going into this business. We will soon see what the crossover is between traditional NBA enthusiasts on one hand and gamers on the other hand. Even those gamers that are playing NBA 2K may be largely a different audience than those who play basketball or attend and watch NBA games.

"There's no certainty, and I don't assume anything going into this, but I think all of our guts tell us that there is an opportunity here and that the marketplace is ready for a league structure."

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