E-Sports & Gaming - the next professional sport?

E-Sports & Gaming - the next professional sport?

20 November 2020Reading time: 3 minutes

With the newly released game consoles from Microsoft and Sony, video games were a hot topic in November. But the world around gaming is changing and consoles are no longer the only way to play video games - quite the contrary. With the computer, via mobile and in the cloud: everything is possible. The former niche market for gaming and e-sports has evolved into a market worth billions. This could result in interesting investment opportunities for investors.

E-Sports - much more than just a hobby

Equipped with controllers, screens and nimble hands, professionals in electronic sports, or e-sports for short, compete against each other in organized competitions. Thousands of e-sportsmen and women compete in tournaments for the prize money that can measure up to those for which, for example, golfers and tennis players compete. After all, the prize money is often in the six to seven-figure range. The former niche market of electronic sports has now become a market with sales in the millions. And the potential is probably not yet exhausted. According to Statista, sales in the e-sports market should continue to grow considerably.

Also very popular with spectators

But e-sports are not only enjoying growing popularity among gamers. Like in "real" sports, tournaments often take place in front of millions of spectators. Some events are sold out within minutes - even though they now fill entire stadiums. However, that is still not all. Also online, the events attract millions of viewers. The overwhelming majority of fans, around 80%, follow these competitions on Internet streaming platforms (e.g. Twitch), so that viewers can follow the tournaments from anywhere in the world. And the popularity continues to grow year after year.

In addition to the players and spectators, sponsors also discovered the world of e-sports. Millennials are a sought-after target group for advertisers. Especially young men between 18 and 30 years are difficult to reach with advertising messages. They are no longer familiar with traditional television and TV advertising. And in the digital world, they shield themselves with ad blockers. With e-sports, a door opens for companies to address this target group. Daimler, DHL and Adidas, for example, have already signed sponsoring partnerships in the field of e-sports.

Gaming Industry: A mass phenomenon

The big money is not yet made with people who watch the professionals, but with those who play on the go or at home. Fortnite, for example, is a global phenomenon: 250 million people are online regularly to engage in pixel battles with opponents. The game is accessible to every gamer on consoles, PCs and mobile phones for free. In this case, the providers achieve their profits mainly through so-called "in-game" purchases. According to the market research, company Newzoo, global sales of video games are expected to reach around 174 billion US-Dollars in 2020, which represents an increase of almost 20 percent compared to the previous year.

Enormous growth potential

The tremendous growth that the e-sports industry has experienced in recent years has been driven primarily by favorable demographic trends, improved product quality and better internet connectivity. In the current year, the corona virus and the imposed lockdown have also continued to drive the industry. Sponsorship, marketing and the organization of events should also serve as a further revenue driver in the e-sports sector.

That is still not all. In addition to the familiar gaming consoles, it is also possible to play video games via mobile or tablet - or in the cloud. Similar to Netflix for movies or Spotify for music, there will also be platforms for games in the future. Via a subscription model, gamers will have access to all kinds of games - everything in the cloud. Tech-giants like Google and Microsoft are working very hard to make this vision a reality. The biggest challenge seems to be to provide the platforms in the desired quality, without interruptions and E-sports and gaming open up opportunities for investorswithout delays.

E-sports and gaming open up opportunities for investors

The enormous growth potential of the e-sports and gaming sector could also open up interesting opportunities for investors. This is why Vontobel has launched tracker certificates on the Vontobel E-Sports and Gaming Index. This index is actively managed by Vontobel specialists and contains shares of companies active in the gaming and e-sports sector. This includes cloud gaming, chip manufacturers, game developers as well as equipment, game technology and video streaming. Vontobel investment specialists analyze a wide range of gaming stocks and include the potentially most promising ones in the index. The index is calculated as a performance index, i.e. dividends are net reinvested.

Source: Vontobel Wealth Management

05/10/2023 04:08:40


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