E-sports is an all-encompassing term used to describe online multiplayer video games played competitively for spectators and the many tournaments and events they spawn.
Over 50 video games across consoles and PC are considered to be part of a rapidly growing e-sports industry, with professionally organized leagues and tournaments offering millions of dollars in prize money for the best players.
There are 454 million e-sports viewers globally, which is estimated to rise to 645 million by 2022, per Newzoo 2019 Global Esports Market Report.
E-sports Industry in 2019
The growing opportunity in e-sports is grabbing the attention of marketers and platforms. Multiple revenue streams are connected to e-sports, including advertising, sponsorships, media rights, ticket sales to live events and merchandising.
One such classic example is Overwatch League, the competitive video-game venture that Activision Blizzard ATVI launched last year, naming Coca-Cola Co as its official global beverage sponsor for non-alcoholic drinks. The game developer, which runs the professional e-sports league, also signed sponsorship deals with carmaker Toyota Motor Corp, wireless provider T-Mobile US Inc and computing companies HP Inc. and Intel Corp.
E-sports has continued its rapid global growth with revenues exceeding $1 billion and audiences of more than 443 million across the globe, according to a Forbes report.
North America is poised to generate $409 million of e-sports revenues in 2019, the maximum by any region, per Newzoo 2019 Global Esports Market Report. China and South Korea will follow with a respective 19% and 6% exposure. The rest of the world will make up the remaining 38%, per a Reuters report.
Platforms such as e-sports betting and fantasy sites have attracted significant investments, which is driving the market. E-sports betting is on its way to hit the $8 billion mark in total wagers this year. Growth estimates hint at more than $16 billion of annual wagers in the years to come, per a Venture Beat report.
Rising Demand for E-sports
While e-sports is currently a small part of the huge video-game industry, it is growing exponentially. North America, Western Europe, and the Asia-Pacific region are expected to be the largest e-sports markets in 2020.
Competitive video game advertising revenues in the United States are expected to surpass $200 million by 2020, per an eMarketer report.
The European e-sports audience is predicted to increase at a steady rate, reaching an estimated 105 million people by 2020, per a Deloitte report.
The e-sports industry is expected to benefit from huge revenues, attributed to player spending on in-game purchases, merchandising and ticket purchase for live events and tournaments. Per a Mordor Intelligence Report, players will spend $4.5 billion on immersive gaming by 2020.
Additionally, the blend of blockchain technology and gaming holds great promise for the e-sports industry. Blockchain provides a useful tool for gamers for various reasons including decentralized asset exchanges, verifiable scarcity of virtual objects and collectibles, fast and secure payment networks, and enables developers to properly monetize their creations.
Moreover, rising Internet penetration is driving demand. GlobalWebIndex’s data indicates that more than 1 billion people around the world now stream games over the Internet each month.
E-sports executives consistently cite Alphabet GOOGL Google’s YouTube and Amazon’s AMZN Twitch, which tend to garner younger audiences, as the leading platforms for e-sports viewing in the United States.
Year To Date Performance
Stocks in Focus
Nvidia NVDA makes high-end GPUs that are marketed for PC gamers and are the top choice of professional gamers. The exponential rise of e-sports promises to generate even more interests in its GPUs. The stock carries a Zacks Rank #2 (Buy).
Turtle Beach HEAR is a leading designer of headsets for gamers. the company's products have hit a new wave of growth due to the success of battle royale shooter Fortnite, which has over 125 million users worldwide. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Video Game Publishers
Electronic Arts’ EA Competitive Gaming Division focuses on operating professional leagues for games like FIFA, NHL, Madden NFL, and Battlefield.
EA and Respawn Entertainment recently announced the Apex Legends Global Series for PC gamers around the world. The Global Series marks the first e-sports league for the popular battle royale game Apex Legends that recently took home the Best Multiplayer Game award.
Meanwhile, Take-Two Interactive TTWO partnered National Basketball Association to launch NBA 2K eLeague. NBA 2K20 launched by 2K Visual Concepts during second-quarter fiscal 2020 contributed to growth in recurrent consumer spending, which increased 32% and accounted for 37% of total GAAP net revenues.
Another video game publisher that stands to is Activision Blizzard. The company'sThe Overwatch League Season Two average minute audience grew 18% year over year in the last reported quarter.
Strong popularity of franchises like Call of Duty (COD) and Hearthstone is expected to boost in-games spending, thereby driving net bookings and top-line growth in the near term. The company will launch the Call of Duty League with 12 teams in January 2020.
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