Market Overview

Esports ETFs Could Be On The Cusp Of Mammoth Opportunities

Esports ETFs Could Be On The Cusp Of Mammoth Opportunities

The theory that the esports investment thesis is stronger and growing stronger amid expectations that more advertising and gambling dollars will flow to the sector is backed by data. 

Such buoyant fundamentals highlight the potential of exchange traded funds, such as the Roundhill BITKRAFT Esports & Digital Entertainment ETF (NYSE: NERD) and the VanEck Vectors Video Gaming and Esports ETF (NYSE: ESPO).

What Happened

Thanks to the esports boom, gaming is the world's fastest-growing form of entertainment, a theme NERD and ESPO are levered to because their rosters are chock full video game publishers, hardware makers and components manufacturers.

As has been widely noted, increasing television viewership — which some estimates will soon surpass that all of major U.S. sports leagues aside from the NFL — is a major contributor to esports growth and the underlying investment thesis.

“As the history of esports continue to unfold, media giants such as ESPN and Turner are broadcasting esports tournaments and competitions,” according to Business Insider Intelligence.

“And in 2014, Amazon acquired Twitch, the live streaming video platform that has been and continues to be the leader in online gaming broadcasts. And YouTube also wanted to jump on the live streaming gaming community with the creation of YouTube Gaming.”

Why It's Important

Brand spending supports the growth trajectory of esports and ETFs such as ESPO and NERD.

In 2016, just $325 million was spent on esports advertising and sponsorships. That figure is projected to top $800 million this year.

“So it's understandable why traditional media companies would want to capitalize on this growing trend just before it floods into the mainstream,” according to BI Intelligence. “Approximately 300 million people worldwide tune in to esports today, and that number is growing rapidly. By 2020, that number will be closer to 500 million.”

Other statistics support the notion that esports has a significant runway for growth in the context of the broader gaming space. As VanEck notes, esports was an $865-million dollar industry last year, but video gaming at large generated $134 billion in sales.

What's Next

Importantly, esports are catching the eyes of professional investors and big name banks.

“Financial institutions are starting to take notice. Goldman Sachs valued esports at $500 million in 2016 and expects the market will grow at 22% annually compounded over the next three years into a more than $1 billion opportunity,” BI Intelligence said. 

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