Professional gamers are powering the explosive growth of electronic sports, or eSports, an industry set to scoop up nearly $1.5 billion in revenue by 2020, according to Newzoo, a market research firm.
eSports are more than a bunch of competing gamers who can play video games really well…
There are a ton of ‘powerups’ helping eSports grow rapidly: professional leagues, million-dollar prizes at tournaments up for grabs, and the number of people watching eSports just keeps growing.
The 2016 League of Legends World Championship finals, one of the standout eSports tournaments, was seen by 43 million people, according to a report from Riot, the League of Legends game developer.
That was a lot more the 31 million viewers, who tuned in to watch the 2016 NBA finals.
And this is only the beginning as mainstream broadcasters such as ESPN and Sky have set up channels to compete with the industry’s traditional digital broadcasters like Twitch and YouTube.
With prize money for some eSports tournaments rising above $20 million, many experts believe that eSports will eventually take over the number of people who watch traditional sports.
eSports offers sponsors an ‘enormous’ opportunity
The eSports fan base is expected to grow by another 50% toward 2020, totalling 286 million, according to report from Newzoo. In doing so, eSports would overtake the 160 million people who watched the NFL last year.
So advertisers and sponsors have paid millions to get their brands and products in front of the eSports crowd.
And it’s not just ‘any’ brands but the best like Arby’s, Audi, Coca-Cola, PepsiCo, Gillette and Bud Light.
George Woo, global eSports marketing manager at Intel said the opportunity for sponsors is “enormous”.
The large number of eSports tournaments will attract more digital platforms like YouTube and Twitch, eager to serve content to eSports fans.
Newzoo predicts that sponsorship will make up a significant $655 million, nearly half of eSports 2020 predicted revenue of $1488 million, or $1.48 billion.
Nowadays, investors want to invest in an industry with super-fast growth that has a young audience (16-35). eSports is that industry.
But the world of investing in eSports is still at the early stage: Private markets make up the biggest piece of the eSports investment pie, which serves leagues, teams, and players.
Thankfully, the ‘pure play’ way is one of the best ways to profit from eSports.
The ‘pure play’ way for investors to ‘get in’ on the game
So how does an eSports pure play work? It’s simple. Buy the shares of companies that are involved in the eSports.
For example, you could purchase the shares of Chinese tech giant Tencent owner of Riot Games, the maker of League of Legends game, so as eSports grow, Tencent will likely profit from that growth too.
As well as Tencent Holdings, Activation Blizzard and Electronic Arts are some of the leading companies involved eSports.
Out of the three companies, some experts believe Activision Blizzard to be one of the more aggressive companies trying to make it ‘big’ in eSports.
Activision Blizzard not only has a lot of top games but also created the first major eSports league with a traditional city-based team structure, for its popular first-person shooter Overwatch.
Teams will buy into the league with a one-time payment, and receive an equal share of league-wide net revenues.
More revenue can be earned through ticket sales, advertising and other initiatives.
But if you don’t want to own a bunch of different stocks of companies focused on eSports, then there’s a different kind of pure play – the exchange traded fund, or ETF.
Buying an ETF like GAMR (ETFMG Video Game Tech EFF), let’s you ride on the eSports investment wave as the ETF tracks the performance of companies listed on stock markets that support, create or use video games.
So, if the returns of the companies listed in the GAMR EFT grow, then the return of the EFT grows too.
The return of the GAMR EFT matches the explosive growth of the industry, rising nearly 40% over the past year. That beats the return of the S&P500 and Facebook over the past year.
Whether or not you believe that the future of sports belongs in the digital world doesn’t really matter.
What matters is eSports are booming. Money keeps pouring into an industry which has captured the attention of millennials. So it’s easy to see why investors are eager to ‘get in’ on the game.