Is esports investing really the next big thing? We examine the reasons savvy investors are looking at this exciting space.
With big tech names like Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB) and Netflix (NASDAQ:NFLX) now suffering sizeable losses in recent years, 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 why?
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 space.
What investors should know about esports
These electronic sports already have a huge reach across verticals and countries around the globe. Currently players can take diverse and turn them into the option to join an esports . Esports and the are growing by the year, bolstered by , the rise of professional players in esports arenas and interest in 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 the Overwatch League and League of Legends. 2018’s most-watched esports event had 127 million viewers — to put that in perspective, that’s more than seven times the viewership of the 2018 NBA finals games.
The draw to compete is strong, with over $155 million in the prize pool money awarded in nearly 3,500 esports tournaments last year. The top games in terms of prize pool money awarded were: Dota 2, Counter-Strike: Global Offensive, League of Legends, StarCraft 2 and Fortnite.
2018’s top esports team was Team Liquid, a professional gaming organization made up of 60 “championship caliber athletes” — its members brought in more than US$25 million. In fact, according to Esports Earnings, Team Liquid took in close to US$35 million from 1,664 tournaments.
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 now has grown to have 140 million unique users each month.
Why is esports investing the next big thing?
When considering the following that esports has generated, multiple investment opportunities begin to percolate. From electronic arts such as game design to hardware like headsets to events and advertising, the possibilities to invest and make a profit are vast and lucrative.
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 close to US$50 billion and a share price of just under US$65. It has recently been speculated that Activision signed a US$160 million deal with YouTube.
The deal allegedly includes significant incentive clauses for ad sales and and viewership targets. This means that tournaments, professional esports players, game developers and the entire competitive video gaming industry could receive a monetary boost.
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.
Skins are another potential area for investors to look at — there is a huge market for skins, which are “a customization to the way a particular virtual weapon in the video game,” with players spending large sums of money collectively to modify and personalize their game experience.
And of course, esports events are not to be overlooked as a place to profit. In 2020, massive gatherings featuring games like Overwatch, Counter-Strike: Global Offensive, Hearthstone, Dota 2, StarCraft II and more will draw tens of thousands in attendance and millions streaming in live.
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$12.9 billion by 2020.
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 set to reach US$1.65 billion this year. Will you invest in esports? Share your opinion in the comments below.
This is an updated version of an article originally published by the Investing News Network in 2019.
Don’t forget to follow us @INN_Technology for real-time news updates!
Securities Disclosure: I, Nicole Rashotte, currently hold no direct investment interest in any company mentioned in this article.