Esports is the fast-growing, international phenomenon of competitive video gaming. In 2027, it’s estimated that esports will generate more than $6.81 billion in revenue for a compound annual growth rate (CAGR) of 24.4% from 2020.
The 2021 Free Fire World Series is a tournament hosted in Singapore, which attracted a record 5.41 million viewers, topping League of Legends’ previous record of 3.99 million! A great example of how esports has become a global phenomenon!
Esports has been around since as early as 1972 with games such as “Spacewar!” but was not considered a sport until recently where fans began organizing tournaments and competitions for prize money just like traditional sports athletes do today.
The sheer amount of players and spectators in and around the esports world is trending towards being as big as traditional sports or bigger. This blog post will cover what you need to know before investing in what many call the decade’s investment opportunity.
Defining The Esports Market
Esports is short for “electronic sports,” which makes it difficult to actually define. The first thing that comes to mind whenever you think of traditional sports is games like football or basketball, where teams play against each other in organized leagues for money and fame. Esports represent the act of playing video games competitively against other people and having spectators watch.
Games like NBA2K, FIFA, and even fighting games like Street Fighter replicate the sport in question, and the tournament rules are straightforward. There are brackets, and the team that wins the most matches in a set time frame advances in the rounds until one is crowned champion and given a fixed number of dollars depending on how many teams were participating.
Esports has become so popular that traditional sports leagues like the NBA are beginning to invest in esports to make their own league more popular!
What makes Esports so different from traditional sports?
How do you play against other people when it’s just a video game? Well, although no actual physical bodies are competing, esports athletes have to play and strategize just as hard as other athletes do.
Esports has become a huge part of many people’s lives, to the point where many players try to make it their full-time job. The same goes for those who watch esports, especially with online streaming becoming more and more popular throughout recent years.
A Loose Definition Of “Sport”
Although NBA2K is an excellent example of esports, it is not what gathers the most viewers. Esports also include strategy games like Fortnite, Counter-Strike: Global Offensive (CSGO), real-time strategy games like Starcraft II, and League of Legends, which features teams of five players who compete in a virtual battle arena. The rules and objectives in each game vary, but the basics are always the same: destroy your opponent’s things, kill all their players, or capture this spot on the map.
Just like traditional sports, esports athletes train to improve their skills in their game of choice. Although not every esports athlete is considered professional, some players dedicate themselves to their craft by opting for esports training facilities instead of college or university in the hopes of someday making it big in the scene. Some players even quit school to improve their skills in time for upcoming tournaments, a process nicknamed “The Grind.”
Just like how some traditional athletes are born with athletic genes, esports professionals often have high hand-eye coordination, fast reaction time, and strategic thinking in common. And just like how some traditional athletes need steroids or other performance-enhancing substances to do well in professional leagues, so are their allegations of players using drugs to enhance their performance in esports.
How Is Money Made In Esports?
Keeping up with traditional sports, there is a lot of money in esports. Companies like RedBull and Monster Energy have sponsored various teams and even players to join forces and compete in tournaments for the opportunity to win upwards of hundreds of thousands of dollars.
The biggest of them all was in 2019 when Fortnite World Cup Finals saw a prize pool of $15.1 million split between two team members!
The esports industry may seem complex and intimidating from the outside, but when examined brought down to the simplest terms, there are three core segments:
The Players (consumers)
The players (consumers) buy the games and play them. The more popular a game is, the more players there will be, and thus, the bigger competitions/tournaments there will be for prize pools to rise exponentially. The bigger the prize pool, the more people want to participate in tournaments or watch live streams of said games.
Millennials are not only the biggest consumers of esports but also make up a lot of the teams competing in various tournaments. Notable Millenials include Ninja, who played Fortnite and gained over 16 million followers on twitch by making entertaining streams, even having Drake play with him one time!
The Tournament Organizers/Clans
The next segment consists of the Tournament Organizers/Clans. The Tournaments are organized by various people, companies, or clans (clans consist of multiple people playing under one organization). These individuals or organizations help set up tournaments where finalists are then given prize money for winning the tournament.
One of the most popular clans is Faze Clan, which is known for its top CSGO players and pushing for an IPO. Many sponsors and companies such as Audi, Mountain Dew, and Red Bull have partnered up with Faze Clan to expose their products. This is a great way for esports athletes to make money instead of going pro in traditional sports because players get a cut from the clan’s sponsorship deals!
The Game Developer/Companies
Lastly, the final segment consists of the companies that create the games played in tournaments. Likewise to traditional sports, these developers provide more content to keep it fresh and new every year or every few months by creating new characters/maps/weapons/etc. to keep their games interesting.
Sometimes they even release new versions of the game entirely, which results in the old version becoming obsolete and moving onto newer versions of the game (i.e., League of Legends).
Some of the most popular publishers include Riot Games, who have published League of Legends, Blizzard Entertainment, with the most popular title being Overwatch, Riot Games again for the ever so popular Fortnite, Ubisoft for Tom Clancy’s Rainbow Six Siege, Valve Software studio with Counter-Strike: Global Offensive, Activision-Blizzard publishing Call of Duty, and EA publishing Apex Legends.
The Live Streamers
The content creators (organizers, broadcasters, etc.) have been known to create their own following of fans that watch them regularly. In eSports, the most popular content is live-streamed by people who play the games and also commentate on it as they’re playing. These streamers have a huge advantage because they can make money off of advertisements alone if they choose to do so, but players can also use Twitch or YouTube to upload their full game-play sessions so that they can make money off of the game itself.
Or if not, streamers use affiliate links to earn commissions on every product purchased through their link. Notable e-sports live streamers include Tyler1, who is known for streaming League of Legends and making over $100,000 a month through his Twitch channel.
As you can see, there are several ways individuals and companies can make money in esports to help sustain it and encourage its growth even further!
Why Is It A Good Idea To Invest In Esports?
As one of the fastest-growing industries globally, esports is only expected to get even bigger over time. It is quickly becoming a major source of entertainment for millions of people worldwide, and it’s not hard to see why.
Did you know that as of 2021, there are at least 250 million people watching esports and that the total revenue generated from esports will exceed $1 billion?
What’s more, almost half of all individuals who watch sports on a regular basis tune into esports as well! This is especially true for North America, where about 30% of people who watch sports also watch Esports.
And with such a steadily growing fan base, it’s not too hard to see why companies are starting to invest in teams of their own so that they can have a shot at getting some of the huge prize pools.
Diverse Investment Opportunities
As stated above, there are many different ways individuals can get involved with esports. If you are interested in developers, you can invest in game development companies that are creating some of the latest and most popular esports titles out there, increasing their chances of winning tournaments.
Easy To Get Involved
The great thing about investing in esports is it’s never too late or too early to get involved. There is always room for growth, which means there is room to make money.
And thanks to the fact that everything is done online, it’s also quite easy for people of all backgrounds to get involved with.
A Safe Bet
The industry is already showing many signs that it will continue to grow. With the current generation being more open to technology than ever before, esports has a bright future ahead of them.
That’s why instead of seeing investing in esports as a gamble, you should see it as a safe bet. After all, you are buying into an industry with so much potential to grow and develop even further in the years to come!
Esports Companies To Invest In Today
As more and more people get involved with esports, there will be even more opportunities for people to create their teams or invest in the ones they see a lot of potential in.
If you are looking for companies to invest in today, a few of the most popular among them.
Activision Blizzard Inc. (NASDAQ:ATVI)
As the owner of the record for some of the most popular esports games in existence, Activision Blizzard Inc. is one of the top companies to invest in today.
The company owns several different subsidiaries responsible for developing and publishing some of the best esports titles out there, including Overwatch, Hearthstone, StarCraft II, World of Warcraft, Call of Duty, and Heroes the Storm, and more.
This year’s sell-off is a great opportunity for anyone looking to get involved while the price is low. Shares fell following the news of a delay for games like Diablo 4 and Overwatch 2. Although this caused shares to drop 10% this past year, the company has seen a steady increase in the past five years and shows no sign of slowing down its operations.
Electronic Arts Inc. (NASDAQ:EA)
Another company that has made quite the name for itself in the esports scene, Electronic Arts Inc., is one of the most popular companies to invest in today.
The company was founded back in 1982 and since then has developed dozens of different games, each with its own esports scene where people compete to win big. The company has developed such games as Madden NFL, FIFA Soccer/Football, Battlefield 1, Star Wars Battlefront, and many more.
Ea also published Apex Legends, a Battle Royale game that is currently one of the most popular games, rivaling Fortnite and COD Warzone.
Ea has a market cap of $39.66 Billion and is currently trading at a price of $139.48 per share. That represents an increase of 17.28% in the past year and 80% in the past 5 years, which many would consider a safe bet.
Turtle Beach Corporation (NASDAQ:HEAR)
Turtle Beach Corporation is the largest gaming headset maker in the world, representing one of the most popular choices among gamers.
Both casual players use their headsets up to professional streamers and esports teams who compete in tournaments worldwide, giving you a chance to invest in what is easily one of the most popular companies in the industry.
Turtle Beach Corporation is a relatively new company, having started only in the 90s and quickly becoming one of the most popular companies to invest in today.
Their stock price has increased by 255.73% over the past five years, and they have had a pretty good year so far, reporting $85.3 million in net revenue for the third quarter this year.
Enthusiast Gaming Holdings Inc (NASDAQ: EGLX)
Enthusiast Gaming Holdings Inc is a Canadian company that currently specializes in video game journalism. It was founded in 2014 and is one of the most popular companies to invest in today.
The company currently has a market cap of $486.88 million and is currently trading for $3.85 per share, which means that there’s still room for growth as esports becomes more and more popular among gamers and investors alike.
The company focuses on print media and online content, making it an excellent choice for anyone looking for a solid investment opportunity in the gaming industry.
The company sponsors several esports teams that compete in popular games, and we believe it is severely undervalued at the moment.
Some pretty big names in the esports industry are still not publicly traded yet and therefore currently not available for investment. However, there is a lot of potential and excitement surrounding the release of their initial public offerings. These companies include:
The FaZe Clan started in 2010 and has become one of the most popular esports teams globally, representing some of the best players, notably in Call of Duty. It started out as a clan of friends identifying themselves with the tag within games until they debuted on YouTube.
Since then, they have grown their team to 89 members and their fan base to over 8 million subscribers on Youtube alone, with a total audience across channels of around 350 million people.
FaZe is currently not listed on any stock exchange platform, so there’s no way to invest in them right now. Instead of an IPO, they announced a merger with a SPAC called B. Riley Principal 150 Merger Corp.
The clan managed to raise $118 million in private investments before the merger, and it is estimated that they will be worth $1 billion after all is said and done.
Epic Games is the company behind such games as Unreal Tournament, Gears of War, and most notably, Fortnite.
They are also one of the more popular companies to invest in even without an IPO, so we expect big things from them once they go public. After another successful round of funding ($200 million from Sony,) they now have a valuation of $28.7 billion.
The IPO is expected to go live in 2022 or later.
As you can see, esports is more than just a growing trend. Esports represents an entire industry with tons of room to grow, especially as it becomes more popular among younger generations and gamers alike. It is primed to become one of the biggest industries on earth if it isn’t already, and there are many companies worth investing in that offer plenty of room for growth.