What’s the story behind esports, and why should market participants should consider investing?
Esports — or electronic sports — is competitive gaming. Just like traditional sports, some games are one-on-one, while others are team-based; however, these matches are played using computers or game consoles.
Esports fans can tune into these competitive events via a variety of streaming services such as the game-streaming service Twitch, which has seen a large jump in viewers and streamers since the COVID-19 pandemic. There were 2.44 million average concurrent viewers in May 2023 compared to 1.26 million in May 2019, and 6.82 million streamers in May 2023 compared to 3.93 million in May 2019.
Viewers also turn up in droves to watch live esports programming — prior to the 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 live esports tournaments continue to return in 2023. Meanwhile, the industry is witnessing the dawn of hybrid esports events.
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.
How to invest in 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 in esports on a smaller scale, and there are a number of options to check out — for example, online mobile multiplayer video game competition platform Skillz (NYSE:SKLZ) and esports online and live events creator Allied Gaming and Entertainment (NASDAQ:AGAE).
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.
How to invest in 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 topped US$232 million in 2022.
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. But esports prize money rebounded in 2021 to reach US$251 million.
The top games in terms of prize money awarded in 2022 were: Dota 2, Arena of Valor, PlayerUnknown’s Battlegrounds Mobile, Fortnite and Counter-Strike: Global Offensive. 2022’s top esports league team by prize amount was Tundra Esports, a UK-based professional gaming organization that won US$9.08 million in prize money for the year. The majority of that came from the group’s Dota 2 team, which took home US$8.52 million when it won the game’s largest annual tournament, the International.
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.
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$9.07 billion in revenue for the company in 2022 — representing more than one-third of its total revenue for the year.
There’s also hardware to consider, including items like headsets, mice, 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 the growing popularity of esports.
Additionally, as the competitive video gaming industry continues to grow and be taken more seriously, 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$24.19 billion in 2028 — up from the US$11.2 billion made in 2022. One company operating in this burgeoning space is FansUnite (TSX:FANS,OTCQX:FUNFF), a company that provides white label esports betting platforms.
How to invest in esports ETFs?
Since esports is still somewhat in its infancy, there is only one pure-play esports ETF for investors: the Roundhill BITKRAFT Esports & Digital Entertainment ETF (ARCA:NERD).
Although they’re 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).
Securities Disclosure: I, Melissa Pistilli, currently hold no direct investment interest in any company mentioned in this article.