How to Invest in Esports

- February 19th, 2019

Why should market participants be investing in epsorts and how does one do so? INN has rounded up the ways in which you can invest.

With the cannabis and blockchain rushes seemingly over, investors are looking for the next big thing. With many believing that next best thing is esports, we look to answer why marketing participants should be investing in esports.

Esports — or electronic sports — involve competitive gaming with computers or consoles. Two or more players compete in multiplayer online battles until a winner is determined, usually by points.

Fans can tune into these competitive events via game-streaming service Twitch, which has 140 million unique users every month, and viewers also turn up in droves to watch live esports programming.

Indeed, with major arenas around the world selling out for live esports events, and new purpose-built venues for esports tournaments springing up, it’s clear the industry has an enviable audience that appears poised to keep growing into the future.

Given this enthusiasm, many investors are looking for ways to get involved in esports. While the space is just opening up, there are already diverse methods to get in. Here’s a look at stocks and exchange-traded funds (ETFs), two of the simplest ways to potentially make money in this exciting market.

Investing in esports: Esports stocks

The first and perhaps most obvious place to start when investing in esports is with publicly traded stocks. The esports industry already includes large players such as Amazon (NASDAQ:AMZN), which burst onto the gaming scene when it acquired Twitch back in 2014 for US$970 million.

Although a company like Amazon does not offer pure-play esports exposure, it does offer stability. Major companies like this could be a good investment for those who are new to the esports space and are looking for a stable way to get access to the growing world of competitive video games.

Of course, others may prefer investing on a smaller scale, and there are new esports options appearing all the time — for example, Enthusiast Gaming Holdings (TSXV:EGLX) completed its IPO in October 2018.

As in any market, earlier-stage companies generally come with increased volatility. But that can also bring the potential for major investment returns for those who get in on the ground floor. It’s up to individual investors to gauge what investment opportunities they are comfortable taking advantage of.

Investing in esports: Esports-related stocks

While esports stocks are a solid investing choice, it’s important to remember the scale of the market.

To put the wide reach of the esports gaming industry in context, prize money claimed claimed by teams competing at tournaments in an esports arena is increasing at an average rate of 42 percent a year and revenue topped US$173 million in 2019. The top games in terms of prize money awarded were: Dota 2, Counter-Strike Global Offensive, Fortnite, League of Legends and StarCraft 2.

2019’s top esports league team was Team Liquid, a professional gaming organization made up of 60 professional esports players, or, as they have been described, “championship caliber athletes. The video gaming members brought in more than US$34 million last year.

What does all that mean? Put simply, while the rise of esports is happening as fans continue to tune in, so too are its affiliated markets. Companies that develop and sell products related to gaming have the potential for growth and to discover many revenue streams and reap major rewards.

NVIDIA (NASDAQ:NVDA), which makes computer chips that are considered “the gold standard in gaming,” is one example, with a reported 86 percent of its chips being used by individuals in the gaming industry.

There’s also the hardware to consider in the electronic arts, including things like headsets, mouses, gaming keyboards and consoles. For that reason, companies like Microsoft (NASDAQ:MSFT) and Logitech International (NASDAQ:LOGI) could also be opportunities to profit from growing popularity of esports.

Additionally, as the competitive video gaming industry continues to grow and slowly rival traditional professional sports, not only is sponsorship entering the space more rapidly, but as is the world of esports betting. In fact, it has been forecast that the esports betting industry will see a revenue of US$23.5 billion in 2020 – up from the US$315 million made in 2015. 

Investing in esports: ETFs

Since esports is still somewhat in its infancy, there aren’t any pure-play esports ETFs to invest in just yet. However, if you’re still looking for some exposure and would prefer to go the ETF route, the Video Game Tech ETF (NYSE:GAMR) is an option to consider.

It should be noted that its expense ratio is a little high at 0.82 percent. And again, most of its 68 holdings are technology related, but not pure esports companies. So if you’re wanting to dip your toe in the pool as opposed to diving in, this could be a viable option. 

Investing in esports: Opportunities abound

In review, it seems like there’s no better time to get in on esports in some way, shape or form. As both viewership and participation continues to grow and therefor increase money that can be made within the space, there is no better time to invest. Whether you choose publicly traded esports stocks, stocks related to esports or ETFs, there are lots of opportunities to get exposure in this exciting and growing market.

What esports investment would you choose? Let us know in the comments.

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.

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