Trevor Francis, Jim “Catfish” Hunter and bowler Don Carter are all names that can be associated with being the first to break the magical seven-figures in sports — for a UK football transfer fee (1979), an MLB single-season salary (1975) and the first $1 million sporting endorsement deal (1964) respectively. Today, you might consider a million dollars a relatively trivial sum when compared to Gareth Bale’s £86 million move to Real Madrid, LeBron James’ $24 million annual salary or Michael Jordan’s $60 million a year sponsorship deal with Nike. But those first deals were the forerunners of the massive figures (both financially and socially) we have become so accustomed to, and which helped set new standards for valuing individuals in sport.

A New High Score

Unlike the sporting events we have grown up watching, eSports take the form of organized multiplayer video game competitions which pit professional gamers against each other for cash prizes. In early November, it was reported that a professional eSports group had sold its League of Legends (LoL) European team for close to, if not above, that special $1 million mark. Prize money and earnings have been eclipsing this for a while now with tournaments like “The International” offering a top-prize of a staggering $6.6 million. Will this big-money transfer of an eSports team possibly signal the next level for competitive gaming as a recognized “sport”?

Although we might not see the Olympics choosing eSports as the next event to add any time soon, it certainly has developed a consumer following. Who might be positioned best to play host to this phenomenon, and who might benefit from the growth, aside from the players themselves?

Connecting to Game

The first name one might consider is that behind many of the games played competitively, Activision Blizzard ($ATVI). While Valve Corporation developed Dota 2, the highest grossing eSports game in terms of prize money, Activision is behind 5 of the top 10 and appear to be setting their sights on expanding. In a press release on September 24, Activision announced “a New Era for eSports” relating to their Call of Duty World League, adding “the Arrival of Call of Duty: Black Ops III Will Mark the Deepest eSports In-Game Integration in Franchise History.”[1] On October 22, Activision announced a new division to specifically focus on eSports,[2] and on November 2 announced an agreement to buy King Digital Entertainment ($KING), maker of the famed Candy Crush Saga, for $5.9 billion.[3] The strategic acquisition should help them push their existing eSports games into mobile and reach a new demographic. With these moves and the upcoming release of team shooter Overwatch, Activision is likely to stay among the leaders.

Selecting a New Host

Using AlphaSense to conduct our research, we found that Gfinity ($GFIN.GB) mentions “eSports” in their reports more than any other company. Not surprisingly, as they claim to be one of the leading eSports providers in the world and was created “to help push eSports to a professional level.”[4] In the last year, Gfinity was behind “the largest eSports event ever staged in the UK [where] almost 4,000 spectators attended,”[5] and collaborated with Activision to stage the European Call of Duty Championships at the Royal Opera House.

In addition, Gfinity opened the first dedicated eSports arena in the UK — the Gfinity Arena in London. With Machinima (investors include $GOOG and $TWX), Twitch (acquired by $AMZN) and YouTube ($GOOG), there may be stiff competition for online viewing figures, but as the popularity of eSports grows, demand for attending live events is likely to rise.

To put that demand in perspective, it has been estimated that there were 27 million unique viewers tuned in to “The International,” the Dota 2 Championship, in 2015 — more than The Masters or NBA Finals.[6]

1450-eSports-charts

Re-Connect Controller

In the same way that fans who see Cristiano Ronaldo or Kobe Bryant in action want Nike ($NKE) boots or shoes, fans of eSports may want to get their hands on the newest gaming equipment. This could spell good news for peripheral manufacturers or PC specialists. Companies like Logitech ($LOGI), Turtle Beach ($HEAR) or Mad Catz ($MCZ) may benefit from increased headset demand. Nvidia ($NVDA), who called eSports a “new and exciting growth driver,”[7] Intel ($INTC) or AMD ($AMD), makers of processors for newer gaming machines that require specialized graphics or system requirements, may also benefit.

This Level Sponsored by

On October 8, IGN and Coca-Cola ($KO) announced a partnership to provide coverage of the “rapidly growing world of eSports.”[8] Of course, Coca-Cola sponsors a great range of events and sports, but this is arguably a new avenue for them and certainly for eSports as they were described as “the largest non-endemic brand in eSports.” Not only might this benefit the Coca-Cola brand in terms of reach, but it also may signal a broader change in legitimacy for eSports as an avenue for marketing — fueling more investment down the line and further growing the opportunity for games-makers, distributors and equipment manufacturers.

Game Not Over

Naturally, not everyone will consider eSports a legitimate entertainment nor understand why there is such demand for and money involved in just watching others play computer games. Perhaps there were similar feelings when Trevor Francis’ transfer went through, or when Don Carter received his endorsement deal. Regardless, the trends in viewing figures on services like Machinima, Twitch and YouTube as well as increasing attendance at major tournaments suggest that eSports cannot be ignored, and that there may be significant upside to being on the winning team.

Sources
1. Activision’s Call of Duty® World League Marks New Era for eSports, Press Release, September 24, 2015
2. Former CEO of ESPN Steve Bornstein and MLG Co-Founder Mike Sepso to Lead Activision Blizzard’s New Division Devoted to Esports, Press Release, October, 22, 2015
3. Activision Blizzard Announces Agreement to Acquire King Digital Entertainment and Better-Than-Expected Third Quarter 2015 Financial Results, Press Release, November 2, 2015
4. World’s Top Call of Duty Teams Converge Today in Los Angeles to Kick-off Third Annual Call of Duty Championship, Presented by Xbox, Press Release, March 27, 2015
5. Gfinity PLC – Final Results for the Year ended 30 June 2015, Press Release, November 2, 2015
6. NVIDIA Corporation (NVDA) Upgrade to Buy: Gaming, Auto, and Cloud Play w/ a Virtual Reality Kicker, Broker Research, September 17, 2015
7. NVIDIA Platforms Delivering Growth, Company Presentation, September 21, 2015
8. IGN and Coca-Cola Partner To Create New Series, “ESPORTS WEEKLY with Coca-Cola,” Press Release, October 8, 2015





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