The rapid ascent of eSports, competitive video gaming to the uninitiated, has seemed implausible. But recent developments in the industry and the current news flow around the nascent sector, suggest that our early convictions about its potential for professionalization and value creation are correct.
In this month’s insight Giles Tulloch examines the incipient eSports industry, Activision Blizzard – one of its leading participants, and the opportunities it presents for our portfolios.
Sports present a paradox for the investor. It is an extremely popular global industry with enormous revenues and massive growth potential. Football, the biggest sport, had $4.8 billion in player transfer payments in 2016 and China has just gotten started. It would be extremely attractive to be able to invest in football or other individual sports. But it is often difficult, if not impossible, because of the limited group that is able to benefit. In football, the bulk of the value goes to the few global players who play for the highest bidders. Leagues are cooperatives held by owners. The vast amounts clubs receive for TV rights, go straight out to their top players. Most struggle to be consistently profitable. The value of players’ rights change with their fortunes and third-party ownership is typically banned.