Understanding the Video Gaming and Esports LandscapeJohn Patrick Lee, CFA, Product ManagerDecember 22, 2020
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The video gaming industry continued to generate media eyeballs and investor dollars in 2020 as the COVID-19 outbreak forced billions of people to find new entertainment sources in light of a global shutdown.
The below articles and links are a great starting place for investors to get a sense of what’s happening in the video gaming and esports ecosystem. Some of the articles are over a year old, but we believe the themes and trends highlighted are still very much in play today.
1. Newzoo: Global Games Market Report and Global Esports Market Report
Newzoo is the gold standard for video game and esports industry analysis and projections. Newzoo’s yearly “Global Games Market Report” and “Global Esports Market Report” are both available in Light versions, allowing readers to download and read selected highlights. Newzoo’s industry projections for both video gaming and esports are the most widely-used figures in articles about the industry.
Key Takeaway from Newzoo’s Global Games and Esports Reports:
- The video gaming and esports industries represent a globally diverse set of companies tapping into changing consumer preferences and key demographic trends.
Matthew Ball’s articles about video gaming and the broader media landscape are required reading for anyone interested in the industry. Matthew Ball uniquely combines granular, data-driven analysis with a 30,000-foot view, and is a consistent source of informative, challenging and illuminating insights.
Key Takeaway from Matthew Ball’s Metaverse:
- The Metaverse will transform the modern economy and represents a next-generation opportunity akin to when the internet was first embraced by investors and consumers around the world.
3. Roundhill: Livestreaming – A $5 Billion+ Global Phenonemon
Roundhill Investments (a VanEck competitor) consistently publishes quality content about esports, video gaming and related industries. Roundhill’s livestreaming blog provides a succinct, comprehensive overview of livestreaming, why it’s important and who is involved.
Key Takeaway from Roundhill’s Livestreaming blog:
- Livestreaming plays an integral role in the broader video game ecosystem, and game-centric streaming companies may provide investors with a next-generation media opportunity.
Citi’s report is now publicly available free of charge, and is the only Wall Street sell-side analyst research report on this list. Citi’s overview of the current video game landscape, although published over a year ago, still rings very true today. The Console/PC Value Chain infographic (page 12) is an excellent starting point for understanding the relationships within the video game ecosystem.
Key Takeaway from Cloud Invaders:
- The video game industry will be transformed in the future as consumers embrace cloud gaming platforms and shy away from up-front costs associated with paying for games (aka game as a product).
5. YouGov: Gaming and Esports: The Next Generation
YouGov’s data-intense report provides a great overview of the regional idiosyncrasies that characterize the video gaming and esports ecosystem. What works in one market or target demographic may not necessarily translate into success in another.
Key Takeaway from The Next Generation:
- Gaming is not a homogeneous block of consumers, meaning that different groups must be approached in different ways in terms of marketing and advertising efforts. Sony and Microsoft’s next-generation consoles illustrate two drastically different approaches to the ongoing console wars.
6. Nielsen: Esports Playbook for Brands 2019
Nielsen’s contributions to the esports ecosystem have helped to institutionalize the industry. Specifically, the average minute audience (AMA) represents a standardized metric that allows brands to invest in the industry with the same confidence as they have with TV advertising metrics.
Key Takeaway from Esports Playbook for Brands 2019:
- To effectively manage an esports sponsorship, brands must have clearly-defined objectives and measurable KPIs, while at the same time embracing an interactive collaboration with their esports partners.
7. Forbes: The Most Valuable Esports Companies 2020
For the past few years, Forbes has compiled an annual list of the most valuable esports companies. This year, Forbes details some of the COVID-related struggles that esports organizations faced, with valuations stretched after a hot 2019 and COVID forcing a number of the premier events to be cancelled (or go online-only).
Key Takeaway from Forbes’ Most Valuable Esports Companies 2020:
- Against the backdrop of COVID-related event shutdowns, esports company valuations have stalled as the companies are forced to invest in new areas, like social media and streaming websites, to foster growth and provide revenue to recent investors.
Kotaku’s bearish esports article caused quite a stir when it was published in mid-2019. The article does a great job of going through some of the booms and busts in esports’ relatively short history, and putting then-current valuations in perspective in light of revenue figures that were publicly available at the time. Since publication, some of the main points of the article have panned out (see the 2020 Forbes article on plateauing revenues), but the esports industry as a whole is still very much alive and well.
Key Takeaway from Kotaku’s Esports Bubble:
- Esports valuations were (at the time) built on hope, hazy data, and easy money, leading to a broadly overvalued ecosystem. Despite this, consumer demand and behavior will probably lead towards continued investment and institutionalization of the esports ecosystem.
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Authored byJohn Patrick Lee, CFA