There’s no other sector i’m more bullish on in the years to come then gaming, esport & virtual worlds. I work with children and see where the world goes and how big gaming has become. At the same time, I have adult friends who run Esport teams and who are really engaged in the eSports industry. Professional eSport clubs are popping up all over so everything indicate that we are at the beginning of an explosion! Already in 2022 should eSport be a part of the Asian Games, and eSport might be in the Olympics in France 2024. All this shows how big this electronic sport has become and how enormous it will be in the future. The corona-pandemic has accelerated this unstoppable megatrend. Within eSports and Gaming we will find both the future of entertainment and future of sport Athletes. The gaming industry has already become greater than both the film- and music industry combined!
Fun fact: The final of the popular game League of legends had more viewers than the super bowl in 2019 (100 million unique viewers vs. 98 million for the Super Bowl).
Beside the professionals more and more people are using gaming as fun & relaxation. And the more engaged we become with gaming, the more money we spend to buy in game inventory. In the purchasing of in game inventory lays a HUGE income potential for the gaming industry and combined with a fast payment solution(crypto,blockchain maybe?). Imagine virtual worlds where you can get your hands on a very rare sword, then sell this sword in game and take your profit to buy more cool in game stuff or take the money out as “real money”. Those solutions can be built on blockchain technology. I think in the end that gaming and “the real world” will melt together. Development of 5G, Virtual Reality and Augmented Reality will drive this trend further.
Competetive gaming(eSports) and mobile gaming are where the most of the growth are coming in the near future. Esports are expected to register a CAGR(compound annual growth rate) of 20% for the forecast period of 2021-2026 – GLOBAL NEWSWIRE
Above you get an insight into the extreme growth in eSport terms of both number of viewers and revenue. Despite gaming and eSports good growth until today, I think we are just at the beginning considering how huge this could be.
Some statistics on how revenue is divided within eSports. Normaly the sponsorship is shared with companies that shows the tournaments, the athletes / teams and game publishers. Game Publishers (Blizzard, Nintendo, EA, Tencent, etc.) have received and are going to get a sharp increase in revenue in that they sell the rights to use their games in major tournaments. If it were to become an Olympic sport, which I believe it must become at some point, this will explode to new heights.
The large growth in pure gaming is mobile gaming. This also include all age groups, “all people” can play on their phone, whether you are 2 or 100 years old.
IMO - whats next for the gaming industry.
I think the next big thing in gaming is huge virtual reality worlds. Imagine if you could live in a pokemon world, or a fantasy world like the lord of the rings. That would change our life in an extreme way. At work you are a teacher and when you come home you are a dragon slayer! Soon the big companies like Apple, Facebook and Alphabet will come with more advanced VR-glasses.
In these worlds you can go on dates, catch pokemon, fight in a battlezone.. Only our mind sets the limitations.
Just imagine how much in game purchases this could create! If you go on a date you will need the finest clothes.
How to invest in the sector?
One thing I have learned in this sector is that things change very fast. Suddenly, a game comes up from nothing and become the world’s most popular game in a matter of months (hottest example here is fortnite). So, you have games that just has become a sports diciplin like football / baseball / hockey, such as League of legends, CS Go or Hearthstone. This is the kind of competitive games that evolves little by little all the time without compromising the game’s basic idea and keeps the interest alive. These are games that are very strong in eSports and is most likely just as relevant in the next 10 years as they are today. League of legends, owned by Chinese Tencent is one of the games that are considered for the Olympics.
Games have gone from something you bought for a given price, then you finished the game and then bought a new one. Now its more normal to get the profits from “in game purchases”, meaning that you are constantly buying stuff in the game. It can either be things that makes you stronger, but the most common is the type of “skins” that makes the characters you play different and often makes you look more awesome.
Fun fact: The company LVMH has started selling their products digitaly, so you can now get Luis Vuitton clothing on your character in various games.
Personally, I have chosen to invest broadly in the sector through the ETF “VanEck Vectors Video Gaming and eSports UCITS ETF”. This ETF represents about 25% of my total portfolio. It can certainly be profitable to invest in individual companies, but in this sector I choose a broad exposure, because I then get both companies that shows the tournaments, companies that makes the graphics for the games (Nvidia, AMD), large game publishers and company specializing in mobile gaming. I like the composition of the holdings in this ETF.
There are others ETF’s you can check out like “HERO” and “NERD”. You can also invest in eSports with mutuals funds like “eSports Fund” and “White Fleet – Finserve Gbl Esports”. They are all good alternatives, but I prefere the VanEck’s “ESPO”.