Why The Best Is Yet To Come For Esports

Why The Best Is Yet To Come For Esports

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

2020 will go down as a banner year for esports. 

In terms of engagement, time spent watching esports on platforms like Amazon.com Inc AMZN-owned Twitch rose to an all-time high last year as gamers sheltered in place. 

On Wall Street, investors couldn’t get enough esports either. The VanEck Vectors Video Gaming and eSports ETF ESPO, rose 80% in 2020 and took in over $459 billion in inflows. 

That performance was driven by sharp rallies in video game stocks like Activision Blizzard, Inc. ATVI, Take-Two Interactive Software Inc TTWO, and Nintendo NTDOY, all of which made new all-time highs last year. 


2020 performance of ESPO compared to several of the largest U.S. listed video game stocks
Source: Benzinga Pro

It seems as if 2020 was the perfect storm for esports. The industry was buoyed by gamers having fewer in-person entertainment alternatives, a continued flow of new title releases, and the release of the PlayStation 5 and Xbox Series X consoles

Such enthusiasm has resulted in drastically higher valuations for companies with esports exposure. But the huge run has not made industry experts any less bullish. In fact, there’s a case to be made that the esports story is only just getting started.

“The space is experiencing structural long term growth,” said JP Lee, ETF product manager at VanEck. “It's a combination of these big picture trends—people wanting to play video games, interact with their entertainment lives online, cord-cutting, and demographics.”

Despite a slight decline in industry revenue in 2020 (mostly as a result of canceled live events) gaming market research firm Newzoo is projecting esports revenue to hit $1.8 billion by 2022. That would represent a nearly 100% increase from 2020. 

There are a few factors at play here. The biggest revenue drivers for the industry are expected to be a combination of increased media rights, in-game purchases, and recovering live event sales.

Globally, more people watch certain esports events than the Super Bowl, with much of that viewership coming from emerging markets like China, India, Indonesia, and Brazil. This trend also makes esports a demographics play, Lee said. 

“I think there is a case to be made that things are a little overvalued right now. But I would say the long term trends are pushing us in a direction where more people are going to be playing video games 10 or 20 years from now than they are today.”

According to Lee there are other drivers as well, like the rise of cloud gaming and the continued push towards things like the Metaverse—the virtual reality-enabled universe that will be populated by video games. 

“Combined, they make for an exciting future for esports,” he said. “It's as good as it's ever been today, but it's not as good as it's ever going to get.”  


Important Disclosures: 

This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.
An investment in the Fund may be subject to risks which include, among others, investing in the video gaming and esports companies, software, internet software & services and semiconductor industries, equity securities, communication services and information technology sectors, small- and medium-capitalization companies, issuer-specific changes, special risk considerations of investing in Asian, Japanese and emerging markets issuers, foreign securities, foreign currency, depositary receipts,  market, operational, cash transactions, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversified, and concentration risks, all of which may adversely affect the Fund. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund's returns. Small- and medium-capitalization companies may be subject to elevated risks.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit  vaneck.com/etfs. Please read the prospectus and summary prospectus carefully before investing

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.

Posted In: eSportsJP LeePlayStation 5TwitchVanEckXbox Series XNewsBroad U.S. Equity ETFsSpecialty ETFsEmerging Market ETFsSportsGlobalTop StoriesMarketsTechTrading IdeasInterviewETFsGeneral