Video games have been a staple of consumer entertainment since their earliest days, and people have always been obsessed with playing the latest games and systems. However, the advent of smartphones pushed many away from traditional gaming platforms until the latest trend, esports, brought people back in a hurry.
What Are Esports?
Esports are defined as any form of competition facilitated by electronic systems, and that typically refers to competitive video game playing. While most gamers play their favorite games as a form of leisure, professional gamers enter international tournaments, rack up sponsorships, and compete for multi-million dollar prize pools.
Competitive gaming at a professional level is a relatively new concept, but it’s already compiling a rabid fan base that looks very similar to those of regular sports. For the average gamer, esports offer a variety of new ways to interact with their favorite games, and following specific leagues and players passionately is becoming a regular thing.
Money to Make
Of course, when there’s this level of interest in something, there’s also going to be money to be made. Between the companies that develop the games and leagues, the corporate sponsors that use esports as a marketing tool, and the millions of viewers watching ad-supported livestreams of events, esports is becoming a cash-heavy business.
According to research from Newzoo, worldwide esports-related revenue was already up to $325 million in 2015, and this year’s expected total was $463 million, which would represent year-over-year growth of 43%. The same research suggests that the esports business could cross the $1 billion threshold by 2019, when total revenue is expected to be $1.1 billion.
Stocks to Watch
With all this in mind, our investor brains will remind us that we need to look out for the companies that stand to benefit the most from the esports boom.
One of these has to be Electronic Arts (EA - Free Report) . In December 2015, Electronic Arts launched its “EA Competitive Gaming Division,” which promised to set up leagues for its biggest titles, such as FIFA, Madden NFL, and Battlefield. In a recent earnings report, EA noted that this division is off to a hot start.
Another company to look out for is Tencent Holdings (TCEHY - Free Report) . Tencent owns Riot Games, the developer of one of the world’s most popular games, League of Legends. At the latest world championship tournament for League of Legends, worldwide viewership peaked at 14 million people, with well over 30 million people tuning in over the course of the event.
Finally, investors need to look out for Activision Blizzard (ATVI - Free Report) . Activision recently purchased a major esports company, Major League Gaming, for $46 million, and the company is looking for new ways to continue cashing in on its massive Call of Duty and Overwatch titles. ATVI announced last week that it will eventually launch its own league for Overwatch, which currently has over 20 million active users.
Of course, these aren’t the only companies making esports plays right now. Take-Two Interactive (TTWO - Free Report) , for example, recently partnered with the National Basketball Association to launch the “NBA 2K eLeague.” The league, which is set to launch in 2018, will feature teams operated by each of the NBA’s 30 franchises (also read: Will Partnership With NBA Be a Slam-Dunk for Take Two Stock?).
Companies from other corners of the entertainment world are also getting in on the action. Earlier this year, Lions Gate Entertainment (LGF.A - Free Report) announced that it invested in The Immortals, an esports franchise that competes in video games like League of Legends, Counterstrike GO, Overwatch,and Super Smash Brothers (also read: Lions Gate Eyes eSports Potential; Invests in The Immortals).
This is a big business on the cusp of really breaking out. Look for professional gaming to invade your TV screens and watercooler conversations soon!
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For more on the latest trends in the video gaming industry, check out this exclusive interview with Andrew Chanin, CEO of Pure Funds, and the Zacks Friday Finish Line team:
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