Notes from the Floor: CSE Esports and the Capital Markets

On Wednesday (June 19), the Canadian Securities Exchange (CSE) hosted the Esports in the Capital Markets event at the Westin Bayshore in Vancouver, British Columbia.

The event provided an overview of the explosive industry, with speakers including executives from Pepper Digital, the Gaming Stadium, ePlay Digital (CSE:EPY) and Cash.live.

Esports is still in the advent of its growth stage. With the top esports team worth approximately a quarter of a billion dollars by some estimates, and millions in prize money up for grabs at tournaments, investors are paying attention.

Anna Serin, director of listings development at the CSE, ushered in the event. She told the audience that the CSE’s focus is on providing listings for entrepreneurs at a low cost, and said that the CSE has undertaken 550 deals in 2018, a marked increase from 261 in 2016.

.@CSE_News kicks off the Esports in Capital Markets Event at the Westin Bayshore pic.x.com/W75C38bv4T

— Tech Investing News (@INN_Technology) June 19, 2019

Brent Wolfe, senior manager of public companies at MNP, gave a presentation in which he discussed how MNP was the first auditor within the cannabis industry and is now actively involved with esports clients in the nascent industry.

Up next were Vice President of Operations Matt Low and Vice President of Marketing Spiro Khouri, both with the Gaming Stadium. The Gaming Stadium is building a 6,000 square foot esports stadium in Richmond, British Columbia, that will hold over 110 spectators.

It offers coaching classes and training, while encouraging sportsmanship and respectful play. The Gaming Stadium, which began in 2018, has partnered with Telus (TSX:T), Memory Express, Nintendo, PepsiCo (NYSE:PEP) and Vertigear.

Low and Khouri described how the esports industry can be split into two types of viewers: occasional viewers and esports enthusiasts. The Asia-Pacific region is home to most viewership from esports enthusiasts. Khouri said that it will take a few years for the rest of the world to catch up.

“You really can hone in on the audience you’re looking for,” said Khouri. “What this allows us to do is to cater our messaging at the stadium on a day-by-day basis to any brand that is looking to get their word out (when it comes to advertising).”

Khouri further went on to add that each esports game has a different demographic, and compared it to the Olympics, in that esports is the overarching term and each game is its own subdivision.

Esports games have their own demographics and skill levels. The esports title is the overarching banner with each game having its own subdivision, says @SpiroKhouri from @GamingStadiumCS

— Tech Investing News (@INN_Technology) June 19, 2019

Low then broke down how esports makes money, with avenues such as revenue from sponsors, merchandise, media rights, licensing fees, leagues and teams, advertising and publisher fees.

How does esports make money? Matt Low from @GamingStadiumCS breaks it down: sponsors, merchandise, media rights, leagues and teams, advertising and publisher fees

— Tech Investing News (@INN_Technology) June 19, 2019

Susan Abramovitch, partner with Gowlings, spoke next. Abramovitch, a world-renowned entertainment lawyer, discussed the differences between esports and traditional sports, as well as the different categories of esports.

According to Susan Abramovitch, an entertainment lawyer from @gowlingwlg_ca categories of esports include: first person shooter, real time strategies, multiplayer online battle arena, fighting games, digital collective card games and battle royale

— Tech Investing News (@INN_Technology) June 19, 2019

First-person shooters are games where players view a combat game in the first person, such as Call of Duty and Overwatch.

Real-time strategy games are those where resource management and combat are employed, with examples including Starcraft.

Multiplayer online battle arenas are typically team games, such as Dota 2 or League of Legends, that incorporate strategy and action.

Fighting games involve one-on-one competition, with series such as Street Fighter and Super Smash Bros.

Digital collectible card games involve players using decks of cards that they’ve built to beat opponents in one-on-one matches. Popular titles include Hearthstone and Magic the Gathering: Arena.

Lastly, battle royale games are ones in which players are dropped into a shrinking battlefield and fight to the death for resources, with Fortnite and Apex Legends as the top games.

Abramovitch also discussed how game publishers are the owners of esports games. “Without a game publisher, there is no esports,” she said. “Game publishers are the content creators and game organizers.”

She also discussed Ninja, the world’s foremost esports player, who attracts over 50,000 views at any given time.

.@Ninja, the first gamer to featured on the cover of @espn magazine receives viewership of 50,000 views at a given time, says Susan Abramovitch, partner at @gowlingwlg_ca @CSE_News #esports pic.x.com/n5bMzPezNE

— Tech Investing News (@INN_Technology) June 19, 2019

When looking at esports from a financing perspective, she went on to add that it is difficult to predict which games will be a success.

Following Abramovitch’s presentation was a finance panel. Here, Scott Burton, CEO of Askott Entertainment; Carlo Yau, client development manager at the Investing News Network; and Jay Roberge, partner at Tehama Capital, discussed investment opportunities in the esports sector.

Scott Burton of Askott Entertainment, Jay Roberge of Tehama Capital and Carlo Yau of @INN_Technology speak on a panel at @CSE_News on #esports financing discussing how capital is being used towards R&D and back-end development. pic.x.com/8eOgeHfhb5

— Tech Investing News (@INN_Technology) June 19, 2019

“Nothing is as global than what we see in esports,” said Burton.

Meanwhile, Yau discussed how he sees the sector taking off in the betting and training niches of the market, due to its actionable and data-centric features. Roberge cited the back end and infrastructure approach to investing in esports.

For his part, Roberge noted that he is paying attention to support-level software businesses — for example, businesses that are taking esports to a local level.

In the final panel of the event, industry leaders Trevor Doerksen, CEO of ePlay Digital; Devon Zhau, head of business development at the Home Key; Guy Halford-Thompson of Pepper Esports; and Matt Jarvis of Cash.live came together to speak. Offering insight into the industry, the panelists discussed how esports will continue developing.

The Home Key, for example, provides training equipment, leagues and facilities for esports. “The Home Key is trying to bring the barriers down. We are creating a self-sustaining ecosystem,” Zhau said.

On a similar note, Pepper Digital is targeting its business to casual non-professional players, which Halford-Thompson sees as a key market opportunity. Halford-Thompson has raised C$45 million in investments in the past, and consequently turned it into C$300 million in investor value.

“From an investment standpoint, you always want to be ahead of the curve. I’m seeing the same signals in esports today,” said Halford-Thompson.

The event culminated with Landon “Captain L” Trybunch and Mason “Locus” Charlton, two professional esports players, playing Super Smash Bros on the live screen. The reception area also featured a handful of professional esports players in action as attendees mingled after the event.

A demo on what competitive esports gaming looks like pic.x.com/rBmPhoLmup

— Tech Investing News (@INN_Technology) June 19, 2019

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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.