With all the talk of CES and the Motley Fool reporting and recommending stocks like $ATVI for their potential growth in an up and coming eSports sector (among other reasons), I thought now would be a perfect time to give my insight on this rapidly growing market.
First with some information on myself. I am an 18 year old senior in High School. I have been playing video games for a long time, probably since I was about 10 years old or so. I have played World of Warcraft, Call of Duty, League of Legends, Minecraft, and Counter Strike: Global Offensive extensively, as well as being an avid fan of watching any type of professional video games, even those which I have not played.
What are eSports?
ESports, short for electronic sports, refer to a competitive sport played on an electronic platform or video game.
Not all popular video games are conducive to an eSports environment. The two games that account for the majority of eSports at the moment are Counter Strike (CSGO) and League of Legends (LoL). Games like Minecraft and World of Warcraft, while incredibly popular, don’t conduce to eSports because they are not competition based games. People don’t naturally realize how much teamwork, communication, and individual talent is required to play competitive video games. Let me tell you. It takes a lot of all. I think communication, strategy, and teamwork is more important in CSGO than in basketball (I play Varsity Basketball by the way). Some teams practice more than 16 hours a day (Yes, 16 hours!) when preparing for the playoffs. Hard work and dedication is necessary for success just as it in in athletic sports.
ESports teams function in many ways similar to a regular sports team. Players are signed onto contracts with their respective teams, who are sponsored by a gaming organization. Popular gaming organizations sponsor teams in multiple different games. The most popular organizations typically have dominant teams in multiple different games. If you feel like looking at what a gaming organization looks like, check out Team SoloMid (TSM, http://www.tsm.gg/) and Fnatic (http://www.fnatic.com/). There are hundreds, maybe thousands, of teams and organizations, however only a few (~10-20) are relevant for the top level of competition for any 1 video game.
The difference between eSports and individual content creators
An important distinction to make when investing in eSports is its difference from individual “gamers” or content creators. Individual content creators record their gameplay fortheir viewers and are independent of any type of eSports market. They typically post daily and rack up hundreds of thousands, or millions, of views daily. At this moment the independent content creators receive much more views/money from adds than eSports due to 1. They can play any game they like, they are not limited to games conducive to competition and 2. They upload short videos daily that fit into the schedule of their viewers. Ask any Youtuber or Twitch streamer what is the most important in becoming a popular content creator, and they will respond sticking to a schedule is as most important, if not more important, than the actual quality of the video itself.
Are eSports the next Sports?
In my opinion, eSports will experience significant growth to the point where they will be nearly as popular as athletic sports. As mentioned by TMF already, eSports had 126 million unique viewers over the course of 2015. I’m skeptical on how they measure this statistic separate from independent content creators, but clearly the field is growing more popular.
Kids are beginning to watch and play video games from a young age. What makes sports so popular? Well, competition is a natural instinct, and kids begin playing sports and most continue to play them from the time they are 5 to 25. Do I think video games will achieve this type of penetration into the average life? No, but I do think it can come reasonably close to the point where everybody in the country knows what eSports are.
Fans can interact with the players they look up to. Many professional gamers also have individual channels where they play in front of a crowd (usually 10000-50000 viewers at a time) when they are not practicing with their team. Imagine if you could ask Tom Brady questions as hey was throwing balls in practice, or if LeBron explained to viewers the drills he was practicing and what skills he was working on. How cool would that be! Well, many people love interacting with professional gamers, asking questions as well as asking for tips to improve their own gameplay.
As a complete side note, I just want to say I no longer play LoL or CS:GO, but anytime I see professional eSports on Twitch.tv, I will watch it and still enjoy watching tremendously.
Ok, I believe that eSports will have massive returns in the future, who do I invest in?
This is the really hard question for me. I have no doubt that eSports will grow massively and that there must be some way I can take advantage of my knowledge; however, no company stands out to me.
TMF has been hyping up ATVI for a long time, and for many reasons. One of their most recent reasons was the acquisition of Modern League Gaming (MLG) and the hiring of former ESPN CEO, Steve Bornstein, to head up an eSports division that appears to be in a good position to take advantage of a growing market.
Here are my concerns about the future of MLG. The servers that post video game and eSports videos and livestreams are completely monopolized by 2 sectors of Google, Twitch.tv and Youtube. Youtube is where many individual creators post content, where as Twitch has the monopoly on real time gaming livestreams. All popular eSports are viewed on this website as well as many individual streamers. I would invest in Google if all it was made up of was Twitch and Youtube; unfortunately, Google has so many projects and investments and different markets that eSports will still probably remain a small share of their whole value. Last year MLG tried to create a competitor to Twitch (MLG.tv) to stream competitive Call of Duty. It failed miserably. Call of Duty this year went back to streaming on twitch, and hopes to recover some of their lost viewership. I want to see if MLG can recover from this mishap.
Another concern is that most competitive eSports are managed by the companies that created the game. For example, Riot Games created League of Legends, and they manage the LoL competitive scene. Valve manages the CS:GO eSports, the game they created. These companies are private and cannot be invested in. The question for me is, what company can create an eSport division that can penetrate the competitive scenes of all eSport-conducive games to control as many tournaments and leagues as possible.
In conclusion, I believe that eSports as a market will grow tremendously in the next 5-10 years, but at the moment no company appears poised to take control of this growing sector. If any company excites me at all, it is $ATVI, and I hope that with the addition of the former CEO of ESPN, MLG can recover from their mishap last year and find a way to take more market share of eSports. If I notice any positive effects of this change, I will probably start a position in $ATVI.
This is my first real post, so I will gladly take any constructive criticism and feedback that I can use to improve my posts. Let me know if you have any more questions on eSports or video games in general. Also, tell me if I used any video game lingo by accident and I will explain what that means further.