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June 7, 2018 • TECHNOLOGY

E-sports moves video gaming into a league of its own

  • The burgeoning e-Sports economy generated revenues of greater than US$650 million in 2017.
  • Media rights are one of the fastest growing revenue streams, representing 15% of the total e-Sports market.
  • More than 70 million people watch professional gaming competitions over the Internet or on TVs.

    Video games have long rivalled music and movies as big time money makers in the world of entertainment, but the expanding universe of professional gaming competitions is moving them into a league of their own.

    E-sports, as it’s known, has skyrocketed in popularity in recent years, with more than 70 million people worldwide now watching these gaming competitions over the Internet or on TVs, according to estimates by SuperData Research.

    E-sports competition
    In some cases, viewership has even begun to outpace major events of traditional sports leagues like the NHL. The League of Legends world championship, for example, attracted a total of 43 million watchers in 2016, with 14.7 million people tuning into the final matchup, while the deciding game six of the 2017 Stanley Cup Finals reached a peak TV audience of 9.5 million viewers.

    But this may only be the beginning. As existing professional leagues for games like Overwatch and NBA 2K gain more traction and new leagues for other games get created, E-sports has the potential to provide significant new revenue streams for video game publishers, online distributors and “arms dealers” that manufacture the equipment needed by E-athletes to perform at the highest level.

    This includes, in particular, the sale of media rights, one of the fastest growing segments of the e-Sports economy that overall generated revenues of greater than US$650 million in 2017, according to Newzoo, an independent e-Sports market research provider.

    Revenue from rights deals now accounts for roughly 15% of this total and has continued to climb in recent months as more high profile transactions are finalized. BAMTech, a subsidiary of The Walt Disney Corp., recently agreed, for instance, to pay US$300 million to Riot, a game publisher owned by Tencent Holdings Inc., as part of an exclusive seven-year commitment to stream and monetize League of Legends competitions.

    Twitch, a video streaming platform owned by Amazon Corp. meanwhile, signed a two-year US$90 million dollar deal with Activision Blizzard Inc. in January to stream every match of the Overwatch league.

    Other areas of potential top line growth include ticket sales to live events, merchandise, advertising and sponsorships, which generated $266 million in revenue last year and reach $655 million by 2020, according to Newzoo estimates.

    All in all, e-Sports remains an industry in its infancy, one that could take years to hit full stride. But with double digital growth rates and a fan base already numbering in the tens of millions, its potential as a new and exciting investment opportunity has arrived.

Commentaries contained herein are provided as a general source of information based on information available as of October 1, 2017 and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and the manager accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Investors are expected to obtain professional investment advice.

References to specific securities are presented to illustrate the application of our investment philosophy only and are not to be considered recommendations by AGF Investments. The specific securities identified and described herein do not represent all of the securities purchased, sold or recommended for the portfolio, and it should not be assumed that investments in the securities identified were or will be profitable.

Published date: October 30, 2017

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