Levelling up to video gaming's disruption - and positioning for growth
Esports and video gaming are disrupting the sports and entertainment industries and technology will propel further disruption, the high performance and investment appeal of the sector, according to a new whitepaper from VanEck.
Sydney, 7 January 2021 – Esports and video gaming are disrupting the sports and entertainment industries and technology will propel further disruption, the high performance and investment appeal of the sector, according to a new whitepaper from VanEck, "Levelling up: An investor's perspective on the disruptive impact and accelerated growth of esports and video gaming".
The video game industry is tapping into global consumer demand for online, interactive entertainment, leading to record-setting revenues and an unprecedented user base, according to the whitepaper. In 2020, the total video game industry was projected to reach US$175 billion in revenues, bigger than the cyber-security and robotics industries.1There are now over three billion people around the world that play video games2and revenues are forecast to reach US$218 billion by 2023, representing a 9.4% compound annual growth rate since 2018.3
Arian Neiron, VanEck's Managing Director and Head of Asia Pacific, said: "The spike in gaming during the COVID-19 pandemic is simply an acceleration of trends that have been underway for several years. Driving much of this growth has been the transition from gaming at home, often a solo activity, to a group-play scenario where people can play games anywhere and with anyone, or watch esports.
"Technology has enabled much of this growth and will continue to drive the growth of video gaming and esports globally, allowing for the merging of entertainment experiences. Movies and television, rather than just being a one-way engagement (a TV program streams at you), will adapt to become two-way engagement," said Neiron.
As video gaming and esports grows, revenue is coming from a variety of sources. The Harvard Business Review has identified esports as a disruptive technology that is changing the sports viewing market.4
"Improvements in accessibility open up new markets and as technology get better, efficiencies improve and devices become cheaper. Emerging markets are an example of this. We believe the boom in video gaming and esports is likely to be much faster in emerging markets. This is due to improvements in technology," the whitepaper says.
"The 2019 Fornite World Cup was one of the biggest esports tournaments ever. The 23,000 plus seats at Arthur Ashe Stadium in Queens, which has a higher capacity than Madison Square Garden in Manhattan, was sold out through the weekend for the Fortnite World Cup; 40 million players had participated in qualifiers hoping to make the final which was also viewed by over 2.3 million people across YouTube and Twitch.
"The 16-year old winner, Kyle "Bugha" Giersdorf won US$3 million in prizemoney, more than the US$2 million Tiger Woods reaped when he won the US Masters that same year. Today, esports and video gaming are bigger than ever," the whitepaper says.
Society is witnessing a paradigm shift as esports competitions are considered to be on par with traditional sporting events. The International Olympics Committee even announced that esports should be recognised as a sporting activity in the sixth session of its summit in October 2017.5
Despite these compelling trends and fundamentals, most investors are under exposed to this sector, esports and video games makes up only 4.85% of the NASDAQ 100 and only 3.71% of MSCI's information technology sector.
With targeted exposure to companies involved in the future of gaming entertainment and sports, the VanEck Vectors Video Gaming and eSports ETF (ASX: ESPO) is an Australian first. ESPO focuses on investing in the largest pure-play video gaming and esports listed companies globally. The ETF invests only in companies that generate at least 50% of their revenues from video gaming and/or esports.
"ESPO's holdings include leading game publishers Tencent, Nintendo, Electronic Arts and Activision Blizzard, which have the potential to continue to grow their revenues at strong rates. ESPO also invests in related software developers, streaming services, and companies involved in esports events. Revenue requirements ensure targeted exposure to video gaming and esports companies," said Neiron.
"Esports and online video games are a significant disruptive force in the traditional media and entertainment and industries. Australian investors can now invest in these winning platforms with ESPO, an Australian first ETF," said Neiron.
VanEck is one of the world's largest issuers of ETFs (Exchange Traded Funds), managing in excess of $50 billion globally for individual and institutional investors. Founded in New York in 1955, VanEck is a pioneer in international investing and in gold funds, launching the first gold equities fund and the first gold ETF in the US.
In Australia, VanEck is the fastest growing ETF provider in the country and a leader in 'smart beta' investment strategies. We have 25 exchange traded funds on ASX that focus on delivering superior performance through beyond-the-usual approaches and providing access to asset classes typically unavailable to Australian investors.
General information only
Issued by VanEck Investments Limited ACN 146 596 116 AFSL 416755 ('VanEck'). This is general advice only, not personal financial advice. It does not take into account any person's individual objectives, financial situation or needs. Read the PDS and speak with a financial adviser to determine if the fund is appropriate for your circumstances. The PDS is available at www.vaneck.com.au. An investment in ESPO carries risks associated with: financial markets generally, individual company management, industry sectors, ASX trading time differences, foreign currency, country or sector concentration, political, regulatory and tax risks, fund operations and tracking an index. See the PDS for details. No member of the VanEck group of companies guarantees the repayment of capital, the payment of income, performance, or any particular rate of return from any fund.
1Bloomberg Intelligence, 2019
2DFC Intelligence, Global Video Game Consumer Segmentation
4Matt Gavin, 2018, 3 Examples Of Disruptive Technology That Are Changing The Market, Harvard Business School Online – Blog
5Yang Yue, 2018, Research on esports and esports Indutry in China, China Institute of Sport