Esports, or electronic sports, involve competitive gaming primarily on computers, mobile phones or game consoles. Two or more players compete solo or in teams in online or LAN tournaments, usually in stadiums or concert halls. In practice, these tournaments and watching esports are no different from watching classic sports, often tournaments are played in the same venues, e.g. the biggest Dota 2 tournament, The International, was originally planned to take place in Stockholm at the Globen or Avicii Arena. That is quite a change from the locally organized tournaments for little money 10 years ago.

Esport has grown tremendously since then, and the trend does not seem to be slowing down in any way, quite the contrary. In the U.S. alone, 24 million viewers watched esport in the year 2021. Esport fans can watch these tournaments via Twitch, which averaged 2.78 million concurrent viewers and 8.46 million streams every month in 2021. As a result, the sector has seen a huge increase in investment from venture capital investors and, more recently, private equity funds. For example, according to Deloitte, the number of investments in esports doubled in 2018 – from 34 in 2017 to 68 in 2018. This is reflected in the total dollars invested: investments increased to USD 4.5bn in 2018 from just USD 490m the previous year, a staggering 837 % increase year on year. These investments are distributed across the entire ecosystem – from esports organizations and players to tournament operators and digital broadcasters – and enable it to function and grow.

Esport as such, however, has been going through a very turbulent period in recent years. The Covid-19 pandemic de facto halted this entire increase and tournament operators were counting great losses. Leagues and tournaments moved online, but due to higher latency, international competition ceased to exist for 2 years. Ironically, in contrast, video game sales skyrocketed during the quarantine period. However, just as the situation was beginning to calm down and signs of cautious optimism that live esports tournaments could return in 2022 began to appear, Russia attacked Ukraine. Players from Eastern Europe had been among the best for a long time and many teams and organizers are therefore wondering what to do next. 

But perhaps for these reasons and the temporary slump and confusion, it is wise not to neglect esport and to keep it on the radar again. The initial boom has faded somewhat in the context of recent events and the market is once again offering interesting opportunities for appreciation. The first place to start when investing in esports are publicly traded shares of tech companies. The esports industry is already home to big players such as MTG, Microsoft and Amazon, which burst onto the gaming scene in 2014, when it bought the largest and de facto only streaming service, Twitch, for USD 970m. However, such investments do not offer pure esports exposure. This can usually be found in more specific companies – for example, NVIDIA (a graphics chip manufacturer) or Esports Technologies (NASDAQ: EBET), which had one of the most successful IPOs in 2021. Last but not least, there are ETFs. For example Roundhill BITKRAFT Esports & Digital Entertainment ETF (ARCA: NERD) is a pure esport ETF. Other ETFs offering exposure to the esports market include the Video Game Tech ETF (NYSE: GAMR), VanEck Vectors Video Gaming and Esports ETF (NASDAQ: ESPO) and the Global X Video Games & Esports ETF (NASDAQ: HERO).

However, the question arises: will the growth of esports be hampered by possible further pandemic waves and will confidence in the industry decline due to the growing tendency to link esports with the NFT?

If you are interested in this topic, do not hesitate to contact us, we will be happy to advise you in this area.

Author: Jan Havelka