In this episode, I am joined by Dave Capitano, the Higher Education Practice Leader at Baker Tilly. Dave has worked with hundreds of universities on a variety of higher education matters, from finance and operations issues to esports and name, image and likeness.
I was recently on Dave’s podcast discussing the first 50 days of NIL. In our time off air, he mentioned his passion for esports, and I jumped at the chance to have him come on and educate me because I’ve admittedly been sleeping on esports.
Did you know more than 175 colleges and universities have an officially recognized varsity esports program with more than 5,000 student athletes participating in esports? There’s a whopping $16M in scholarships for elite esports players–a fact I was shocked to learn. In addition, more than 475 institutions have esports clubs.
Dave joined me this week to share what it takes to add esports, the revenue opportunities, and even the crossover opportunities with athletic departments. Sneak peek: he shared a fantastic idea I think all athletic departments should steal with regards to engaging donors!
Some things that Dave and I discussed on the podcast were:
- The popularity of esports at college universities ranging from the Division I to the club sports level
- The scholarship opportunities involved with esports
- The different revenue opportunities involved with esports
- Facility considerations for esports
- The challenges of policing your team in a competitive, virtual world
- A look at esports recruiting
- Crossover opportunities for athletic departments and esports programs
Check out Baker Tilly’s esports evaluation guide for more information.
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We’ve edited the full transcript below to focus on the highlights from the podcast.
I think the numbers I had here are about 175 colleges and universities that have a recognized varsity esports program of more than 5,000 student athletes. That is so much bigger than I realized the market for this really was. Can you tell us a little bit, just kind of a 30,000-foot view of what esports looks like at the college level?
What esports looks like at the collegiate level
So just a little bit of background because I think it is interesting that when I was first introduced to esports going back almost a year and a half, two years now, I had the same reaction. One of those individuals that is in my network that’s very close to me when he kind of tells me to look at something I park up and I look at it and he said, “Dave, you really need to look at what’s going on with esports.” And I said, “Can you help me understand what that is?” I was blown away with the ecosystem that’s out there and the infrastructure that exists.
Look here at Baker Tilly, and what I do is focus on college universities. There’s a whole industry at the professional level, right? That’s a whole different conversation. But just at the collegiate level, it is big. It’s a big sport for the colleges and universities to participate in, and so you mentioned some of the statistics, one of the organizations that is probably the biggest on supporting esports at the collegiate level is the National Association of Collegiate esports, and the statistics you quoted came from their membership blog, and that’s just that the varsity level.
One hundred seventy institutions participate in the varsity level, not to mention the club level, not to mention the team level. So, all kinds of sizes of schools Division One, Two and Three, have the ability to participate in this type of esports infrastructure, and when we talk a little bit more, we’re going to talk about the equalization of sports across those sizes of schools because right now in our traditional sports whether, it’s our football or basketball or other other high end sports in our different college universities, we don’t see that level of we see a big disparity with regards to those that have and those that have not. esports kind of levels out for us, but it’s certainly a growing industry.
Probably the first institution that really embarked on esports in any aggressive manner was University of California Irvine, and they started off in 2016-2017. I had the pleasure of talking with Mark Deppe, the Director of esports out there and did a podcast interview with him on the formation of that esports program and they hold themselves out as the first public college university. So you’re talking 24 or 36 months before COVID even hit where schools built an infrastructure to the point right now that you have the the level of schools they’re participating and more importantly, the level of scholarships that are being given out to student athletes.
Scholarships for esports
I had no idea you could get a scholarship to play esports until you sent me information about it. I think that the number that came from NACE was that there’s about $16 million per year in scholarships and financial aid for elite collegiate esports players right now. I had no idea there was that kind of scholarship money available for esports.
So let’s just take the professional person out of this equation and go back to the parent who’s sitting there screaming at their child to get outside, you need to get some exercise, get out and get some sun! Get away from that video game.
And then the kid’s gonna turn around and say, “Hey, Mom, I just got myself a $25,000 scholarship to one of the biggest universities out there.” And that’s what’s happening right now. So interesting enough, their statistics are just pushed out. I just read them today. The top 10’s of schools, they’re giving out scholarships, and the number one school that is given out scholarships for esports is actually right in my backyard.
It’s a client of ours Arcadia University outside of Philadelphia here in Pennsylvania, and they’re holding themselves out as giving out $25,000 scholarships to their student athletes. So this is an opportunity for kids to participate in school at a point where maybe they never even thought they had the ability to do it, and the diversity with regards to the individuals playing is interesting in itself when we get there. So yes. Big time sport, big time opportunities.
The different ways that esports could start at universities
So how do esports come into being at a college or university? I’m sure there’s probably more than one way, but if athletics isn’t the one putting this together and starting it up, do you have any feel for how this starts at the university level?
So there’s a variety of different ways it could start. So I’ve talked to institutions where it’s housed in their IT department, right? Student Engagement is a big part of it, so a lot of times they’ll sit on the academic side of the equation. I had the opportunity to do an interview with the Head Coach of esports at Boise State, Chris Haskell, goes by Doc Haskell, and by the way, if you have an opportunity to talk to Doc, you really should he’s a leader.
He was esports Coach of the Year for 2019, and they have a varsity level esports program that functions and is housed in their athletic department. And when I talked to him, I said, “Coach, tell me a little bit about that.” He said, “Dave, our esports players participate in the weight room, they participate with the nutritional program. We don’t have guidance. We don’t have the NCAA oversight and guidance, but we abide by all the NCAA guidance on rules and compliance issues. We hold ourselves out as a varsity sport, and we commit to that to our student athletes in every way.” So it really is a wide spectrum of how different schools are doing it, but Ohio State, University of Texas at Dallas, up and on and these big schools are competing at this high level with their esports program, and they’re holding their student athletes out to a high degree of accountability for it.
The intersection of intercollegiate athletics and esports
How common is it for the situation to be like it is at Boise State where that sort of housed athletics and really integrated well with the athletics program?
I would say if I would talk to 10 individuals there’s probably three or four at the top level that are at that level. There’s other institutions. So in Pennsylvania, we have a school called Harrisburg University. Harrisburg University has no athletic programs whatsoever but it has esports. They are actually the first Esport champions.
ESPN held the first esports championship in 2019, and Harrisburg University won that championship level. So I did a conversation with the president there, Eric Dart, and I asked Eric about the platform. He said, “Dave, we are never going to be able to hold ourselves out and recruit student athletes, but this gave us an opportunity to really embrace something new that aligned with our curriculum, aligned with our values and principles, and give our athletes ability to compete at the highest level.” And they competed and won an ESPN championship.
So they’re not a varsity sport like Boise State they still got the high press of a Boise State with regards to being nationally known for what they’ve done in esports. So we turn on Saturday afternoon and watch football, we’re really accustomed to seeing these power five schools out there. In the esports which is a billion dollar industry, little Harrisburg University is holding themselves at the national level. So that’s what you’re getting from it.
The investment required to add esports
I always love when they have these sort of emerging sports and these opportunities for schools that aren’t traditionally the powerhouses to have an opportunity to compete at that level, which kind of leads me to my next question which is trying to understand what sort of investment is involved when a university decides they want to fund an esports program, and what are the revenue opportunities in esports? What does that look like in terms of what you need from a facilities perspective?
So that’s one of the questions I get from a lot of our schools is, what’s the investment look like? What’s the potential ROI on it? So a great example, I’ll go back to UCI (University of California Irvine) and Mark, and I asked him about the same journey that they took me putting that program in. And he said, “Dave, here’s how I did it. I walked across campus, I looked for the first empty building that wasn’t being utilized. I went to the Chancellor and said, “Hey, by the way, I got three computers, and I got a bunch of students already enrolled on campus that are already playing esports in their dorm rooms, you mind if we use that empty building down the hall, we’ll clean it up, and we’ll do it.” They said, “Yeah, no additional costs.”
They cleaned it up. Within 12 months, they had major sponsors, they turned it into the one of the best facilities they had, and then it grew from there. So what we’re seeing right now because it’s a relatively new market, that a lot of the promoters, even the equipment they use, the headsets, the chairs, the computers, these are individuals from the vendor side, they’re very invested. We see them stepping up and really committing to in kind contributions and the types of equipment that’s needed. Schools are looking to utilize otherwise empty space to do it, building the programs where the existing students are are then recruiting new students into the program. So the upfront costs are very small compared to any other sport that we’re looking at. There’s other challenges that we could get to, but the infrastructure and the development is probably the least one.
There are some schools that are in positions where they’re saying to themselves, the bandwidth is challenging to themselves, and if you look at particular areas there are states like Georgia and others that are actually looking to put in mandates that allow for different types of tax incentives or credits or different types of funding at the state level to encourage more aggressive esports and building out this infrastructure. So yeah, it is amazing the level of support you could get to put a program in from others.
Revenue opportunities for esports
What are the other revenue opportunities? Do they sell tickets for events? I just have no feel for what this looks like from a revenue perspective.
You alluded to some of our earlier conversation. Schools are actually building auditoriums where they would sell tickets, just like you would go and watch a football or basketball event, you would go fill the auditorium and you will watch student athletes playing these video games on big screens right?
Now COVID shut all that down, and that’s so that is something that kind of stalled, but the revenue really comes from the ability to recruit students that otherwise wouldn’t have the ability to tap into. So most institutions are trying to build their enrollment base from an esports program, just like a school that will put any sports program in, how do we enhance our student body? How do we enhance our recruiting? So right now, if you’re in the K-12 world, all these students coming out of high school are embedded in some type of gaming or esports. That’s their culture, on their phones, on their PCs, on their consoles. No matter how they’re playing it, they’re engaged in esports.
If you go and you now don’t have an esports program in play, you’re at a disadvantage in recruiting a student that’s like, “Wait a minute, I could go down the street to this guy over there. He has clubs for a team sport or a varsity sport, and by the way, he’s given scholarships out so I could have tried out.” You are at a recruiting advantage to have that in place. Oh by the way, Boise State right now is doing their tryouts for the new class. So today is their day to do tryouts for their new esports program, so I thought that was interesting.
Facilities for esports
I’m always intrigued by facilities. We know that some folks were building brand new facilities. Do we see esports programs using existing athletic department facilities like are basketball arenas a good fit or maybe smaller gyms that are used for volleyball and gymnastics?
I think you’re going to be open to different opportunities, but I would say that you’re probably going to default to your auditorium where you’re giving lecture halls versus maybe your basketball court. So I just did a conversation with a school that took an old restaurant that was going out of business adjacent to the campus, and they turned that into their esports facility. So I don’t think it is an issue with regards to where the space is in conjunction to your athletic program itself, but any place can be retrofitted to make sense for the size of the program you have. So they’re really trying to be cost effective and utilizing otherwise unutilized space.M
Male vs. female participation in esports
And you mentioned enrollment. The first thing it made me think of was I went to a D3 (school). I say that all the time here on the podcast, and we did not have a football team, but there’s always a lot of discussion in smaller Division III’s who have lower male enrollment about adding football because it adds male enrollment to the university, and I’m thinking about how with esports, we see more men playing than women. So I wanted to talk about Title VIII, but before we get into that, is that how we’re seeing it be used in some instances is adding esports in order to boost male enrollment?
So the statistics show that it is not necessarily a male dominated sport. There’s certainly a large (female) population engaged with esports, and the issue is what you’re going to see is a lot of schools will say there’s an issue with potentially being sexist with regards to some of the the teams themselves.
So they need to be very careful with regard to any type of issues around improper behavior, ethical behavior with regards to the sport itself. That’s one of the biggest stereotypes that are gauged out there. The schools are very concerned with making sure they don’t deal with it. So UCI Irving actually has a policy that’s very well used and published out there on their equity and inclusion around this particular topic, and I think that was very well done, and I referenced to it quite often with regards to their policies and procedures to make sure that the sport is open to both females and males and that there’s no abuse occurring within the program itself and the different games that are being played.
And so it’s not for males only by far. I’ve actually talked with schools that contemplated putting in female teams and male teams, and the feedback they got from the females was ridiculous. Why would I ever want just a female team? “Because I can’t beat any guy that is out there.” The skill sets will really allow for a level of equalization across both the females and males.
That’s one of the things I was gonna ask you was if it’s generally split into female and male teams.
You’re gonna see a variety of different team setups out there. Some of the more concerning issues are being able to actually police your teams. So in this virtual world, you could potentially have a student athlete on your team that on Saturday afternoons will engage in your collegiate esports program, but on Sunday is playing at the professional level.
Yeah, so we did an article on the playbook on how to put an esports program in, and one of our challenges was, “Hey, guys, you really need to be watching this because while the NCAA encourages amateurism, and they can engage in this professional level,” This was before NIL.
So these college players were playing collegiate level on Saturdays, and they were making $1000’s of dollars on Sunday playing at the professional level. So the problem exists is just trying to figure out, do you really have a student athlete on your team or do you have some shark just jumping in behind the scenes? How do you identify your students? Well, they got some, some computer URL that identifies who they are, and if they get caught abusing the policies and procedures, and they get kicked out the league, they just create a new one. They jump into a new league. So that’s the type of thing that schools need to be concerned about when you put these programs in play.
Size of eports teams
Generally, I’m sure it varies, but is it possible for a school to start with a very small number of student athletes or do these tend to be bigger groups? What does that look like size wise?
So what I usually hear from schools is if a school is going to start off, they usually look into the existing population. So here’s the other aspect of it. When you talk about overall retention of students and student engagement, these students are already sitting in the residence halls gaming, isolating themselves from the general population, and one of the number one red flags is when you have a student that’s being isolated, the potential for retention becomes an issue.
So a lot of the programs are developed with a team of six to a dozen individuals witexisting student athletes that are already there, and then they can recruit them from there like Boise State having their tryouts today.
You’re not talking of a 100 person program, but what you are looking at is a team that’s maybe like I said a dozen to 24 individuals on the team depending on how they’re rotating the different games that they’re playing.
So you could engage in two or three different games and have a team that specializes in that particular game that they’re playing, and then you have a larger ecosystem around potentially a club sport or team sport which engages more the population in the process as well. While they’re not on the varsity team, they’re still very much engaged with the overall concept at the institution.
Academic programming around esports
One of the interesting things that you mentioned and what you sent over to me too is the academic programming and the degrees that have popped up around esports which doesn’t necessarily surprise me only because I’ve been so deep in the NIL stuff.
I’ve talked to a number of professors across the country who are starting NIL related courses in sports management programs, in communication and journalism programs, at law schools. I think we’re gonna see that grow, and so it doesn’t necessarily surprise me that we’re seeing esports related academic programming pop up too, but you said in what you sent me over that Harrisburg University actually has a bachelor’s degree in esports Management, and you mentioned some of the career paths available in production and broadcasting and coaching and marketing and developing the games, and I think that’s a really interesting side of this is the ability for not just the student athletes who are playing the games, but also other other students at the school who are interested in being part of that whole ecosystem. Are you seeing that grow at more schools or is this more unique to Harrisburg at this point?
I mean that that is one of the biggest playing points. It’s interesting, when I talk to schools about it there. They’ll say, “Well Dave, what do you mean? Is there a profession where these kids are going to get a major in esports?” I’m like, “Well, do you ever become a professional where your kids getting a major in football or basketball”? They come to your school, major in all different things, and they just play in these sports as part of their experience on the campus.
esports is no different. So I’m not saying everyone that goes into esports is going to end up at the professional level, some aspire to do that, but it is all those things that go along with it, the business is huge. So just like sports management, you could rattle off a dozen different programs that are encompassed in your traditional football or basketball program around that whole industry, and esports is very similar. So schools are definitely tapping into that.
So, I’ve been practicing a little over 30 years in the business, and I think I mentioned to you on our podcast that I’ve never felt that more young than I do now with regard to dealing with these people at the esports because they are 20-25 year-old kids, and they’re running the programs. So they speak a whole different language, but man the energy is high, and they see what they see as a part of their ability to make a living in that ecosystem. And we’re gonna see more of it.
Recruiting for esports
What doesn is recruiting look like, for esports? With more traditional athletic programs we think about big, flashy facilities, and not just like the ones that have putt-putt courses, and barber shops and such for football programs, but just in general, the level at which they’ve kept up. Even their Olympic sports facilities and the advances they have in training and nutrition and all that sort of stuff. So, we know that traditional athletes look at that kind of stuff. They’re obviously interested in who the coach is and how they fit into that coach’s particular system. Is that similar to what we see in esports or does recruiting look a little different in esports?
I guess the best way to answer that question is maybe the point that people can relate to in a different way. So let’s take the example if you’re a cyclist, and you’re really invested in that sport. There’s a company called Zwift, and Zwift is aligned with cyclists, and they have software and hardware.
They allow you to connect your bike to this. It’s like a peloton on steroids, right? You pedal on your house you’re engaged with it, but you have this virtual screen in front of you and you race against people all over the place, and basically what you’re doing is you’re getting on a bike, you’re putting your headset on and you’re putting your virtual goggles on, and now you’re in the Tour de France racing against people, and every experience you have from head to toe on that bike in your living room is like you’re riding the Tour de France, and actually in 2020 when the Tour de France did not race, every one of the individuals in the Tour de France got hooked up to a swift technology, and they held a Virtual Tour de France for the first time when COVID hit and they didn’t miss a beat and gave away prize money and everything else just like the Tour de France.
If you’re a NASCAR fan, NASCAR did the same thing. And NASCAR actually has a platform called E-NASCAR, where these NASCAR racers are racing their cars in our virtual game. So when you think about the investment, the technology and the investment in the infrastructure, it is high end tech stuff.
I was talking to one of my college presidents today. and he actually sent me up for himself, and he sent me the virtual goggles, and he was on his mountain bike and he was pedaling.He said, “Our architect department just did a similar thing for drawing on a bridge design, and we presented it to local county, and we had them put the headsets on like they’re walking across the bridge. So that’s all forms of the technology that goes into play in this particular industry.
How athletic departments can leverage esports with donors
I’ve got to start paying better attention and try out some of this stuff, you get your own little bubble of what you usually cover in your own area of expertise, and tha, to me, has been the best part about having my own podcast is it sort of forces me to get outside of my box. I’ve put my work inside and learned about these other things, and this is so eye opening for me, I feel bad that I haven’t been paying better attention to esports, but you’ve inspired me. I’m gonna pay more attention going forward.
Let’s let’s go back to something maybe we could relate to our sporting world of Madden Sports with EA technology. We know Madden Sports is a big part of gaming and his programs have been out for years.
EA just signed a very large contract all around NIL because of the growth spurt, they’re going to now see what the ability to re-attract collegiate athletes into their world.
Let me paint this picture for you. You got one of your top athletes at your institution. His following on social media is through the roof. He’s capitalizing on the NIL, he’s signing major contracts, and he’s the star of one of Madden’s programs. So you hold a fundraiser where you bring all your major donors into your esports auditorium, and then you have them sit down with the star athlete and you’re sitting right next to him. But you’re up on the screen playing basketball against them at the same time. You try to invite your donors onto a court and have them play physical basketball with this guy. No thanks. You put them in a virtual game, which is they’re cutting checks the left the right because they’ll engage in that.
I love that. Phenomenal idea. Because we saw as NIL was coming out, I learned about Yoke where people can go play video games against all types of celebrities and athletes, and now student athletes, we’re gonna have the opportunity to sign up for a Yoke and get paid. It’s like $1.99 to play against one of them (student athletes) in a game, and so there’s been a lot of conversation about how cool that’s going to be when their (EA’s) either football or basketball or both games come back, how much more fun Yoke is going to be.
But this is like totally next level because you’re talking about not playing somebody who’s across the country from you, but being able to sit in the same space with somebody like that and have that kind of donor event. I will make sure all my development friends hear about this and listen to this episode because I think that is an awesome idea, and if anybody decides to do it I want to hear about it. So you guys email me if you decide to do something like that.
I get excited just thinking about it. Because I tell you what, I would love to engage in one-on-one basketball with one of these players, but I would never do it right. Now I can play a video game against them. I do that.
Overcoming questions and hesitations to adding esports
When you get brought into this process, and somebody is kind of talking to you and you’re talking to university stakeholders, what are their biggest questions or hesitations about jumping into this and how can we make them feel better about those?
The first thing is they’re the types of games that are out there like these first shooter games, people get really nervous when you talk about the violence in some of these potential games, and they don’t see the NASCAR they don’t see some of these other games that they’re being played their strategic games and so forth, the bike racing, all those exist.
So schools really kind of challenged themselves with regards to which of these platforms are we going to engage in at the competitive level, and really setting the right expectations with regard to their program and their student recruits. Because a student could come in and say, Well, I’m really good at this game, and they say, well, that’s not our platform, because it doesn’t align with our values and our principles. So the selection of the games is key.
Then the Equity with regards to female and male athletes and making sure there’s a safe platform and infrastructure that everybody feels comfortable with regards to their program. So the policies and procedures and infrastructure on making sure that all happens is another concern, and then ultimately, they’ll get to “What’s my investment?” So these are the top three things that our schools want to know about, and that’s where we kind of get pulled in because of how we help them kind of understand the policies and procedures, design the infrastructure, put in the accountability, the reporting that allows them to get leadership to get comfortable that they have a program that’s not going to get them in trouble at the end of the day in some of those areas.
What’s the best way to learn more about Baker Tilly and to get in touch with you all if they want to talk about esports?
So you can certainly find this at Baker Tilly Collegiate Athletics and esports. So that’s our landing page for a lot of information, you’ll get access to all our thought leadership and all our podcast information and our playbook on esports you can certainly find me on LinkedIn.
So they’ve capitalized on LinkedIn and get connected to all the thought leadership there is, and if you’re interested, I’m a big fitness guru myself and I compete as a natural bodybuilder you can find me on TikTok. If you’re interested in information on fitness and bodybuilding you can find me there as well.
And at the end of the day, that all gets you connected back to esports in some way or fashion or another.
Thank you again for joining the Business of College Sports podcast. I really appreciate you sharing so much of your knowledge around esports. Thank you, Dave.
Kristi. It was a pleasure. I hope it was good information and hopefully we have more conversations.
Thanks to my intern Will Whitmore for assistance with this episode.
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