Market Overview

Ad Revenue Another Big Catalyst For The Esports ETF

Ad Revenue Another Big Catalyst For The Esports ETF

Fast approaching its six-month anniversary, the VanEck Vectors Video Gaming and eSports ETF (NYSE: ESPO) is quickly becoming familiar with favorable, fundamental data points.

What Happened

A recent note from Goldman Sachs indicates that in just a few years, esports television viewership, already bigger than that of Major League Baseball and the National Hockey League, will rival TV viewership levels of the NFL, the most popular U.S. sport.

Then there was the recent data point that confirmed global esports revenue topped $860 million last year and will surge to $1.7 billion by 2022.

Count advertising revenue as one of the drivers of esports' overall revenue growth.

Why It's Important

“Esports ad revenues in the US are poised to surpass $200 million by next year,” according to eMarketer. “We define esports as organized gaming competitions among professional players and teams. Digital ad revenues from esports in the US will grow 25% to $178.1 million this year. There are multiple revenue streams connected to esports, including advertising, sponsorships, media rights, ticket sales to live events and merchandising.”

ESPO's 25 components must derive at least 50 percent of their sales from video games or esports to be included in the fund's underlying index. The fund's lineup includes video games makers, such as Activision Blizzard Inc. (NASDAQ: ATVI) and Electronic Arts Inc. (NASDAQ: EA) as well as some semiconductor makers.

NVIVIDA Corporation (NASDAQ: NVDA) and Advanced Micro Devices Inc. (NASDAQ: AMD), which make chips widely used by competitive PC gamers, combine for over 14 percent of ESPO's weight.

What's Next

ESPO's multi-pronged approach to esports investing could serve investors well as the industry grows. The fund is up 21.06 percent year to date, putting it slightly ahead of the Nasdaq-100 Index.

“Audiences for esports are large and growing,” according to eMarketer. “This year, 30.3 million people in the US will watch an esports event at least once a month, up more than 18% over last year. We expect esports viewers to grow by more than 50% between now and 2023, reaching 46.2 million at that time.”

Advertisers are hungry for exposure to esports viewers because many of these viewers fit into the highly sought after millennial demographic, are highly educated and have above-average levels of disposable income.

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Photo by Piotr Drabik/Wikimedia.


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