Evolve to Launch Canada’s First Esports ETF

The esports industry has expanded to remarkable levels in recent years. With 75 percent of North American households having at least one gamer, there are 2.2 billion gamers worldwide.

A gamer is defined as someone who spends six or more hours playing video games a week.

In Canada, the esports industry is gaining further momentum. On May 16, Evolve ETFs announced that it will be launching Canada’s first esports ETF, with the ticker HERO, called the Evolve E-Gaming Index ETF.

The ETF will be a passive, index-based ETF and will be composed of companies that are categorized within this sector, including hardware companies, software companies and development companies that are focused on esports.

The index-based fund will be organized according to the market cap weightings of its holdings.

Online viewership rates in the esports industry are on the rise. “When I was looking at viewership, 11 percent of all the viewing hours on YouTube and Twitch are actually specifically on egaming,” Raj Lala, CEO of Evolve ETFs, told the Investing News Network (INN).

“Some of these professional gamers, they have anywhere between 30 and 50 million viewers or followers that watch how they actually play. It’s a huge business.”

The Evolve E-Gaming Index ETF will track the performance of the Germany-based Solactive Egaming Index. This index is comprised of internationally listed, equally weighted companies with market caps over 100 million euros.

The esports industry has skyrocketed globally. According to SuperData Research, in April alone, US$8.86 billion was spent on digital gaming around the world. Year-over-year spending increased by 7 percent for digital gaming, and the fastest-growing vertical for gaming was premium gaming, where user spending increased 17 percent compared to the same time last year.

“In the past, you would just buy the video game and put it in your console and that was the end of the revenue generation for the organization that created that video game. Now there are a range of ongoing in-app purchase and in-game advertising opportunities ,” said Lala.

“In some cases, you could be spending hundreds, if not thousands of dollars on one specific game to continue to play it. The revenue model has become more complicated, which obviously works out quite well for the companies.”

The esports industry encompasses a number of different components, including viewership, esports betting, live streaming and live attendance in stadiums.

For example, according to Statista, in 2016, 17 percent of US gamers said they watched esports videos regularly. In addition, 19 percent of US gamers said that they watched esports live streaming regularly.

A total of US$13 billion is anticipated to be placed in esports betting worldwide, according to Geekwire. It estimates that esports betting revenue alone will reach US$1.8 billion by 2020.

“One of the stats I saw is that next year it’s expected that 70 million people will tune into an esports final, which is more than the Stanley Cup finals,” said Lala.

The targeted audience of gamers extends across many demographics. Initially, Lala told INN, he thought that the ETF could be marketable to the baby boomer generation with teenagers at home who play video games.

“Then what I realized is how many 40 something year olds are actually doing it as well. A friend of mine told me that a bunch of bankers that work on his trading desk, their average age is 45, they wake up on a Saturday morning and they all hop online together and play an esport and compete against other teams, and spend three to four hours on a Saturday morning.”

In 2018, according to eMarketer, US$805 million in ad revenue was generated within the esports industry. Sponsorship revenue totaled US$277 million, while media rights and ad streaming were next.

In Canada, PwC released a separate report that estimates a 22.7 percent compound annual growth rate in the esports sector over the next five years.

Evolve ETFs has filed its preliminary prospectus and the launch is pending on approval from the securities commission. The ETF launch is anticipated to take place in the next few months.

Evolve ETFs’ industry peer, Horizons ETFs, told the INN it does not plan to launch a Canadian esports ETF. The company has been at the forefront of providing ETF products, including Canada’s first cannabis ETF, a small-cap marijuana ETF and an artificial intelligence-driven ETF.

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Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.