Esports Investing in Australia

The gaming and esports sector is growing in Australia, particularly after COIVID-19 lockdowns left many people spending increased time at home during 2020.

Nerds unite! In less than fifty years, video games have gone from a novelty to a passtime to an intrinsic part of life for many people.

Video gaming media have even provided ways for players to make money, turning them from a hobby to a legitimate moneymaking venture. One of these methods is called “esports”.

Esports competitions bring both individuals and teams together to play video games. Amateur players were the first competitors, but now the space is full of professional gamers who play for prize money.

The esports phenomenon has taken the world by storm, and the land down under is no different. With many tech-focused investors wondering how they can cash in, here's a look at esports investing in Australia.

What's happening in the Australian esports sector?

Esports is a multibillion-dollar industry and it continues to gain traction in many different ways.

Australia is just one esports hub, but it's certainly one to watch. A report from PwC shows that the esports segment grew 16 percent over 2021 even with limited events, hitting AU$15.7 million. Its just one part of the larger play category discussed in the report, with the entire play segment expected to reach just over AU$7.3 billion by 2026.

Furthermore, the esports growth rate in Australia is set to exceed both the UK and Canada. Despite the lack of events due to COVID-19, esports maintained its growth, and even though the return to Australian events might be slow, there's been a shift in perception. Esports are now being recognized more closely with traditional sports.

In August 2022, Australia represented the Oceania region in the first Commonwealth Esports Championship in Birmingham. This event was a demonstration event with all stakeholders looking towards esports featuring as a main medal event at the Victorian Commonwealth Games.

One of the most awaited esports events to make a comeback to Australia in 2022 was DreamHack, an immersive gaming experience including professional and amateur esports tournaments, as well as other activities such as cosplay, screenings and LAN parties. The DreamHack brand is a part of ESL Gaming, the world's leading esports company. ESL Australia bills itself as the operator of the country's largest esports events, including the Intel Extreme Masters, Melbourne Esports Open and the ESL Stage at PAX Arena.

At a smaller scale, Australia looks to be nurturing future generations of gamers — the League of Legends High School League and the Australian Esports High School League Cup are popular with viewers. The latter is a government program that provides structured esports competitions for high school students.

Recognizing the growing popularity of esports, Monash University has also entered the arena, and seeks to nurture and find the next generation of gamers through its Elite Student Performer Scheme. Monash hosted the fifth annual Monash Arcade Expo in 2021 — Australia’s biggest university gaming event.

Australia's gaming and esports ETF offers broad exposure

It's clear esports is gaining traction in Australia, and investors are looking for the best ways to get exposure.

Exchange-traded funds (ETFs) are a popular way to gain access to any given market. These vehicles generally include a basket of stocks focused on a particular investment theme, meaning they track the performance of the sector they follow without being overly affected by any specific company.

In September 2020, the first Australian ETF for professional video games joined the ASX. Called the VanEck Vectors Video Gaming and eSports ETF (ASX:ESPO), it allows investors to tap into the esports trend.

“We believe the growth of video gaming and esports is a trend, not a fad. It reflects structural changes including the increased consumer demand for online entertainment, the rise of interactive entertainment and the fragmentation of the digital media landscape," said Arian Neiron, VanEck's Asia Pacific managing director.

“The eSports and video gaming industry is growing at a breakneck pace, and is already bigger than the cybersecurity industry and robotics industry. Since 2015, video game revenues have seen an annualised growth rate of 13 percent and it has been estimated that by 2023, video game revenues should hit US$200 billion."

It's worth noting that although this ETF is listed on the ASX, it is not focused specifically on ASX esports and gaming stocks. Its top holdings include NVIDIA (NASDAQ:NVDA), Tencent Holdings (OTC Pink:TCTZF,HKEX:0700) and Advanced Micro Devices (NASDAQ:AMD).

How fast is gaming growing?

Let’s take a step back for a moment and look at the gaming industry as a whole. Video game revenue for 2021 was US$180.3 billion. That’s already substantial. The sports industry in the same year was worth almost US$355 billion, for comparison. That’s almost twice the revenue, but if you think about the sheer juggernaut that the sports industry is, more than half is impressive.

As for growth, numbers vary. Fortune Business Insights estimates US$545.98 billion by 2028, Zion Market Research says US$435 billion in the same time frame, but Ein News has the most conservative estimation of US$317.17 billion.

That is the industry as a whole, of course, and not just esports, but as interest in gaming increases, interest in all aspects of the industry will increase. As this phenomenon becomes ever-more ubiquitous in our digital age, we need no imagination to envision a future of gamers.

Can we know that esports will prove to be an ever-larger part of culture? Only if you believe the Olympic Committee, which is adding esports to the roster of events at the 2022 Asia Games — eight games in a variety of genres will be showcased at the event.

Australia's largest gaming investment option

One of Australia's biggest companies with exposure to esports and gaming is Aristocrat Leisure (ASX:ALL,OTC Pink:ARLUF), a gambling machine manufacturer that now also makes mobile games. Its casino-themed games are free to play, but the company makes money through in-app purchases.

With a market cap of about AU$23 billion, Aristocrat is a behemoth, meaning it offers some stability. However, as a more diverse company, it doesn't offer pure-play exposure to esports and gaming.

Other large ASX-listed esports stocks include Australian gaming and entertainment group Tabcorp Holdings (ASX:TAH,OTC Pink:TABCF), which provides gambling and entertainment services in three segments: lotteries and keno, wagering and media and gaming services.

Crown Resorts recently announced its removal from the official lists after being acquired by SS Silver Party, which is owned by Blackstone (NYSE:BX).

Smaller Australian esports and gaming stocks

Investors interested in companies that are focused more specifically on esports and gaming may want to look at smaller-cap stocks. The ASX is home to multiple options there as well. Two examples are listed below.

Emerge Gaming (ASX:EM1) is developing and marketing Arcade X, its online esports gamification platform in South Africa and Eastern Europe. Market Cap: AU$21.98 million.

iCandy Interactive (ASX:ICI) is focused on developing and publishing mobile games worldwide. Market Cap: AU$133.22 million

Click here to learn more about small- to mid-sized Australian esports and gaming stocks.

This is an updated version of an article first published by the Investing News Network in 2021.

Don't forget to follow @INN_Australia for real-time updates!

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

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Ryan Sero

Ryan M. Sero is a writer from Southern Ontario, Canada. His background lies mostly in the arts sector, where he worked as a playwright. However, he has experience working in a variety of formats, including including commercials and corporate writing. As an editor, he has worked on fiction manuscripts, plays and financial sector documents.

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