Once an intriguing new corner of the gaming and entertainment industries, eSports today have become an undeniable phenomenon. The global eSports market is estimated to be worth approximately $1 billion, and is expected to reach $1.6 billion by the year 2024. Granted, this is still small in comparison to the video game industry at large, which according to Fortune Business Insights hit some $203 billion in 2020. But it is nevertheless clear that the visibility that’s been gained through live broadcasts and streams, and the rising popularity of teams and players, have been enough to attract significant business to the eSports sector.
While much of that business is direct, it also comes in the form of investment –– not only in terms of corporate sponsorships, but also from private individuals buying into related assets. And as long as eSports continues to grow and attract attention, it is likely to attract new investors. But before you decide to become one of them, it’s important to know a few things.
There’s a Lack of Expert Consensus
Probably the most important thing you should know about investing in eSports is that, despite the growing popularity of streamed competitions, there’s no consensus regarding the profitability of eSports as an investment. The main argument in favor of the idea is that the additional exposure eSport competitions have gained through live TV broadcasts and streaming will lead to more fans, and ultimately –– by extension –– more profits.
While that logic is sound however, there are other factors to consider as well –– most notably the mixed impact of the pandemic on the industry. As a Washington Post report on video game investing notes, the truth is of the matter is that the pandemic had a dual effect on eSports. As many would expect, the number of people watching eSport events indeed increased around the world. But at the same time, the vital live event revenue model “completely fell apart” –– causing even the bullish analysis platform Newzoo to drop its own projections for the industry from $1.1 billion to $950 million.
This sort of conflicting state of affairs has led to a lack of expert consensus regarding where the industry heading. There is some confusion as to whether eSports is merely becoming more visible, or whether it’s actually showing more long-term profit potential.
There’s a Variety of Stocks
Esports should be viewed by investors as a sort of collaboration across industries. Computer peripherals manufacturers provide the CPUs, controllers, and headphones competitors use; gaming companies develop and distribute the games. And then of course, eSports events also require collaboration with organizers, sponsors, and streaming companies and/or TV networks.
As a result, there is not so much an overarching “eSports industry’ to invest in directly. Rather, there are numerous individual companies you can invest in that make up the building blocks of eSports –– and benefit from its success. An experienced tech investor might prefer to put their money into stock in hardware providers like Logitech or Corsair, for instance, while someone with a deep understanding of gaming industry giants like Nintendo or Tencent may prefer to invest in developers. Those preferring to focus on the newer and trendier options made popular by eSports in the first place, meanwhile, might lean toward investing in a streaming giant like Twitch.
There Are Also ETFs
Beyond the numerous possibilities in stocks, people looking to invest in eSporst also have the option of exploring exchange-traded funds, or “ETFs.” An ETF is an investment pool that includes different securities at the same time. Like mutual funds, these allow people to invest in bundles of valuable assets and share in the cumulative gains (or losses) of those assets. The main difference though is that while mutual funds are traded through companies that manage the assets, ETFs are there for you to buy and sell as you please –– just as you would shares in an individual company.
As to how these options play into eSports, the financial guidance site AskMoney dove into some eSports investing options in a past article and outlined some options that fit into this category. For example, Global X Video Games & Sports (HERO) is an ETF that invests in 40 companies at once, all of which either publish games or are otherwise involved in eSports (some examples being Electronic Arts, Nintendo, and Zyngan). Another option is VanEck Vectors Video Gaming and Esports (ESPO), which similarly bundles gaming and eSports assets, but takes a more international approach (with Nvidia, Tencent, and Advanced Micro Devices among its holdings).
If you’re interested in eSports investment but you’re not quite sure where to focus your efforts, an ETF like one of these could be worth looking into.
The Market is Inherently Risky
A category like eSports that is perceived as something of a rocket ship can give off the impression that it is somehow less risky than other investment options. Unfortunately though, this is not the case. We’ve already noted that the pandemic exposed some of the inherent instability of the eSports market –– crippling live events, for instance, but causing game streaming platforms like Twitch to virtually double their activity. And while the pandemic is an extreme example of something that can disrupt entire industries, eSports have not been invulnerable to other disruptions either.
For an example we need only turn to Activision Blizzard –– a company with an extraordinary record when it comes to creating titles that end up becoming successful eSport platforms, like Overwatch and Call of Duty. Regrettably, allegations of sexual harassment within the organization led to drastic changes among the company’s heads just last year, which per the market analysis outlet CNBC resulted in a drop in stock price. This too is a specific example, but it serves as a reminder that even a trendy or up-and-coming market like this one is inherently risky.
There’s no doubt that eSports makes for an exciting investment opportunity. But as with most any investment opportunity, it’s important for newcomers not to get swept up in that excitement. While there may well be opportunity in various aspects of this market, due diligence is always required.
Meanwhile, to keep up to date with more commentary and news from the gaming world, we recommend that you return soon to Techplusgame again soon.