You Too Can Be an eSports Investing ‘HERO’

Canadian eGaming ETF has appreciated 34% year to date

Capital Ideas Media | July 17, 2020 | SmallCapPower: eSports/eGaming has become one of the fastest-growing subsectors of technology and entertainment, especially among the Millennial and Gen-Z cohorts. It represented just 1% of the global gaming market at nearly $700 million in 2017, yet the industry is expected to reach $1.65 billion by 2021, representing a 27.4% CAGR according to market research firm Newzoo.

(Originally published on Capital Ideas Media on June 9, 2020)

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eSports can be most simply defined as organized, competitive video gaming at the professional level, where participants compete in a virtual environment for money and recognition.

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And, with much of the global population locked down to stop the spread of COVID-19, eSports growth could actually accelerate.

For Canadian investors, a more ‘conservative’ way of participating in the global growth of eSports can be found in the Evolve E-Gaming Index ETF (TSX:HERO).

Evolve E-Gaming’s Top 5 holdings, which comprise 45% of the ETF’s constituents, include NetEase, Inc. (NASDAQ:NTES) [the largest weighting at 9.87%], Activision Blizzard, Inc. (NASDAQ:ATVI), Electronic Arts Inc. (NASDAQ:EA), Sea Limited (NYSE:SE), and Nintendo (OTCPK:NTDOY).

While HERO invests globally, 54% of its holdings are based out of Asia, with U.S. companies making up 26.5% of its portfolio. Newzoo discovered that the Asia-Pacific region accounted for 51% of global eSports enthusiasts in 2017, with the number of eGamers in that part of the world expect to hit 290.2 million by 2023.

eSports, though, remains under-monetized relative to traditional sports. Average revenue per eSports enthusiast was just $3.60 in 2017, a fraction of the $15 average revenue per basketball fan and $54 average per sports fan globally, according to a study by Newzoo.

According to a Goldman Sachs eSports report dated October 2018, eSports generated an estimated $655 million in annual revenue in 2017, 38% of which came from sponsorships, 14% from media rights, and 9% from ticket revenue.

By 2022, though, media rights are anticipated to reach 40% of total eSports revenue, with sponsorship expected to become the second largest contributor of revenue at 35%.

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