Market Overview

After Recent Deals, This Esports Company Cannot Be Ignored Any Longer

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After Recent Deals, This Esports Company Cannot Be Ignored Any Longer

Esports has been a key beneficiary of the 2020 pandemic. As traditional sports and events were canceled due to lockdowns, esports saw its interest and viewership exponentially rise, as gaming picked up the slack. 

But what exactly is esports? Esports is a form of competitive video gaming, which is watched and appreciated as a spectator event. Even before the pandemic, esports and competitive gaming have been experiencing strong growth. The growth in spectating competitive gaming has also given rise to esports betting and wagering.

For instance, did you know the 2019 League of Legends championship drew a greater viewership audience than the Super Bowl? Furthermore, the Fortnite World Cup winner took home a larger cash prize than even Tiger Woods winning the Masters.

According to market research firms like ResearchAndMarkets, global esports growth is expected to continue for the foreseeable future. The firm estimates that the global esports market will be valued at $3 billion USD by 2025, which represents a compound annual growth rate (CAGR) of 18% between 2020 and 2025. 

While there are a handful of publicly-traded companies that focus on various aspects of esports, Esports Entertainment Group (GMBL) is cementing itself as a stand-out player within the emerging industry.

GMBL: An Overview

Esports Entertainment Group, Inc. is engaged as a licensed online gambling company that specifically focuses on esports and related wagering. The company maintains online gambling and 18+ gaming licenses from the United Kingdom, Ireland, Malta, and Curacao. This gives Esports Entertainment a global footprint across the high-growth esports and online gambling markets.

Using its "three-pillar strategy," Esports Entertainment seeks to continue building and acquiring synergistic assets, owning and operating proprietary wagering platforms and related events, becoming an esport technology infrastructure provider and being a sought after source for esports data and analytics.

The three pillars are defined as Esports Entertainment & Infrastructure, Esports Wagering, and iGaming & Traditional Sports Betting.

Pillar One: Esports Entertainment & Infrastructure

The first pillar is centered around the esports ecosystem and infrastructure, which is necessary to create a reliable, competition-grade environment for the esports community. Without the technological infrastructure, there is no esports as we know them today. 

Within its first pillar, Esports Entertainment Group has four primary entities: Esports Gaming League (EGL), ggCircuit, Helix eSports, and Genji.

Esports Gaming League (EGL)

The EGL serves as a tournament platform for both online and live gaming events. Esports Entertainment Group can monetize this platform through five key revenue streams: Sponsorships, streaming rights, advertising, ticket sales, and other merchandise. 

EGL has also been working with traditional sports teams to serve as their official esports tournament platform. The EGL already has several notable traditional sports sponsors: LA Kings, LA Galaxy, Arsenal, the Philadelphia Union, and the Philadelphia Eagles. Non-sports EGL sponsors include Red Bull, KFC (YUM Brands), and Lenovo.

Helix eSports

Helix eSports is Esports Entertainment Group’s state-of-the-art entertainment centers. These act as the physical locations for tournaments or gaming events. Currently, there are five esports centers under the Helix brand, which includes two of the five largest centers across the United States.

These tournament centers have the capability of running over twenty tournaments per month, per location. This makes the economics of continuing to expand Helix centers throughout the country feasible, as overall industry growth continues. On average, it costs around ~$500,000 to build a Helix facility. However, with 20%+ EBITDA margins on a scaled basis, the facility pays for itself in typically less than a year.

ggCircuit

ggCircuit serves as Esport Entertainment’s B2B software solution for gaming centers. Using cloud computing, ggCircuit helps provide management solutions for gaming facilities. The software service currently serves over 1,000 locations around the world, which helps power 1.9 million unique users and over 60 million hours of usage.

The cloud-based software solution primarily uses a “seat subscription fee” as its main revenue source for ggCircuit. Furthermore, the company can generate further revenues from on-screen advertising, etc.

The ggCircuit solution is widely utilized by universities. As esports have begun to be included within collegiate sports and activities, more universities have been adding the necessary infrastructure to accommodate esports. Esports Entertainment Group has over 50 universities on the ggCircuit platform, including Ohio State University, Syracuse University, and the University of North Carolina. 

Genji

Genji is an esports analytics entity that assists with facilitating talent identification, broadcasting analytics, and other key data. Genji has previously worked with FIFA and the NBA 2K League to help with data-based decisions, such as combines, drafts, and more. 

On a forward-looking basis, Esports Entertainment Group sees opportunities to create combine-style reports for players that are on ggCircuit-connected servers. Also, the analytics platform will allow VIE.GG, its wagering platform, the ability to offer tighter lines than any other esports or other related wagering platforms.

Pillar Two: Esports Wagering

The second pillar in Esports Entertainment Group’s strategy is esports wagering. As the name suggests, this pillar centers around the gambling and betting aspects of esports. Within its esports wagering ecosystem, the company has two main entities: VIE.GG and LANduel.

VIE.GG

VIE.GG is an esports wagering platform that also happens to be the only esports-focused gambling platform with a NASDAQ-listing and Tier 1 licenses (Malta, United Kingdom, and Ireland). 

The company notes that they have a New Jersey license pending, which awaits approval from the NJ Department of Gaming Enforcement. Esports Entertainment Group estimates that it's New Jersey VIE.GG launch could occur within the late first quarter of 2021.

In August 2020, Esports Entertainment Group announced an expanded partnership with Dignitas, one of the most successful esports organizations in the world. Under the extended agreement, VIE.GG acquired the jersey & naming rights to Dignitas' Counter-Strike: Global Offensive (CS:GO) team. During official events and tournaments, the CS:GO team will compete as Dignitas VIE.GG.

“Dignitas is a true leader in the esports community,” said Grant Johnson, CEO. “Expanding our existing partnership and placing our brand in front of the millions of engaged Dignitas fans around the world further demonstrates our commitment to growing VIE.gg into the leading wagering platform in esports globally."

LANduel

LANduel is a proprietary wagering platform that allows player-vs-player betting. Essentially, gamers can place wagers on a player-vs-player basis within video game competition. The platform's strict four-factor authentication helps provide a fair gaming environment. Another enticing factor to LANduel is its close relationships with major gaming publishers to ensure that all events and related wagers follow the applicable community guidelines.

Along with VIE.GG, LANduel is working with the New Jersey gaming authority to create a pilot program for the platform sometime in early 2021. 

Pillar Three: iGaming & Traditional Sports Wagering

Esports’ third pillar focuses on the more traditional wagering markets of online gambling and traditional sports wagering. For most people, online gambling or place bets through a sportsbook are more familiar variants of betting. However, while these may be more familiar, they still present an opportunity for strong growth.

In the not-so-distant past, gamers would have to visit the likes of Las Vegas, Malta, or Macau to have the freedom to place a sportsbook wager. Fortunately, many western countries are now rethinking their approach to gambling, particularly online wagering. 

As of November 2020, there are now 20 U.S. states with legalized sports betting and another six states that have recently passed bills aimed at legalizing sports betting. In early December 2020, Canada made major steps to potentially legalize sports gambling in 2021. 

Argyll Entertainment

Operating under the brands SportNation and Redzone.bet, Argyll Entertainment offers traditional sports wagering and iGaming. The company maintains Tier 1 gambling licensing in the United Kingdom and Ireland; with ambitions of expanding with a Malta license. 

Esports Entertainment notes that a Malta license for SportNation will allow the brand to expand operations to an additional 150 countries and jurisdictions, such as Canada, New Zealand, Finland, and Japan.

GMBL Recent News: Deal Signed With Philadelphia Eagles, Acquisition of Online Casino Operator 

Good news has continued to pour in for Esports Entertainment Group, as the company looks to continue its aggressive M&A strategy. Just recently, the company announced two major deals that will likely provide ample synergistic opportunities throughout its three pillars.

Philadelphia Eagles EGL Deal

On December 15, 2020, Esports Entertainment Group announced that it had signed a multi-year deal with the Philadelphia Eagles. Under the terms of the deal, Esports Entertainment will serve as the “first esports tournament provider for an NFL club,” according to the press release. 

Specifically, the deal will allow the company's Esports Gaming League (EGL) entity to host and operate bi-annual Madden NFL esports events and tournaments for the Eagles. Also, the deal makes the Philadelphia Eagles a shareholder of Esports Entertainment Group.

"We are thrilled to partner with the Philadelphia Eagles as they introduce their fans to the world of competitive esports gaming,” said Grant Johnson, CEO of Esports Entertainment Group. “The Eagles join a growing list of high-profile organizations that have chosen Esports Entertainment Group as their esports tournament provider, affording us an incredible opportunity to expand our brand reach within multiple large, dedicated fan bases and setting the stage for significant growth ahead. We intend to build on this momentum.”

Lucky Dino Acquisition Agreement

On December 16, 2020, Esports Entertainment Group announced that it has entered into an asset purchase agreement with Lucky Dino Gaming Limited, a Malta-licensed online casino operator. 

The online gaming company allows Esports Entertainment to access new markets across Europe and Scandinavia, where esports is extremely popular. In a sense, the assets acquired are equally as impressive as expanding operations into a notably vibrant esports market. 

During the full year 2020, Lucky Dino reported revenues of $21 million and EBITDA of $3.8 million. In 2021, the online casino is estimated to generate revenues of $24 million and EBITDA of $5 million. By 2022, the company estimates revenue of $29 million and EBITDA of $6.5 million.

"Over the past five years, Lucky Dino has evolved from a single brand white-label casino operator into a multi-brand, class-leading casino operator and technology business,” commented Grant Johnson, CEO of Esports Entertainment Group. “In addition to further strengthening our tech stack, Lucky Dino’s assets will give us a substantial foothold in multiple new jurisdictions across Europe and Scandinavia where esports are extremely popular, and with Lucky Dino’s 30K monthly active casino players we will have tremendous cross-selling opportunities with our SportNation and Vie.gg betting platforms.”

Overall, Esports Entertainment Group continues to be a stand-out pure play in the high-growth online gambling and esports industry. Growth across the industry has continued before the pandemic, but the lockdowns have led to an exponential increase in viewership, rating, and interest. 

Esports Entertainment Group takes a diversified approach to the industry, seeking to offer solutions on the technology & infrastructure side, as well as wagering. Through its extensive M&A strategy, the company has developed an enticing esports ecosystem that has yet to be fully appreciated by the markets. Instead of chasing overvalued DraftKings, Inc. (DKNG), investors should take a deeper look into Esports Entertainment Group. 

 

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