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 hot sector. Many believe esports could be 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 game consoles. Two or more players compete solo or in teams in online matches until a winner is determined.
Esports fans can tune into these competitive events via the game-streaming service Twitch, which had 2.78 million average concurrent viewers and 8.46 million broadcasters each month in 2021.
Viewers also turn up in droves to watch live esports programming — prior to the COVID-19 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 were mostly moved online during the pandemic, but there are signs of cautious optimism that live esports tournaments may return in 2022.
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, one of the most successful initial public offerings (IPO) of 2021 was Esports Technologies (NASDAQ:EBET), which launched its IPO in April of that year.
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 an option for investors, it’s important to remember the scale of the market.
To put the wide reach of the esports gaming industry in context, total prize money claimed by teams competing at tournaments in esports arenas revenue topped US$241 million in 2019.
In 2020, COVID-19 lockdowns impacted live events, so prize money from esports tournaments totaled about half that much, coming in at US$127.5 million. Esports prize money rebounded in 2021 to reach US$206 million.
The top games in terms of prize money awarded in 2021 were: Dota 2, Counter-Strike: Global Offensive, PlayerUnknown's Battlegrounds Mobile, PlayerUnknown’s Battlegrounds and Arena of Valor. 2021’s top esports league team by prize amount was Team Spirit, a Russian professional gaming organization whose Dota 2 squad won The International 2021 and received the largest single prize payout in esports history at US$18 million.
The reach of the esports industry is vast, with a wide variety of games, as well as varying computer and console requirements. Essentially, 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 company is a behemoth in the gaming tech market, with its gaming vertical generating US$12.46 billion in revenue for the company in 2021 — more than 46 percent of its total revenue for the year.
There’s also hardware to consider, 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 for investors 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's been forecast that the esports betting industry will see revenue of US$20.7 billion in 2027 — up from the US$12.67 billion made in 2020. One company operating in this burgeoning space is FansUnite (CSE:FANS,OTCQX:FUNFF), a company that provides white label esports betting platforms.
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).
This is an updated version of an article first published by the Investing News Network in 2019.
Don’t forget to follow us @INN_Technology for real-time news updates!
Securities Disclosure: I, Melissa Pistilli, currently hold no direct investment interest in any company mentioned in this article.
- Esports Investing: The Next Big Thing? | INN ›
- 4 Reasons You Should Be Interested in Esports | INN ›
- What is Esports? The Facts for Investors | INN ›
- Top Esports Stocks | INN ›