Almost everything is going digital.
We now have eSports which continued to grow in popularity.
Here’s a bitesize primer to help you understand about eSports and identify some possible investment ideas if you are bullish on this sector.
What is eSports?
No. It isn’t about Cristiano Ronaldo competing in FIFA 21.
eSports is not about athletes and sporty people but about computer gamers playing against one another in competitions.
That said, there are some similarities between traditional sports and eSports:
- Competitive – players are skilled and able to perform at high levels
- Entertains and awes spectators
- Brands want to sponsor these competitions/leagues because they can get in front of a large number of spectators
- Lucrative prizes (if you win)
Here are some differences:
- eSports are obviously less physical than sports
- There are many game publishers hosting eSports competitions whereas physical sports tend to have one governing body (such as FIFA or NBA) to officiate the games and set the rules.
- Sporting events’ TV rights are often lucrative and made available through cable networks. eSports tend to be livestreamed over online platforms such as Twitch and YouTube.
Which are the top 3 most popular eSports games?
The top eSports game (according to Lineups) is League of Legends with an average monthly viewership of 250,000. Riot Games is the publisher and a fully owned subsidiary of Tencent (SEHK:700).
The second most popular eSports game is Fortnite, gathering an average of 200,000 views each month. The game was developed by Epic Games in 2017. Tencent (SEHK:700) owns 40% of Epic Games.
The third most popular eSports game is Counter-Strike: Global Offensive, which also attracted an average monthly views of 200,000. It was jointly developed by Valve and Hidden Path Entertainment.
What are the top 3 eSports events?
The International 9 had the highest prize money of $34m (data from Dot eSports). This is an annually held Dota 2 competition hosted by Valve. The finals took place in August 2019 at the Mercedes-Benz Arena in Shanghai, with OG defeating Team Liquid.
The most attended eSports event was held at Spodek Arena in Katowice, Poland, with 174,000 attendees! Two competitions, ESL One powered by Intel and the Intel® Extreme Masters (IEM) World Championship, were held over two weekends. Given that Covid-19 is still untamed without a vaccine, I do not think this record can be beaten anytime soon.
The League of Legends World Championship was the most watched eSports tournament in 2019 with 137m hours.
Who are the top 3 eSports teams?
Team Liquid is the highest earning eSports team with a cumulative earnings of $35m from 1,810 tournaments.
Team Liquid is based in the Netherlands and have several divisions competing in various games such as League of Legends, Fortnite, Counter-Strike, Hearthstone, Dota 2 and PUBG.
The team is owned by aXiomatic, counting Golden State Warriors co-owner Peter Guber, motivational speaker Tony Robbins, and basketball Hall of Famer Magic Johnson as some of the shareholders.
OG is not far behind with $34m in cumulative earnings from 94 tournaments. They were the champions for Dota 2 (The International 2018 and 2019 competitions) in the last two years.
The third team with the highest earnings is Evil Geniuses. The team earned $24m from 852 tournaments. They are based in the US and fielded players to compete in various games such as Call of Duty, Counter-Strike: Global Offensive, Dota 2, and Tom Clancy’s Rainbow Six Siege.
How much can you earn playing eSports?
I bet few would have imagined that you can make millions playing computer games. If only I had played more and studied less… I’m kidding. I wasn’t a good gamer to begin with.
Johan Sundstein, aka N0tail, is the highest earning eSports player with US$6.9m from 122 tournaments. Born in 1993, the Danish is a top Dota 2 player.
The top Singapore player is Daryl Koh (aka iceiceice). He made US$1.6m from 95 tournaments, most of the prize money from competing in Dota 2.
You don’t have to be a pro-gamer to make a living in eSports.
The scene has allowed a second tier of gamers to make a living. These gamers live stream their gameplay on Twitch (owned by Amazon) and charge subscription fees to fans. The highest paid streamer is Tyler ‘Ninja’ Blevins who was estimated to make between US$400,000 and US$800,000 per month. That would be US$4.8m in a year with the lower end estimate.
Before you quit your job to become a gamer, you have to know that only the top 20% of any field (including eSports) would probably earn most of the money. The Pareto Principle always applies. While you may envy the millions made by the top players, the majority of the players may have trouble making a good living out of eSports.
Where to watch eSports?
Streaming platforms burgeoned together with rising internet speed.
The big tech companies are fighting for viewers on their streaming platform.
Amazon leads the pack via Twitch, which has a 72% market share as of 1Q2020. Microsoft’s Mixer came in second but it was reported that Mixer was shut and Microsoft would partner Facebook Gaming instead. YouTube Gaming has 8% share among the four platforms.
And don’t forget about the Chinese streaming platforms. They are a force to be reckoned with considering the massive pool of gamers in China. Huya (NYSE:HUYA) and Douyu (NASDAQ:DOUYU) captured more than 50% of the game streaming market in China.
What’s the prospect of the eSports industry?
The eSports industry generated US$1.1 billion in 2019 and it has been growing fast at more than 20% per year. This growth rate easily outpace any GDP growth of a country and eSports is still in its early days.
What can you invest in?
There are many ways you can invest in the eSports industry.
Publishers
The most obvious way is to invest in game publishers. Tencent (SEHK:700) is the largest game publisher as it owns many top game titles via its subsidiaries and investments. Some examples include:
Other publicly listed game publishers are
- Activision Blizzard (NASDAQ:ATVI) – Overwatch, Call of Duty
- Electronic Arts (NASDAQ:EA) – Battlefield, Sims, FIFA
- Take-Two Interactive (NASDAQ:TTWO) – Grand Theft Auto, Civilization, NBA2k
Platforms
We have discussed about some of these platforms previously and most of them are listed, which gives you more investment options than game publishers.
- Amazon (Twitch) (NASDAQ:AMZN)
- Facebook (Facebook Gaming) (NASDAQ:FB)
- Alphabet (Google Gaming) (NASDAQ:GOOGL)
- Huya (NYSE:HUYA)
- Douyu (NASDAQ:DOUYU)
Hardware and Peripherals
Gaming requires high performance hardware to give the players as much edge as possible. This would include top end graphics cards and CPUs. Also, they would need ergonomic mouse and keyboards.
Here are some listed companies that provide the hardware and peripherals:
- Nvidia (NASDAQ:NVDA) – graphics cards
- Advanced Micro Devices (NASDAQ:AMD) – CPUs and graphics cards
- Intel (NASDAQ:INTC) – CPUs
- Logitech (SWX: LOGN) – keyboards and mice
- Razer (SEHK:1337) – keyboards and mice
eSports ETF
Don’t know which stocks to pick? You are in luck because there are eSports ETFs to help you get exposure to the industry without looking at individual stocks.
VanEck Vectors Video Gaming and eSports ETF (NASDAQ:ESPO) and Global X Video Games & Esports ETF (NASDAQ:HERO) are two relevant ETFs. See the table for the comparisons.
| VanEck Vectors Video Gaming and eSports ETF (NASDAQ:ESPO) | Global X Video Games & Esports ETF (NASDAQ:HERO) | |
| Index | MVIS® Global Video Gaming and eSports Index | Solactive Video Games & Esports Index |
| Fund Size | $282m | $181m |
| Expense Ratio | 0.55% | 0.5% |
| No. of holdings | 25 | 50 |
| Top 10 Holdings | Nvidia 8.03% Tencent 7.68% AMD 6.94% Nintendo 6.55% Activision Blizzard 6.53% Netease 5.37% Electronic Arts 5.04% Bandai Namco 4.82% Take-Two 4.80% Sea 4.70% | Take-Two 6.52% Electronic Arts 6.44% Activision Blizzard 6.34% Netease 6.19% Nintendo 6.17% Roblox 6.03% Unity 5.29% Konami 4.40% Nexon 4.28% Krafton 4.19% |
In a nutshell…
eSports is a high potential industry and increasingly becoming a new cultural norm for the new generation. An ecosystem has already been created and it is expected to mature further – incumbents become stronger over time and may expand in new verticals.
Do you see a future in eSports? Would you invest in it?
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