How to invest in esports?
How to Invest in Esports
According to John Ballard, Twitch has always been Amazon’s ace in the hole. He believes that the acquisition of the streaming service by the company back in 2014 was a truly smart move. Ballard describes Twitch as a social network for gamers, where viewers can watch their favorite streamers play games, interact with other players, and improve their skills. As the largest platform with 70% active users monthly, according to Goldman Sachs, Twitch is doing well by capitalizing on the «network effect.» The service continues to grow and improve, attracting more new users, while Amazon.com gets its share of the sales. The company has also integrated Twitch into Prime, helping Amazon’s service to become more extensive.
Additionally, owners and top managers of traditional sports teams are investing in the industry. «Nvidia is creating a unique opportunity to attract a larger audience of gamers,» notes Goldman Sachs analyst Toshiya Hari. The corporation holds a leading position among gaming graphics card manufacturers, partly because it invests a significant portion of its budget in developing GPU platforms, while its competitor AMD focuses on other production lines. Nvidia’s specialized chips can also be used in artificial intelligence, machine learning data processing centers, and autonomous vehicles. The excitement generated by this event is one of the reasons analyst Baird Colin Sebastian believes that this type of sport will take a prominent place in the entertainment industry, reaching $145 billion in annual sales volume by 2020. The analyst advises investors to closely watch the companies leading this new trend.
«I’m not a fan of esports, at least not yet. But I decided to attend the finals last weekend,» writes Marketwatch columnist Michael Brush. «As an investor, I became interested in understanding what was causing such excitement. The atmosphere was electrifying – fans watched as two teams lined up at tables on the stage, with the game process displayed on large screens above them.» «Undoubtedly, Fortnite is one of the most popular games in a long time, but even so, its goal is to expand the market, not dominate it,» notes O’Shea. However, Activision Blizzard’s shares may suffer «spells of weakness» due to fears of competition from Fortnite, created by Epic Games. But there is no need to worry. Electronic Arts is an American corporation that distributes video games and creates leagues based on the International Federation of Association Football (FIFA) and the Madden NFL series. Electronic Arts is not making the biggest money from this yet, but it is still ahead.
Tencent is considered a key player in this industry, as it is very popular in China, where the company was founded. China has the largest base of gamers in the world – around 442 million as of 2017, with internet user engagement estimated at 57%, according to CNNIC data. China accounts for a third of the total revenue of the global gaming industry, as reported by NewZoo. The growing influence of esports is also evidenced by the fact that well-known brands are increasingly becoming sponsors in this area: Toyota, HP, Intel, T-Mobile US, Nissan, Berkshire Hathaway, and Unilever. Investors who want to stay informed about the latest trends in the world of video games and esports may be interested in the $120 million exchange-traded fund ETFMG Video Game Tech. Its portfolio consists of shares of 72 companies in this sector, with Glu Mobile being the largest.
«Activision’s business is like Disney entertainment of the 21st century, but with higher operating profitability,» says Jefferies analyst Timothy O’Shea. Another factor that could contribute to the company’s stock growth is the release of the game Call of Duty: Black Ops 4, scheduled for October.