Esports Investing: The Next Big Thing?


Video game controller

Is esports investing really the next big thing? We examine the reasons savvy investors are looking at this exciting space.

With tech giants like Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB) and Netflix (NASDAQ:NFLX) suffering sizeable losses in recent years, investors are looking at other places to put their money.

Could esports investing be the next big thing? Many insiders are pointing to esports as the sector to watch — but where is this interest coming from?

Read on for a brief look at the world of esports and why making an investment in this growing space could be worthwhile for those interested in the broader tech industry.

What investors should know about esports

The term “esports” is used to describe the competitive video gaming industry. Players compete against other individuals or teams in online matches, either from home or at esports tournaments.

These electronic sports already have a huge reach across verticals and countries around the globe. Currently players can take diverse esports games and turn them into esports events; for those who are keen, there is even the option to join esports leagues. Esports and the gaming industry are growing by the year, bolstered by social media, the rise of professional players gaming in esports arenas and interest in competitive gaming as a spectator sport.

While some wouldn’t call this a sport, it certainly is a spectator activity, with people tuning in from around the world to watch players compete in games such as Overwatch and League of Legends. In fact, with peak viewership of more than 3.88 million, last year’s League of Legends World Championship was the most-watched esports event of the year.

The draw to compete is strong, with over $116 million in the prize pool money awarded across 4,258 esports tournaments last year. The top games in terms of prize pool money awarded were: Counter-Strike: Global Offensive, Arena of Valor, Dota 2, League of Legends and Fortnite.

2020’s top esports 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 $2.42 million from three tournaments.

How are video game fans tuning in? Largely via game-streaming services like Twitch. Always ahead of the curve, Amazon (NASDAQ:AMZN) bought Twitch in 2014, and the service has grown to reach 26.5 million daily visitors and 6.9 million unique streamers each month in 2020.

Why is esports investing the next big thing?

When considering the following that esports has generated, multiple investment opportunities begin to percolate. From electronic arts such as game design to hardware like headsets to events and advertising, the possibilities to invest and make a profit are vast and lucrative.

For example, investors could look at companies with ties to major games, such as Tencent Holdings (OTC Pink:TCEHY,HKEX:0700); it owns a 40 percent stake in Epic Games, the maker of smash-hit Fortnite, and also owns Riot Games, whose flagship product is League of Legends.

One of the most well-known esports companies in the game right now is Activision Blizzard (NASDAQ:ATVI), with a market cap of more than US$68 billion. In early 2020, YouTube inked a US$160 million three year deal with Activision for media rights.

The deal is part of a greater partnership between Google (NASDAQ:GOOGL) and Activision that includes significant incentive clauses for ad sales and viewership targets. This means that tournaments, professional esports players, game developers and the entire competitive video gaming industry could receive a monetary boost.

There are also diverse esports-related stocks to look at, such as NVIDIA (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD), which both produce computer chips in high demand for the industry.

If a market participant decides not to invest in stocks, they could always turn their attention to esports exchange-traded funds (ETFs). The Video Game Tech ETF (NYSE:GAMR) is an option to consider.

Skins are another potential area for investors to look at — there is a huge market for skins, which are “a customization to the way a particular virtual weapon in the video game,” with players spending large sums of money collectively to modify and personalize their game experience.

And of course, esports events are not to be overlooked as a place to profit. In 2021, dozens of esports tournaments featuring games like Overwatch, Counter-Strike: Global Offensive, Hearthstone, Dota 2, StarCraft II and more will draw millions streaming in live.

Even gambling has entered the esports space, with esports betting becoming a growing platform to make money — the total amount bet on esports competitions is expected to hit US$13 billion by 2025.

The esports industry is headed for growth

There are already a huge variety of ways for investors to jump into esports, and openings are only expected to grow — the opportunities are vast, and so are the investment products available.

No matter what your play is, this market is certainly one to watch, with revenue set to reach US$1.62 billion in 2024. Will you invest in esports? Share your opinion in the comments below.

This is an updated version of an article originally 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.

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