ESPORTS 101

What are Esports?

Esports, short for “electronic sports”, is the growing business of playing video games competitively in front of a viewing audience.

For most people, the concept of esports may be foreign. It seems strange that people would rather watch someone playing a game than play themselves. However, for the current generation of children and young adults, spectating video games has become a notably popular activity, one that could conquer the landscape of traditional live media, sports, and entertainment.

Twitch Streaming

Credit: GeekWire. March 14, 2018.

Twitch streaming record of 635k viewers set by Ninja and Drake
Fortnite

Credit: Epic Games.

Popular gaming title, “Fortnite”
Overwatch League

Credit: Blizzard Entertainment.

Overwatch League Finals. Barclays Center, July 2018
Riot Games

Credit: Riot Games.

Gameplay from Riot Games’ League of Legends
 

What is game streaming?

Game livestreaming, whereby “streamers” broadcast their gameplay live via web platforms, has taken the original form of entertainment -- the games themselves -- and allowed for a “second derivative” mode of consumption. The digital immersiveness and interactivity of games has made this second derivative an exciting and popular form of new entertainment. Per SuperData, more people watch gaming than HBO, Netflix, ESPN, and Hulu combined.

Esports
Source: Superdata

Why Invest in Esports?

Esports is a large and rapidly growing cross-industry segment, with total revenues in excess of $50 billion. The esports market continues to earn an increasing share of the $2 trillion media and entertainment industry, and is well positioned for the coming decades.

Esports
Source: Newzoo, BITKRAFT Esports Ventures

Growing Viewership

Esports viewership continues to increase, and premier titles like Riot Games’ League of Legends (“LoL”), are challenging the incumbents of traditional sports.

FINALS AUDIENCE VIEWERSHIP (millions)

Source: Goldman Sachs Global Investment Research, Nielsen, Rentrak

Finals Audience Chart
ESPORTS AUDIENCE GROWTH FORECAST (millions)

Source: Goldman Sachs Global Investment Research, Newzoo

Esports Audience Chart

Global Gaming Industry

Gaming is the fastest-growing form of entertainment globally, with revenues increasing at 9%+ per year. By 2022 the global video game market is expected to surpass $190 billion in revenues. Esports stands to directly benefit from growth in the broader gaming industry.

Market report chart

Source: ©Newzoo | 2019 Global Games Market Report

Roundhill believes that esports and video games are the future of live media, sports and entertainment.

Esports & Gaming by The Numbers

A global phenomenon

2.5 billion

The number of gamers globally, including 2 in 3 Americans.

A virtual world

$84.67

The amount the average Fortnite player spends inside the game.

New Economy

$17 million

2019 earnings for popular game streamer, Ninja.

Emerging IP

250 million

The number of registered users for popular mobile battle royale, Free Fire, which has surpassed $1 billion in lifetime revenues.

Growing fanbases

100 million+

Unique viewers for the 2019 League of Legends World Championships.

Modern celebrity

$119 million

Awarded in esports tournament winnings and prize pools for 2019.

Source: Newzoo, Forbes, The Esports Observer, Lendedu, Sea IR, Riot Games

Esports Ecoystem

Roundhill has identified four primary types of public companies that provide exposure to the esports ecosystem — games, media, hardware, and broad-based.

Games - Publishers/Developers

Games companies are primarily involved in the business of developing and distributing gaming software. In several cases, these companies own and operate competitive esports leagues.

  • Game publishers benefit from ownership in the underlying intellectual property, and unlike traditional sports, these companies control the ecosystem surrounding that IP.
  • Historically, game publisher revenues have been hit-driven and dependent on one-time title sales. As the industry moves to a “games-as-a-service” model, publishers are increasingly able to monetize existing IP over longer time horizons.
  • As it relates to esports and game streaming, not all publishers are created equal. Certain game publishers are positioned for esports growth, with a lineup of competitive game titles, while others focus on casual gameplay.
Media - Streaming Platforms, Live Events, Esports Teams

Esports media companies operate livestreaming platforms, entertainment properties, and / or esports events. These companies may also own or operate esports teams.

  • Esports media companies offer a derivative form of entertainment to the underlying games, allowing for increased engagement and monetization.
  • Unlike publishers, media companies are typically game agnostic, and their business models can adapt to the industry as new titles and genres gain in popularity.
  • The business models employed by esports media companies can vary significantly.
Hardware

Gaming hardware companies produce peripherals (e.g. headsets, keyboards), gaming devices and processing units. These companies may act as endemic sponsors for popular streamers and esports organizations. As gaming becomes more competitive and increasingly popular, the hardware sector may benefit from increased demand.

  • As with media companies, gaming hardware manufacturers can provide game-agnostic exposure to the esports industry.
  • Gaming hardware companies generally produce products that appeal to a wide array of gamers, including casual players and esports professionals.
  • Hardware can be seen as the “picks and shovels” of the gaming industry.
Broad-Based

Broad-based companies are stakeholders in various segments in the esports value chain.

Frequently Asked Questions

We have answered your questions related to esports, gaming, and livestreaming. Click here to learn more.

Esports Glossary

Roundhill has compiled a comprehensive esports glossary, including terms that every gamer and investor should know. Click here to learn more.