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Esports Investing: The Next Big Thing?
May. 10, 2022 01:30PM PST
Is esports investing really the next big thing? We examine the reasons savvy investors are looking at this exciting space.
With tech giants like Facebook (NASDAQ:FB) and Netflix (NASDAQ:NFLX) suffering sizable losses in 2022, investors are looking at other places to put their money.
Could esports investing be the next big thing? Many insiders are pointing to esports as the sector to watch — but where is this interest coming from?
Read on for a brief look at the world of esports and why making an investment in this growing space could be worthwhile for those interested in the broader tech industry.
What investors should know about esports
The term “esports” is used to describe the competitive video gaming industry. Players compete against other individuals or teams in online matches, either from home or at esports tournaments.
These competitions already have a huge reach across verticals and countries around the globe. In cities there are local esports events for many different games, and for those who are keen, there is even the option to join esports leagues. Esports and the gaming industry are growing by the year, bolstered by social media, the rise of professional players gaming in esports arenas and interest in competitive gaming as a spectator sport.
While some wouldn’t call this a sport, it certainly is a spectator activity, with people tuning in from around the world to watch players compete in games such as Overwatch and League of Legends. In fact, the 2021 League of Legends World Championship had a peak viewership of 73 million.
The draw to compete is strong, with over US$217 million in prize pool money awarded across 4,419 esports tournaments last year. The top games in terms of prize pool money awarded were: Dota 2, Counter Strike: Global Offensive (CS:GO), PlayerUnkown’s Battlegrounds, Arena of Valor, Fortnite and League of Legends.
2021’s top esports team was Team Spirit, a Russian professional gaming organization established in 2015 — its members brought in more than US$18.79 million from 29 tournaments, although a staggering US$18.2 million was from taking first place at the International 2021, the top Dota 2 tournament.
How are video game fans tuning in? Largely via game-streaming services like Twitch. Always ahead of the curve, Amazon (NASDAQ:AMZN) bought Twitch in 2014, and the service has grown to reach 15 million daily visitors and 8.2 million unique streamers each month in 2021.
Why is esports investing the next big thing?
When considering the following that esports has generated, there are multiple investment opportunities available. From game companies and accessory manufacturers to events and betting companies, the possibilities are vast.
For example, investors could look at companies with ties to major games, such as Tencent Holdings (OTC Pink:TCEHY,HKEX:0700); it owns a 40 percent stake in Epic Games, the maker of smash-hit Fortnite, and also owns Riot Games, whose flagship product is League of Legends.
One of the most well-known esports companies in the game right now is Activision Blizzard (NASDAQ:ATVI), with a market cap of more than US$61 billion. Microsoft (NASDAQ:MSFT), as part of its goal to gain more market share in the global gaming market, made a bid to acquire Activision Blizzard in January 2022.
There are also diverse esports-related stocks to look at, such as NVIDIA (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD), which both produce computer chips in high demand for the industry.
If a market participant decides not to invest in stocks, they could always turn their attention to esports exchange-traded funds (ETFs). The Video Game Tech ETF (NYSE:GAMR) is an option to consider.
In-game skins are another potential area for investors to look at, although they're not traded on the stock market. Skins allow customization for characters or weapons in games such as Dota 2 and CS:GO. These skins are bought and sold for real currency, and some are even worth thousands of dollars.
And of course, esports events can't be overlooked as a place to profit. In 2021, dozens of esports tournaments featuring games like Overwatch, CS:GO, Hearthstone, Dota 2 and StarCraft II drew millions of live viewers.
Even gambling has entered the esports space, with esports betting becoming a growing platform to make money — the total amount bet on esports competitions is expected to hit US$205 billion by 2027.
The esports industry is headed for growth
There are already a huge variety of ways for investors to jump into esports, and openings are only expected to grow — the opportunities are vast, and so are the investment products available.
No matter what your play is, this market is certainly one to watch, with revenue expected to grow by a compound annual growth rate of 21.3 percent to reach US$3.57 billion in 2027.
This is an updated version of an article originally published by the Investing News Network in 2019.
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Securities Disclosure: I, Melissa Pistilli, currently hold no direct investment interest in any company mentioned in this article.
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