Today, we are launching coverage of a new area – eSports. If you are on our mailing list you should have received a copy of our 30-page, detailed report. If you would like to be added to the distribution list leave a comment or a drop us an e-mail.

This area may seem a departure from the usual D2D fare, but I think it is interesting for a number of reasons. First, we are talking about video games, and video games are just fun.  Second, video gaming viewing is one of the pillars of the growth in online video consumption. This is an important new category of demand for network and cloud infrastructure. For those of you interested in such things, it is worth understanding a little bit about potential new customers for equipment. (See this post on Riot Games for a sense of the scale we are discussing.)

Third, eSports is essentially a brand new industry. So we get to watch it form in real-time, to see profit pools discovered and witness how industry economics get divided up. For students of strategy, this opportunity does not come often. As I said in my teaser post last week, this is like geologists getting to watch a new volcanic island pop up in the middle of the ocean.  The industry is already approaching $1 billion in revenue, growing at 40%+ annually. There is still an opportunity to tap into the industry’s immense growth potential, but it remains unclear who will ultimately capture what share of industry economics.

To gauge that process, a few key indicators to watch are:

• The formation of leagues, or the lack of their formation, and who will hold the power in collective negotiations with broadcasters and advertisers.
• The related question of what revenue streams will leagues, players and especially teams be able to harness.
• The labor mobility facilitated by the relative ease of players to switch games throughout their playing careers, and the ability of team organizations to amortize overhead resources across multiple games titles.
• The ability of early stakeholders to maintain their industry position, especially the role of the game companies, the console platforms and the key broadcast platforms – Twicth.TV and YouTube.
• The willingness of large consumer brands to spend advertising dollars against eSports broadcasts.

It is too early to forecast who the ultimate winners, but recent developments have underscored the brewing conflict between the game companies and the teams to capture/share revenue.

In short, a lot is going to happen in the business of eSports in coming years, and we get a front row seat and potentially the ability to invest early in what promises to be a rapidly growing field.