What if Apple invested $500 million in eSports? What kind of medium to long-term impact would this have on the company and would it be a net positive for the industry? In my last piece, eSports: The Future of Entertainment, I gave an overview of the current state of the industry and laid out some useful statistics for newcomers. In this article I'd like to focus more on the unknown by building upon an idea I introduced back then. I won't delve into any of the eSports basics here so reading my previous article is recommended if you're like the dozens of people I meet every week that ask me "what the hell is an eSport?" Consider this less of a near-term stock moving analysis and more of a thought experiment of what this nascent industry could look like after a sizable, strategic investment from a tech company that is uniquely positioned to disrupt the space. While many other tech companies could accomplish similar feats, I firmly believe Apple is best suited to do so and that it would not only benefit the stock, but also eSports as a whole.

Boasting the most success tech gadget of all time and a $200+ billion cash hoard that would make any industry nervous, Apple is in a prime position to make a substantial eSports investment. Although the industry is certainly garnering plenty of mainstream attention lately, it's still just a baby in terms of revenue. The Q3 report from Newzoo shows total 2015 industry revenue increasing 43% YoY to $278M. That number is projected to grow to $765M by 2018, with advertising revenue comprising just under half that. While these growth numbers are extremely promising for a blossoming industry, it's still just a drop in the bucket compared to the size of the traditional sports market. A $500 million investment might sound like overkill for such a young industry, but once you recognize that this is not an investment in just 1 or 2 projects, but one that's spread out over a global emerging industry, it starts to make a lot more sense.

Before we jump into the specifics of what Apple could accomplish with this investment let's first discuss some of the reasons why it would makes sense. Apple's largest acquisition to date has been the $3 billion purchase of Beat Electronics, the premium headset company started by Dr. Dre and Jimmy Iovine. That $3 billion is currently 10x the revenue of the entire eSports industry. This was a strategic move that helped solidify Apple's dominance in the digital media space and was likely the first of many steps to become their own record label. Keeping that in mind, let's also consider Apple's fasting growing market, China. In its most recent quarter, Apple reported that it had doubled its revenue in China year over year, underscoring the critical importance of this region to Apple's future growth. Apple is doing (almost) everything it can to compete with Xiaomi and Google in Asia. The connection I'm trying to drive home is that Apple is increasingly being pressured to focus on capturing the 18-34 year old demographic, particularly among the Chinese youth.

It's clear that this key demographic is experiencing a fundamental shift in the way they consume media. Millennials are continually distancing themselves from traditional advertisement. Your kids aren't in the living room with you watching Seinfeld reruns. They're in their rooms streaming League of Legends on Twitch and watching Netflix. As we know, it's all about the millennial eyeballs! Those 15 retail stores Apple plans to open in China next year have no gaming presence whatsoever. China is by far the largest eSports market globally so it wouldn't be much of a stretch for Apple to strategically chip off a piece of their monstrous cash pile and invest in what many are calling the future of entertainment among the millennial generation. Now let's jump right in and see what Apple could do with just 500 million.

Suppose next week Tim Cook and the gang decides that eSports is the next big thing in digital entertainment and an infrastructure play is well in-line with their goals of amassing young eyeballs and getting new users on their devices. They take a (relatively) small $500 million pinch from their $200 billion cash mountain and they decide to put it to work. Apple certainly wouldn't be the first S&P 500 company to make a significant play in eSports. Disney inked a deal back in June with DraftKings to be the only fantasy sports site allowed to advertise on ESPN (which Disney owns). If you've been watching football lately you've probably seen about 1000 of these ads. DraftKings announced in September that they would be throwing their hat in the heavily saturated fantasy eSports space. The latest decision by New York attorney general Eric Schneiderman to outlaw daily fantasy sports bodes well for the eSports industry. This was the first time an attorney general has made the clear distinction between daily fantasy sports and skilled gaming (eSports) which beforehand had been lumped together in the same decade old legislation.

We also have the infamous Amazon purchase of Twitch last year for nearly $1 billion that started all this mainstream buzz. In terms of viewership numbers, Twitch is now on par with ESPN2 and it's probably only a matter of time until you see Twitch somehow incorporated into Amazon Prime's offerings. Google recently launched their Twitch competitor called YouTube Gaming which is a natural extension of YouTube. Facebook's purchase of the virtual reality headset Oculus Rift will finally see the light of day in Q1 2016, competing with Sony's Project Morpheus and HTC's Vive. We can't forget Microsoft which now allows you to stream Xbox One games on Windows 10 and has their own Augmented reality device HoloLens in the works. The list goes on and on so having Apple finally jump in the mix seems like an inevitability. They've always been 2 steps behind in the gaming space, but with a brand new industry blooming this is the perfect time to strike back with a vengeance.

What's the first thing Apple would do with this $500 million one might ask? Would they go on an acquisition spree or just start creating Apple branded organizations? It would probably be a mixture of the two, but let's start with the latter. eSports veterans will likely express that a tech giant throwing money at an industry they have no prior experience in isn't going to turn out well. Taken at face value I'd agree, but Apple does have a decent track record of succeeding in new industries. One word I hear being thrown around at all the eSports conferences I attend is authenticity. If Apple used only current employees and tried to create eSports events by themselves then yes, it would likely be a failure. Luckily for them, Apple is one of the most sought after companies in the world to work for and they have all the capital they need to hire the right talent to make sure things get done right. After all, why wouldn't Day9 want to go work with Dr. Dre?

So assuming the correct talent is there and money isn't an issue, what are the most important entities to establish if you want to break into the eSports scene? For starters, a professional team. I'd say the three most popular western teams in eSports right now are Cloud9, Fnatic, and Team SoloMid. Using a small piece of the $500 million, Apple could simply buy one of them and jump right to the top, but this is the "most innovative company in the world" we're talking about here so that's not going to happen. It makes much more sense for Apple to start their own team and give it the illustrious Apple makeover.

For one reason or another Apple has never taken a serious stab at content creation before. Starting their own eSports team would be one the best guerilla marketing techniques the company could make. They would be indirectly producing tons of game VODs and tournament highlights and their players would be decked out in the newest Apple products. You'd see the team captain donning the iPhone 7 weeks before its official announcement. Beats gaming headsets would be draped around player's necks alongside Apple branded jerseys. Apple watches for everyone in exclusive colors. Only sponsors that are synergistic with Apple's ethos would be teamed up with the organization. Most importantly of all, players and coaches would be earning respectable salaries.

This is a topic that deserves its own article (One that I plan to eventually write), but to sum it up, player salaries in the eSports industry are nowhere near where they eventually need to be. Top 8 teams are struggling to make end's meat and most team managers can only afford to pay their players a few hundred dollars a month. Apple could change this for the better by setting a new salary standard for professional gamers. Their players would be paid handsome salaries comparable to mid-tier athletes from traditional sports. This would likely cause a paradigm shift within the industry. Other S&P 500 companies would start their own teams or invest in existing ones and the result would be increased player salaries among top teams.

This would create a clearer path to becoming a professional gamer. It would help justify pro gaming as a viable career choice to the millions of disapproving parents and it would philosophically create a major leagues akin to the MLB and NBA. With enough hard work, one could make it to Team Apple or Team Facebook and work for the best companies in the world and be treated like a real athlete. We need to get to a stage where parents are proud to have an eSports champion and every government is proud to host an eSports event. That's a far cry from the present state of affairs. The current salary standard, income disparity, and lack of government support are significant hurdles that the industry will eventually overcome as it continues to mature. Huge inflows of capital for salaries and benefits won't solve these problems alone, especially at the grass roots levels, but it would be a good start in fully legitimizing the industry in eyes of the mainstream.

Marketing is perhaps the biggest benefit of owning or investing in an eSports team. For the large media companies that are rapidly getting involved in the space, eSports is largely a play on entertainment and marketing. Everyone loves to point out that the League of Legends finals were watched by more people than the NBA Finals or Game 7 of the World Series, with the most recent finals attracting 36 million uniqes, and that the Dota 2 International prize pool was over $18 million. Championship events are watched by hundreds of thousands of spectators concurrently and these numbers are rapidly increasing every year. With eSports enthuasistsnow outnumbering ice hockey enthusiasts, it's only a matter of time before it overtakes American football. As I mentioned before, media companies are scrambling to find better ways to get in front of millennial eyeballs. This is it. This is where we are. Whether we're at college, work, or home for the summer, this is how hundreds of millions of millenniials and Generation Z eyeballs consume media now. The $337M estimate of 2018 ad revenue will likely have to be revised upwards after new entrants rush in to follow Apple's lead.

Since my last long list of companies that you would never guess would be getting involved in the industry, a new list has formed. This summer, Geico sponsored Team SoloMid as well as an entire Hearthstone tournament series. They even managed to incorporate their "Save 15 minutes" catch phrase into the actual gameplay in creative ways. A few weeks ago, Cineplex announced its $15 million investment into the industry that will see eSports competitions played out in Cineplex stages across the country. Non-endemic sponsors are now coming on board in droves.

Everyone freaked out last month when ESPN said they're now looking to hire an eSports editor. We're starting to see media websites like Daily Dot and Red Bull carve out specific sections on their website and Twitter accounts dedicated solely to eSports content. Peripheral companies like Logitech and Plantronics have launched specially designed products lines dedicated to gaming gear. The Swedish digital entertainment company MTG has already begun to form an eSports event company monopoly by buying DreamHack, ESEA, and most of ESL. Don't expect these trends to slow down anytime soon.

Now that Apple has successfully created their own team and raised the bar for what a top tier player should be paid, what's their next move? Another aspect of the player pay issue is that there currently isn't enough opportunities for players to earn money. There's usually one large event per month for any given game and the top 3 teams are the ones walking away with any noteworthy prize money. Let's consider for a moment what it would be like for Apple to operate their own arena. Apple could allocate $30 million towards creating a state of the art eSports arena. It would showcase all of Apple's newest products and services. Incorporating creative aspects into the venue like augmented reality, Apple Music performances, Apple Wallet purchases, and sponsored viewing parties are just a few things that come to mind.

Former Burberry CEO and head of retail at Apple, Angela Ahrendt, could blend the premium Apple style into the arena and essentially construct the ultimate Apple Store which could transform into an arena for monthly events. Whether through crowdfunding, selling tickets, or just out of Apple's own pocket, offering huge prize pools would be a huge attention grab. Apple already does a fantastic job with their product events so I'd expect that same quality and professionalism to carry over here.

Just like Citi has Citi Field and MetLife has MetLife Stadium, Apple could build Apple Arena right here in New York City. They could even start their own league that would hold weekly qualifiers online and once a quarter players from around the world would be flown out to NYC to compete on the big stage. This would be the ultimate showcase for Apple products while also having constant news headlines for musical guests, celebrity players, and extravagant prize pools. You mostly only hear about Apple when a new product or service launches, but now you'd see, read, and possibly attend Apple events regularly. This is obviously an incredible undertaking that's easier said than done, but with the right event production and planning Apple could have the hottest tech location on the east coast.

The final piece of the puzzle would be the most costly. Acquisitions. While it makes sense for Apple to start their own team and league, they cannot build every piece of infrastructure from scratch. There's dozens of eSports companies out there that have been in existence for years that have a great deal more expertise in this space. I opened my new Razer Mamba mouse this week and all I could think of was how similar it felt to an Apple product. From the pristine packaging down to the glossy, well-constructed product itself, Razer would be a perfect fit for Apple.

Taking a large stake in AMD for PC parts, acquiring Hitbox for streaming, and Super Evil Megacorp (yes, that's a real name of a game publisher) for Vainglory on iPhone are a few more (costly) examples of how the rest of the $500 million could be spent. The potential for Apple to build a small eSports conglomerate very quickly is right in front of them. While I acknowledge you can't just throw money at an industry and hope it works, I do think this could be an incredible marketing choice for the reasons I laid out above. Just as Apple scooped up Beats in its prime, an incredible lifestyle brand, Apple could dive head first in eSports, which is arguably the most popular lifestyle of millennials and Generation Z, for a fraction of the cost.

Whether this type of strategic shopping spree would be a net positive for the industry would be determined by Apple's approach. Most of these companies know what they're doing so it would make the most sense for Apple to be mostly hands off much like Amazon has been with Twitch. In terms of venture capital, the eSports industry is now officially in a hype cycle. Professional Sports franchises are making big purchases and household VCs names are finally getting their feet wet. We've even seen our first $100 million investent. Even the shark king himself Mark Cuban has some investments in the space. Just last week he was playing League of Legends on the big stage against the CEO of Intel where he called eSports a "real sport".

With a flood of new eSports startups popping up across the globe Apple has the chance to get in front of this industry while it's still young. The startup world is where Apple will get the best bang for its buck. Scouting out innovative new companies that could benefit from Apple's technology and make good use of its resources is a no-brainer. This would allow Apple to acquire young entrepreneur talent on the cheap and stay at the forefront of what's occurring within the industry. Facebook recently hosted its own eSports summit so we know if Apple doesn't do it, someone else will.

Whether it's self-driving cars, wearables, or digital payments, Apple has its fingers in many pies. ESports is a delicious new pie fresh out of the oven that's attracting a lot of hungry investment. While many uninformed companies may write off gaming as an insignificant pastime, Amazon, Google, Microsoft, and Facebook have already realized how lucrative and prevalent gaming is going to be. Millennials are becoming increasingly better at circumventing traditional advertisements and eSports is the holy grail of this coveted demographic. Apple is the odd man out here and each quarter that passes by with no attention to this space will put them farther behind the rest of the pack. Gamers are an outspoken group so this investment shouldn't be rushed or taken lightly. Many people ask me if eSports are sports. I tell them yes, absolutely. eSports require teamwork, sacrifice, split second decision making, and hundreds of hours of practice. To my surprise, Apple put out an iPhone 6s ad last week that featured a few seconds of eSports footage being played on the screen with the voice over "Wait, is this a sport now?" Yes Apple, it is, and within a decade it might just become the most popular sport in the world so hurry up and get your head in the game.