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How To Invest: Esports

Welcome to ‘How to Invest,’ a column where we explore unique trends and offer ideas on how you can invest in them. Nothing below is a recommendation to buy or sell securities.

Depending on which generation you grew up in, the video game industry was drastically different. Whether you grew up playing Pong on Atari, Super Mario on Nintendo or Grand Theft Auto on Playstation, you could agree things are very different now. 

Differences such as graphics, games, and consoles are obvious, but one of the biggest differences now is the rise of esports. Simply put, esports is a form of competition revolving around video games. Before esports, the most competitive people got with gaming was trying to beat a group of friends for bragging rights. 

Esports vs Sports, Green Man Gaming

You may be thinking esports sounds nerdy or is a small, niche market. Think again. The global esports market exceeded $1 billion in revenue and 443 million viewers last year, according to research by Green Man Gaming. Already with a global following larger than the NFL and rugby combined, the global audience is expected to reach 645 million people by 2020.

A Global Opportunity

So now you may be thinking maybe it’s not that popular in the United States. Once again, wrong. Consulting firm Activate estimates by 2021 esports will have more American viewers than every professional sports league except for the NFL. The firm estimates by 2020 esports viewers will watch 3 billion hours of gaming, which would represent 10% of overall sports viewing in the U.S. 
So now that we’ve convinced you it’s not a niche market that is just a fad, we bet you’re wondering how to invest in esports.  

Investing In The Nerds

Despite mentioning earlier that esports isn’t nerdy, one of the best ways to invest in the growing sector is through an ETF (Electronically Traded Fund), ironically under the ticker $NERD. The Roundhill BITKRAFT Esports & Digital Entertainment ETF provides exposure to Roundhill Investments’ very own BITKRAFT Esports Index, which is the first rules-based index designed to track the performance of the esports market. 

The ETF, which was launched on June 6, 2019, consists of holdings that are diversified both geographically and thematically. NERD’s holdings are thematically categorized as broad-based to esports, media, games and hardware. The ETF holds companies located in some of the largest markets such as the U.S., China, Russia and South Korea.

Hours Watched Per Platform in Q3 2019, StreamElements

 If you want exposure to individual companies that have been entering the esports market, look no further than some of the largest tech companies. Amazon owns video game streaming site Twitch, which it acquired in 2014 for $1 billion. Twitch holds a 73% share of the market for video game streaming. YouTube, which is owned by Google parent Alphabet,  holds a 21% share of the market for video game streaming via its YouTube Gaming. Facebook has entered the sector as well with its Facebook Gaming. Despite holding a lower market share of only 3%, it grew 210% YoY, dwarfing the 20% and 16% growth of Twitch and YouTube Gaming, respectively.      

Microsoft is in the same boat, sort of, as Facebook. Microsoft Gaming also holds a smaller share of the video game streaming market at 3%, but has shown remarkable YoY growth of 149%. Unlike the others, Microsoft gives you exposure to the hardware as well, as it is the manufacturer of Xbox. In its most recent fiscal year, Microsoft reported Xbox gaming accounted for more than $11 billion in sales, which is less than 10% of the company’s total. 

When you think of video games, you no longer have to reminisce on the days in the past of playing Duck Hunt or Super Mario. With esports set to quickly become a multi-billion dollar industry, these are just a few of the ways you can capitalize on its growth.   

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