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)
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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