Capturing the Transformative Growth of eSports
ED LOPEZ: The video games market today is undergoing a period of transformative growth, as a confluence of factors creates new potential opportunities for companies involved in the industry. Better technology, mobile apps, and online gaming, as well as change in consumer preferences are helping to disrupt the media and entertainment industry. eSports are a form of competitive video gaming that are often organized as multiplayer events, often streamed online, and even held as live, in person, spectator events. The viewership for competitive video gaming is global and it’s expected to reach 380 million people by the end of 2018. In fact, eSports viewership even rivals that of some traditional sports. For instance, the League of Legends World Championship finals in 2017 garnered more viewers than the NBA finals, the World Series, and even the Stanley Cup.
Investors should be paying attention to eSports. You have a young demographic looking for more customized interactive content. With more people cutting the cord and consuming content online; games are online, they’re social, and they’re even available on mobile applications. Businesses have tapped into an opportunity to disrupt the media and entertainment industry: from large tech companies like Google and Amazon, to traditional sports teams. For instance, the Philadelphia 76ers have created an eSports team, which actually trains in the same facility as the traditional sports team. But really the reason why investors should be paying attention to eSports is because it’s created new revenue opportunities for those involved in the video game ecosystem. What all this means for video game makers is the potential for new revenue sources, from advertising, sponsorship, media rights, even franchise fees. In fact some video publishers have created professional franchise leagues in which they sell team slots for upwards of $20 million. What this means for investors is the opportunity to access a long-term growth opportunity.
With a young demographic, where the average age is under 30, and the ecosystem and awareness for eSports is growing and becoming more mainstream, the stage is set for a sustainable long-term growth opportunity. VanEck believes the best way to provide access to thematic opportunities is through a pure-play approach. That means investing in companies that generate more than 50% of their revenue from that target theme, otherwise your returns are influenced by other factors not specific to the theme. And as may be the case in some themes, there may be very large companies with a small revenue exposure to that theme. And if those companies are included in your portfolio, that portfolio might be affected by external factors. In fact, if the company is very large, you may already have access to them in your core equity exposure. The VanEck Vectors®Video Gaming and eSports ETF, ticker symbol, ESPO, seeks to track an index which is a pure-play and targeted index and one that provides exposure to the companies most influenced by the theme.
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