March 16, 2021 Christie Moffat, Bisnow Houston

In a world where an increasing amount of time is spent online, esports has grown into a billion-dollar industry. There are organized leagues, professional teams, corporate sponsorship deals, advertising campaigns and merchandise. And like traditional sports, there’s an enthusiastic fan base with dollars to spend.

But Houston has a surprising lack of visible esports investment. Observers say that without a dedicated arena or spaces for professional esports, it is harder for Houstonians to get behind a team the same way they can for sports such as basketball or football.

As other Texas cities like Dallas and San Antonio build professional esports facilities, industry participants say it’s only a matter of time until Houston investors get on the bandwagon. And once that first facility is built, Houston’s esports scene could radically change.

“The returns aren’t there today, but they will be,” ZG Companies President and founder Lee Zieben told Bisnow.

The global esports market was valued at $950.3M in 2020, and global revenue is expected to reach $1.6B in 2023, according to Statista. Like other major sports, the majority of revenue comes from sponsorships and advertising, media rights, publisher fees, merchandise, tickets, and digital and streaming rights.

Business Insider Intelligence forecast in 2019 that the number of monthly esports viewers in the U.S. would reach 35 million in 2020, up 10.6% year-over-year. That forecast was completed prior to the outbreak of the coronavirus pandemic, but the firm’s survey data in July indicated that the pandemic would not affect those figures.

Texas has a few major esports teams, including the Dallas Fuel, Mavs Gaming and Team Envy in Dallas, as well as the Houston Outlaws. Houston used to have another team called Clutch Gaming, owned by the Houston Rockets. That team was sold to Harris Blitzer Sports & Entertainment in 2019 for $20M and rebranded to Dignitas.

Zieben is a Houston-based commercial real estate developer and an investor in the Los Angeles Valiant esports team. He told Bisnow that he originally looked at buying the Houston Outlaws in 2019, but found that the level of other investor support was not as strong as he hoped.

“I have another business that I run, and I didn’t have the time, energy or focus, or wanted to put the financial commitment to be the one to revolutionize the esports industry by myself here in Houston,” Zieben said.

Instead, Zieben chose to invest in the Los Angeles Valiant, which was well-organized and well-capitalized. Other investors in the team include AEG, Lionsgate, the Milken family and Steve Kaplan.

But Zieben is still interested in putting his money into esports in Houston, in the form of real estate.

“I have had discussions with a group about building a potential esports arena here. And there are some other franchise opportunities for professional teams [in] Houston that I’ve spoken with the league about,” Zieben said.

An esports arena in Houston would likely need to be a multipurpose facility that could host different events, including other sports and concerts, Zieben noted. An arena of that nature would also be modest in size, potentially holding between 5,000 and 10,000 people.

Zieben did not offer any further details about his discussions into building an arena. However, he told Bisnow that he could see a facility in Houston built within the next three to five years.

Flickr/Dota 2 The International The International: 2014 DOTA 2 Championship held at KeyArena, now Climate Pledge Arena, in Seattle.

When it comes to investment in esports, Zieben is a rarity in Houston. But while corporate interest is lacking, local universities are stepping up.

University of Houston-Downtown, Rice University and the University of St. Thomas have all established esports clubs and varsity programs in Houston to cater to the sport’s growing popularity. In some cases, they have created classes and academic programs to prepare interested students for a future in the growing industry.

“It’s a relatively lower cost to get into, versus starting a football program. For a football program, you’re looking at potentially millions of dollars gets off the ground,” University of St. Thomas Assistant Director of Esports Justin Pelt said.

The University of St. Thomas established an official esports club in September and varsity teams in December, according to Pelt. The university is building out a dedicated training space on campus, there’s an introduction to esports class that students can take and plans are underway to start offering an esports minor specializing in coaching, which students can begin enrolling in for the fall semester.

For Pelt, growing the esports presence at St. Thomas is a powerful tool in the university’s recruiting belt. Not only does it appeal to passionate young gamers looking for a college, but there are opportunities for scholarships and other financial incentives to attract potential students.

A new partnership with the Houston Outlaws, where students can do internships, is also expected to boost the esports reputation of the university.

“We have students from all over that I talk to, who told me that ‘Hey, that’s a big considering option for me — the fact that I can have the opportunity to be exposed to them,’” Pelt said.

University of Houston-Downtown Assistant Director, Student Activities Jose Vazquez said the college decided to launch an esports club and varsity program about three years ago, with the goal of creatively engaging students. As a commuter college with no students living on-site, university leaders wanted to embrace a new way of attracting and retaining students.

Vazquez said U of H-Downtown put substantial effort into building out a dedicated esports training space, complete with Alienware computers and expensive, high-quality gaming chairs. Those efforts paid off when a photo of the space caught the attention of Reddit, leading to a trending post that gained thousands of views and drew attention to the university’s esports program.

“The biggest thing that I would say is, when you start thinking about building something, whether it’s a space for esports, or a program or a team, it won’t draw people in if it’s not something that’s big. You have to think big,” Vazquez said.

Like St. Thomas, U of H-Downtown is also working on launching an academic component to its esports offerings, with discussions ranging from marketing to events production. Vazquez said that senior academic leaders at the university have been discussing how to create courses and certifications that can meet industry standards.

The facilities being created on those campuses are very small, and only for students, leaving a gap in esports facilities across the metro. Internet cafés and gaming lounges are much rarer than in Asia, and venues like A-Rush Gaming in Sugar Land are tough to find.

“I know that this area in Sugar Land really needed something. It just doesn’t have it, you have to go to [inner] Houston for anything near this,” A-Rush Gaming owner Sean Robelen said.

The gaming lounge offers high-end gaming desktop computers and gaming chairs, virtual reality headsets, racing simulators and a specialized booth for livestreaming gameplay. Private events and parties are popular, according to Robelen.

Because there are so few locations in the greater Houston area, Robelen said that he has some customers driving from as far as Baytown, more than 50 miles away, to play games. And there’s interest from out of state as well from potential customers wanting to book the lounge for local tournaments.

“Really, it’s about having somewhere to go, is how this whole thing starts,” Robelen said. “You can’t really have your big tournament unless you have somewhere to do it, and someone that does a reasonable price for it.”

Courtesy of University of Houston-Downtown
University of Houston-Downtown Assistant Director, Student Activities Jose Vazquez in the esports lab on campus.

Zieben said putting his money into esports isn’t rocket science. The rising sophistication of games, along with the skyrocketing value of the industry, points to a shifting definition of what is considered a sport and how people want to spend their recreational time.

“I’m not saying that professional football and basketball and those things are going to go away, but in my mind, it is very natural that you have professional sports now [where] gaming is an activity,” Zieben said.

For future success in Houston, Zieben said the esports industry will need to tap into the passion of the local fan base. Part of the challenge is that in esports, players don’t always need to live and play in the city where their team is officially based.

To a degree, the city’s muted enthusiasm around the former Clutch Gaming was a sign that local fans simply weren’t invested — and without an arena for live tournaments, that problem was amplified.

“To really get your city behind it locally, which helps sell all the merchandise and get buying, you have to do stuff that brings the public in from your local city,” Zieben said.