Esports Investing: The Next Big Thing?

- February 18th, 2019

Is esports investing really the next big thing? We examine the reasons savvy investors are looking at this exciting space.

The S&P 500 (INDEXSP:.INX) had a great run in 2016, 2017 and most of 2018.

But with big tech names like Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB) and Netflix (NASDAQ:NFLX) now suffering sizeable losses, investors are looking at other places to put their money.

Many insiders are pointing to esports as the next big thing — but why? Let’s take a look at the world of esports and why making an investment in this growing space could be worthwhile.

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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.

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. 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 prize money awarded in nearly 3,500 esports tournaments last year. The top games in terms of prize 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 $25 million last year.

How are 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 game design to hardware like headsets, to events to advertising, the possibilities to make a profit are vast and lucrative.

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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.

There are also diverse esports-related stocks to look at, such as NVIDIA (NASDAQ:NVDA) or Advanced Micro Devices (NASDAQ:AMD), which both produce computer chips in high demand for the industry.

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 2019, 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 $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 by 2020. Will you invest in esports? Share your opinion in the comments below.

Don’t forget to follow us @INN_Technology for real-time news updates!

Securities Disclosure: I, Amanda Kay, currently hold no direct investment interest in any company mentioned in this article.

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