Is investing in eSports a good idea?

Is investing in eSports a good idea

Investing in eSports has recently been a growing trend among traditional sport clubs, which has left many people wondering if they should invest as well. We have dug deep into this topic to shed some light whether it’s a good idea or not.

Why should I invest in eSports?

There’s a lot of things that are currently speaking in favour of eSports, which is what has led several traditional football clubs to invest huge amount of money in it. Just to mention a few, you have Roma that have signed FIFA players, Philadelphia 76ers who have bought the renowned Team Dignitas, Boston Celtics who have invested $7 million in Team Fnatic and F.C Copenhagen that have partnered up with an entertainment company to create a CS:GO team called North. Apart from these, there are plenty of other traditional sport clubs that have chosen to invest in eSports as well.

So why invest in eSports? Well, obviously there’s a lot of potential in the eSport industry for these investments to happen. Let’s have a look at some of these.

The industry is showing a steady growth

If we look at numbers provided by a global report from the market research company Newzoo released in February 2017, we find that the eSport industry has been steadily increasing in value. What was only a $325 million industry in 2015, grew to a $493 million industry in 2016 and a $696 million industry in 2017. By 2020 it’s expected that the value of this industry will reach $1.5 billion.

At a first glimpse this might look like big numbers, but are actually nothing compared to what the traditional sport industry is worth. Just the teams playing in the French soccer league “ligue 1” are worth more than this. However, from an investor point of view, the industry has still proven a steady growth and there’s a lot indicating that this esport growth will continue to happen.

Playing video games is the future

As much as this may raise concerns about health, we can’t ignore the technological age that we’re living in. A report released by the Entertainment Software Association shows that 65% of households in America has at least one person spending three hours or more on video games each week. The majority of parents (75%) also limit their child’s time playing video games, which means that the number of hours would be higher if they didn’t.

Furthermore, the money spent on video game content in the US has increased from $17.6 billion in 2011 to $24.5 billion in 2017. What’s also been increasing is the usage of smartphones for gaming. This is a fairly new phenomenon as smart phones haven’t been around nearly as long as console and PC gaming. This allows anyone to play video games at any time, which is why major game developers are investing a lot of money in this.

It’s a young audience

The majority of people who are into eSports today are aged between 21 and 35 years according to Newzoo. With mobile gaming becoming more popular and eSport games like King of Glory being developed purely for mobile devices, we can expect a further interest of eSports from the younger generation. From an investor point of view, a young audience is generally a great idea to invest into as they are the future and will be a lifelong investment.

eSports is a global phenomenon

Something that isn’t necessarily a reason for investing in eSports on it’s own, but one of the factors that make for a promising future of the growth of it, is the fact that it’s a global phenomenon with no restrictions. Anyone with a gaming device and internet connection can take part of the eSport games and possibly be the best player in the world. It’s nowhere near how traditional sports work where you only have certain times to practice and need a at least one partner to practice with. Of course, eSport requires other players as well, but these are always just one click away.

How to invest in eSports?

If you’re not a rich sports team owner or made a fortune in any other way, you might be asking yourself “how do I invest in eSports, is it even possible?” As a single person with a limited budget, it’s of course not as easy as big companies investing in eSports. You clearly won’t be buying any teams or funding any eSport organizations. There are however other options. You can either create a team of your own or invest in eSports stocks.

Create a team

This is by far the most time consuming and hardest way to invest on eSports, but if you have a strong passion for the competitive industry and the dedication required, it’s a fully possible option. By using any resources you have to put together a team and make it successful, you will eventually reach a point where you’re able to get a sponsorship. This is a high risk option as it’s extremely difficult to succeed, but if you do so you’ll also be greatly rewarded.

An alternative option to creating your own team is to invest in eSports team that already exist. Of course, with a limited budget you would probably have to aim for very small organizations and unfamiliar teams.

Invest in eSports stocks

A far more feasible option for the majority of people is investing in eSports stocks. Any company that you can picture benefiting from the growth of eSport would be worth considering investing into. The obvious choices are major game developers, such as Activision Blizzard who have already released several successful eSport games, such as OverwatchStarcraft 2Heroes of the Storm and Hearthstone. Blizzard is undoubtedly a company that is putting a lot of effort into eSports, which the upcoming Overwatch league is a perfect example of.
Other game developers worth taking a look at are Electronic Arts and Tencent Holdings. Electronic arts are the creators of the FIFA franchise, which recently has been showing a promising growth as an eSport. There are for instance several soccer clubs that have signed FIFA eSport players.

Tencent Holdings is the company that owns Riot Games, the creators of the world famous eSport game League of Legends. This is however not the only reason to invest in them, but their newly released mobile device game King of Glory is showing an incredible potential of becoming a top eSport game. It’s been reported that it has more than 50 million unique players and made a stunning $435 million revenue in just one month.

Another answer to the question on how to invest in eSports is looking at the betting companies. With the increasing interest for eSports, there has been an increasing popularity in eSports betting as well. Not only have well established betting operators extended their selection of odds to include eSports, but new operators that are only focusing on eSports have appeared as well. One of newest ones is Arcanebet, which is showing a promising future and could very well be a smart choice to invest in.

Risks of investing in eSports

There are certainly a lot of things that speak in favour of investing in eSports, but let’s have a look at the risks as well. As with any other investment, you will indeed find risks of investing in eSports no matter how promising the future might look. How big the risks are and how you could become affected by certain events depends on what you have invested in. Let’s however start off by looking at the player and execution risk.

Player and execution risk

Before asking yourself “how to invest in an eSports team”, a better question would actually be “do I want to invest in eSports team?” Whether or not it’s a new team that has been formed, it’s likely that you will deal with one or more players that don’t know each other very well, which is always a big risk factor.

The majority of eSport players are young and many probably have strong opinions about certain things. If you’ve gathered a team of rebellious youngsters, this is likely to make the team building a pain in the ass. Not only can coaching each and every one of the players be a challenge, but making sure that the team dynamics are on point could be extremely tough. This is very important as it will heavily affect the performance and results of the team.

Betting risk

It’s quite a well known fact that a lot of betting operators make tons of money, which can make it very tempting to invest in a new operator. As much as this can make you a fortune if everything goes well, there are definitely risks you should be aware of.

If you take a close look at the betting market, you’ll find that there already are hundreds of different bookmakers to choose from. Although not everyone of these are offering eSports and the interest for betting on this is growing, it’s not going to be easy to compete with them.

At the moment big betting companies aren’t advertising eSports very much as it’s still a very small market. However, when they recognize that the interest in eSports betting is big enough, they have a huge budget to bring in the heavy artillery. Wherever they would like to be seen, they can be seen.

Game risk

No matter if you have created a team yourself, invested in an existing one or chosen to invest in eSports through game developers, there’s always a game risk factor you should be aware of. An upcoming game may fail in execution and not become nearly as popular as expected. Even if it would indeed succeed in execution, there’s still always a risk that it will lose popularity to another game in the same genre. You also have to account for scandals, such as cheating happening in the game. All of these can hurt an investment in a game developer, while an investment in an eSport team can be affected by the game they have chosen to compete in losing popularity and credibility.

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