Why should market participants be investing in esports and what’s the best way to do so? Here’s a look at how to get into this new sector.
With the initial cannabis and blockchain rushes seemingly over, investors are looking for the latest big sector. Many believe esports is the next big thing. But what’s the story behind esports, and why should market participants should consider investing?
Esports — or electronic sports — involves competitive gaming with computers or consoles. Two or more players compete in multiplayer online battles until a winner is determined, usually by points.
Esports fans can tune into these competitive events via the game-streaming service Twitch, which had 26.5 million daily visitors and 6.9 million unique streamers each month in 2020.
Viewers also turn up in droves to watch live esports programming — prior to the coronavirus pandemic, major arenas around the world sold out for live esports events, and new purpose-built venues for esports competitions were sprouting up. All these major revenue generators have been mostly moved online for now, but it’s clear the industry has an enviable audience that is poised to keep growing.
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 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 provide 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.
Others may prefer investing on a smaller scale, and there are new esports options appearing all the time — for example, FansUnite Entertainment (CSE:FANS,OTCQB:FUNFF) listed fairly recently in mid-2020.
As in any market, earlier-stage esports stocks 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 by teams competing at tournaments in esports arenas revenue topped US$235 million in 2019.
Although COVID-19 lockdowns impacted live events in 2020, prize money from esports tournaments still managed to reach more than US$116 million. The top games in terms of prize money awarded were: Counter-Strike: Global Offensive, Arena of Valor, Dota 2, League of Legends and Fortnite.
2020’s top esports league team was Turnso Gaming, a Chinese professional gaming organization acquired by Weibo (NASDAQ:WB), China’s biggest social media platform — its members brought in more than US$2.42 million from just three tournaments.
What does all that mean? Put simply, those willing to look beyond the immediate esports industry will see that there are many opportunities for companies that develop and sell products related to gaming. They have growth potential as they discover different revenue streams and reap major rewards.
One example is NVIDIA (NASDAQ:NVDA), which makes computer chips that are considered “the gold standard in gaming.” The multinational technology company is a behemoth, with a reported 86 percent of its chips being used by individuals in the gaming industry.
There’s also 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, sponsorships and esports betting are entering the space more rapidly. In fact, it has been forecast that the esports betting industry will see revenue of US$13 billion in 2025 — up from the US$315 million made in 2015.
Investing in esports: ETFs
Since esports is still somewhat in its infancy, there is only one pure-play esports ETF for investors. That’s the Roundhill BITKRAFT Esports & Digital Entertainment ETF (ARCA:NERD).
Although not pure-play esports ETFs, the following funds also offer investors exposure to the esports market: the Video Game Tech ETF (NYSE:GAMR), the VanEck Vectors Video Gaming and Esports ETF (NASDAQ:ESPO) and the Global X Video Games & Esports ETF (NASDAQ:HERO).
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 esports viewership and participation continue to grow and therefore increase the 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 growing market.
What esports investment would you choose? Let us know in the comments.
This is an updated version of an article first 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.
Editorial Disclosure: FansUnite Entertainment is a client of the Investing News Network. This article is not paid-for content.