<
>

The house that Liquid built

Team Liquid prepares to battle in the third place match in the NA LCS spring finals. Provided by Riot Games

It's 12:30 p.m. in Los Angeles on a weekday in April.

Looking at the outside of a nondescript condo development, you'd never guess what's happening within.

A team of professional gamers have just started a "scrim" against another team. Sitting in leather chairs with "Team Liquid" embroidered on them, some of the gamers are still wearing pajamas, others are in shorts and flip-flops. The clack of fervently worked keyboards ricochets through the air.

These young men are among the best in the world at playing one of the most competitive, and lucrative, online games -- League of Legends. Like players of physical sports, each person here has his own position to play, and each arranges himself next to the person he works with the most.

An untrained observer may not understand most of what is being said, but the tone and cadence, at least, will be familiar to sports fans, who can recognize the sound of commands needed to help individuals play as a team, much like a shortstop calling off a third baseman on an infield popup.

After about an hour, the players retreat to the back of condo, where a huge screen is set up. Plays made minutes ago in the scrim have already been automatically uploaded, ready to be digested and analyzed.

At the helm is Team Liquid's head coach, Choi Yoon-sub, known in the gaming community as Locodoco. Locodoco suggests ways players could improve, while Matt "Matt" Elento and teammates Kim "FeniX" Jae-hun and Chae "Piglet" Gwang-jin are putting up a fight. Backing up Locodoco is an assistant coach and several outside analysts who are kept on payroll so they will be available at a moment's notice.

Welcome to esports today, where top gamers are making hundreds of thousands of dollars and team owners are spending even more that that to build the best teams money can buy. The industry is will likely be worth more than $450 million globally this year and more than $1 billion by 2019, according to market tracking firm Newzoo.

As the players go over the moves they made and debate tactics, they are watched carefully Steve Arhancet, aka LiQuiD112. He's one of the first generation of esports owners, an early mover and shaker in the young scene.

Just five years ago, Arhancet was leading a more typical life as a financial analyst in Washington D.C. -- at least, he was from Monday to Friday. But on weekends, he was a gamer traveling to destinations in Eastern Europe.

It was a wild double life, but he found himself gravitating more and more toward gaming. Arhancet started to wonder whether esports could be turned into a real business that he could jump into full time.

When Arhancet noticed that games on shared Twitch.tv, a site where pro and casual players broadcast their games, were being watched by a million people at a time, he realized he needed to leave his corporate job.

"I thought to myself, 'Well, they are going to be playing ads on this, and there's going to be a space for exclusive or co-exclusive licenses to broadcast this content on platforms," said Arhancet, sitting in a one of a string of condos he now rents to serve as players' bases for working and sleeping. "This industry is someday going to be lucrative."

So, against the advice of family and friends, Arhancet left the corporate world to bring his business mind to esports.

In December 2014, four months after Twitch was sold to Amazon for $970 million, Arhancet made his big move by paying an undisclosed sum to merge with a well-established team, Team Liquid, and the 21 athletes it had under contract.

As esports has exploded in the last year and a half, so too has Team Liquid under Arhancet's management. The team now employs 71 players who compete in 11 different games.

This particular League of Legends team just took fourth place in spring playoffs of the League of Legends Championship Series, living up to a meme that labels the team "Forever Fourth."

Arhancet doesn't seem to be sparing any expense in his effort to establish the team as a top competitor. His players make between $150,000 and $250,000, including base salary, benefits, tournament winnings and streaming bonuses. His support staff seems to be growing by the day.

A couple weeks ago, Arhancet hired Nick Phan, a gaming aficionado who was working at an insurance company. But it wasn't his insurance expertise the team wanted: Phan had previously been a restaurant cook, and he's now the team chef, making two meals a day for the gamers -- a brunch/lunch before they start their roughly eight-hour playing day and an early dinner.

And his job isn't just making food. Phan is also charged with thinking about what protein-to-carb ratio will keep gamers fresh and alert throughout the day and monitoring what the players drink -- soda and energy drinks are strongly discouraged. When he's not in the kitchen, Phan helps manage the team with Steve "Jokasteve" Perino, a former gamer charged with setting the daily agenda and helping execute Arhancet's business.

Joining Phan as a new member of the team's support crew is Summer Scott, a psychologist. It may seem odd to keep a psychologist on staff, but given the players' ages and that fact that they live together and many of them are far from home, the team has found Scott's mediating presence to be extremely valuable.

"A lot of these guys join the team after playing by themselves for so long," Scott said. "Making sure that they understand how to best communicate with each other makes a big difference."

And like any other business, there is turnover. Last week, Arhancet lost a star player on his Counter-Strike team, Oleksandr "s1mple" Kostyliev. S1mple wanted to return to Europe and work from there -- he was living with the League of Legends team in Los Angeles while his teammates lived in their own homes -- but his request was not approved.

In a bid to improve the team's performance, Arhancet is bringing in developers to build analytic systems that dissect performances. It's similar to what is being done in professional athletics, where smart video replay makes it easier for coaches to analyze players.

Arhancet even mandates that gamers exercise outdoors twice a week, making them go to a nearby park to engage in some physical activity. Rules like that make him seem like a parent as much as a boss.

Those rules also made Arhancet rethink who he wants to do business with. It would have been easy to sign sponsorship deals with Hot Pockets, Cup Noodles or Doritos, foods stereotypically eaten by gamers who are willing consume anything portable just to keep themselves going.

But instead, Arhancet found Quest, a maker of protein bars. The bars are now littered throughout the scrim room, where Quest is hoping to get the perfect shot: one of the gamers, mid-battle, picking up their product on a live feed that's streaming to thousands of viewers around the world.

Arhancet also likes Quest because their growth mirrors the growth of his industry. In their first three years, the company grew 57,000 percent, making it one of the fastest-growing private companies in America.

Today, Arhancet says sponsorship, which mostly takes the form of team jerseys, product placements and social media mentions, is Team Liquid's biggest source of revenue. That is downright scary when you consider that most of corporate America hasn't explored the space, which means there may be hundreds of millions of dollars worth of growth potential.

Arhancet calls this an "education issue" because many marketers aren't even familiar with the metrics that define reach in the esports business.

But even though professional gaming is in its infancy, sometimes landing a deal can be as simple as showing the power of esports. A while back, Arhancet was working with ad firm TBWA\Chiat\Day, who had Nissan as a client. Arhancet got a deal with the car brand after one of his gamers, Joedat "Voyboy" Esfahani was given a landing page for something the company wanted to promote; after he alerted his fans to the page, the influx of traffic caused it to crash several times, demonstrating the star's influence and reach.

This led to deal around the Super Bowl last year where Arhancet's team was paid to take pictures with their fathers for the company's #WithDad campaign.

"We had the third-highest engagement of all of their spend with any celebrity," Arhancet said.

It seems like Arhancet should be pleased with the development of his business so far, but he admits he's nervous about the rapid evolution of esports, including all the new names and fresh money coming into the industry.

Celebrities are getting involved now, including two former Los Angeles Lakers: Rick Fox, who started a franchise called Echo Fox, and Shaquille O'Neal, who invested in NRG Esports, which was recently bought by Sacramento Kings minority partners Andy Miller and Mark Mastrov. The Immortals team has drawn investments from, among others, Steve Kaplan, who's one of the minority owners of the Memphis Grizzlies, and Peter Levin, who is Lionsgate Interactive's venture and games president. One top NBA executive told ESPN.com that he expects every owner in the league will soon have an esports team.

Arhancet says he hopes the celebrity interest will add value to the industry, not just drive costs up to absurd levels.

That's a legitimate concern, since the market for player salaries is still sorting itself out. This past offseason, some players were bought out of their contracts for north of $500,000, Arhancet said.

Top gamers in competitive titles are identified by a nickname, and teams who want to sign them must first identify them and track them down, which isn't cheap.

"It's not like I'm sitting on some stadium seats while they're chucking a football and they're at some combine where I can measure all their statistics," Arhancet said.

For example, signing star League of Legends player Piglet required a significant investment of time and money. Arhancet flew to Seoul, South Korea, to convince Piglet's mother to let him join the team. That conversation took place over a five and a half hour meal, with the help of a translator. After that, Arhancet had to handle paperwork and the logistics of moving Piglet from one country to another. Once in the States, Piglet needed to adapt to his new home while under pressure to perform well for his new team.

These days, Arhancet says, due diligence involves psychological and physiological exams as well as tests that help him assess a gamer's drive, determination and lifestyle.

Getting a gamer to sign is just the beginning of the work that has to be done. The players are experts in one position, but they're not necessarily experts in teamwork.

"They can type 200 words a minute," Arhancet said. "They have perfect SAT scores. They're prodigies, but they've never played in a team concept, so you're acclimating these young athletes into a team sport, and that is a high barrier of entry for people to do really well."

While the business side of esports is growing at an astounding rate, Arhancet isn't scared to say that progress has been slower on convincing leagues to be better partners to teams and their players. He says many of the leagues are in it for themselves, not focused on long-term partnerships. The business is already extremely complex, given that each publisher and game is technically its own league, and beyond that, each game can offer multiple high-profile leagues or events -- Counter-Strike players, for example, can compete in DreamHack, ELEAGUE, IEM, and more.

Arhancet is hopeful that the wave of pro athletes and sports team owners investing in the industry will help professionalize contract negotiations.

Arhancet's timely move into esports has helped him keep Team Liquid near the top of the industry for now, but whether he can maintain that position in the coming years is unclear. Esports is growing exponentially, but that doesn't guarantee the survival of those who moved into the market first.

"Just because you were there first doesn't mean you have a right to hold on to the top forever," Arhancet said. "That's why I'm focused on providing my players with what they need, remaining nimble, creating the best partnerships, and if that means taking on new partners to be able to win in the long term, that can happen too."