eSports and Gaming: Welcome to the Big Leagues

Ubika Alpha has provided this investment overview of the gaming and eSports market

SmallCapPower | April 23, 2019: Amidst the flourishing gaming space, the eSports market size was reported to be US$900M in 2018 and is expected to grow to $US1.7B by 2021, implying a three-year CAGR of 23.6%. Major financial institutions have begun to take notice. The Globe and Mail recently reported that independent dealers such as Canaccord Genuity and Eight Capital are at the cusp of placing bets on the nascent eSports industry, amid elevated expectations that this niche sector is going to be front of mind for institutional and retail investors alike, in 2019 and 2020.

*For our initial industry snapshot published on February 11, 2019, please click here.

Ubika Alpha – An Overview of the Gaming & eSports Market

The gaming industry is projected to generate consolidated revenues of US$148B in 2019. The sector differs from other industries, as the majority of players are start-ups or private companies. The largest global publicly-traded gaming company is Tencent Holdings (HKG: 0700), with a market capitalization of US$370B. The gaming industry is composed of publishers and developers that own the intellectual property (IP) and content, which has enabled eSports, an industry sub-sector, to emerge.

The gaming industry captures the majority of the Asian market and is less popular in the United States and Canada. The North American region is experiencing high participation in eSports, immersing itself into this nascent industry. According Bloomberg Intelligence, the relatively underdeveloped gaming market in Canada is valued at US$140B.

2018 Global Games Market (USD Billions)

Source: Newzoo Global eSports Market Report

eSports is a nascent growth vertical within the gaming space. It is defined as multiplayer video gaming, played by professional gamers at a competitive level for spectators. eSports is available to all, including amateur competitive gaming participants, professional teams or leagues, and casual viewers. Often compared to traditional sports, eSports follows similar guidelines and etiquette as that of the NHL or NFL leagues, which control the competitions as well as distribution rights for the matches.

Technological infrastructure is a key growth driver. According to the 2019 Global eSports Market Report by Newzoo, eSports revenues are expected to hit a new high of $1B with a YoY growth of +26.7%. In a 2018 report, it was projected that the mobile gaming space will capture over 47% of the market, with smartphones accounting for about 37% of global gaming revenues. The evolution of technology will support growth in the sector with the global deployment of 5G infrastructure that will allow for a more immersive gaming experience.

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