Calling master chief
A News Corp.-backed professional video-game league is getting a run for its money from two former ad guys.
NEW YORK (Fortune) -- After making a ton of money in the advertising business, Michael Sepso and Sundance DiGiovanni decided six years ago that it was time to goof off. How did these two guys, then in their late 20s, pass the time? They played a lot of "Halo."
Then they had an idea: Why not start a professional video-game league?
Don't laugh. The former ad men raised $35 million from private-equity investors, rounded up some skilled gamers and launched Major League Gaming in 2003. Today, the predominantly web-based league has five million monthly unique users, most of them young men whose average age is 19. They flocked to MLGpro.com to watch star gamers like FearitSelf and ThuggishKilla blast each other to smithereens in shooter games like "Halo 3" and "Gears of War." In June, the league hosted nearly 600,000 amateur matches on its GameBattles Web site.
Now all Major League Gaming has to worry about is not being blown to smithereens by Champion Gaming Series, a competing professional league that made its debut last year and is backed by Rupert Murdoch's News Corp. (NWS, Fortune 500).
Major League Gaming's founders say they aren't afraid of their well-financed rival. "I mean, we're two really competitive guys," says Sepso. "When you do something like this, you want the big guy to fight you. We want to beat News Corporation. Our attitude is, 'Holy s--t! This is cool!'"
Perhaps the biggest reason for Major League Gaming's success is that allows its fans to become its stars. Amateurs who score the highest on GameBattles can join teams that compete in tournaments with as much as $100,000 in prize money. Major League Gaming's July tournament in Orlando, Fla. drew 12,000 people - 20% more than a similar event only a month before in San Diego. Another 365,000 fans watched it on MLGpro.com.
On top of its GameBattles site, Major League Gaming also has a PC-gaming site and another one dedicated to "World of Warcraft." All of them are ad-supported, and have have attracted such blue-chip sponsors like HBO (TWX, Fortune 500), Procter & Gamble's (PG, Fortune 500) Old Spice, Dr. Pepper and Stride Gum.
Championship Gaming Series, on the other hand, has a minimal Web presence and is pouring most of its resources into television instead. The new league is directly bankrolled by three of News Corp.'s satellite television providers: DirecTV, BSkyB and Star. That means it has a potential audience of 450 million viewers worldwide.
"We're creating something that's powerful," Andy Reif, then-CEO of Championship Gaming Series, said in an interview earlier this month before he left the company. "Not just in the U.S., but really big globally." Its sponsors include PepsiCo's (PEP, Fortune 500) Mountain Dew and Dell (DELL, Fortune 500).
Championship Gaming Series started its first season by televising its draft from the Playboy Mansion. Huge Hefner was away, but some of his centerfold models were on hand to make the event more appealing to young male viewers. The league says 2 million viewers watched its second season this year on DirecTV. The champs, England's Birmingham Salvos, walked away with $500,000 in prize money. That's five times more than Major League Gaming's championship "Halo" team can expect.
However, Sepso and DiGiovanni argue that television isn't the best way for either league to attract fans. They should know. Early on, Major League Gaming hired an Emmy-winning producer of more than 30 figure-skating events and spent $6 million on two seasons of shows - one for USA Network and the other for Comcast's (CMST) G4, a cable network that covers video gaming. The former ad guys learned that sponsors didn't want to buy television ads to reach young men. They thought Web ads were a better way to get their attention.
So Major League Gaming pulled the plug on its television shows. Now the award-winning producer handles Major League Gaming's Internet programs. The league says it has more sponsors than ever and expects to be profitable in the fourth quarter. "We can give you five times the number of young men on our Web sites than any television network," Sepso boasted.
It's too early to declare a winner in this smackdown. "I think that, right now, Major League Gaming has more traction than Championship Gaming Series," said Billy Pidgeon, a gaming industry analyst at IDC. Still, he's doubtful that professional video gaming will ever be as popular as other major league sports. "How many people are actually going to watch it?" Pidgeon asked. "I've always thought watching gamers on TV is a waste of valuable gaming time."
Even so, the battle between the leagues should be interesting to watch. In late August, Championship Gaming Series replaced Reif with Dale Hopkins, the former chief operating officer at G4. Unlike Reif, a former executive at pro volleyball league who didn't play video games, Hopkins is comfortable with a controller in her hands. She has a PS3, an Xbox and a Wii at home. She plays "Madden NFL" with her son.