StarCraft changed the world. This computer game was arguably the first major esport, or electronic sport, with immense popularity and a professional circuit in many parts of the world, particularly the U.S. and East Asia. Today many games have a professional following, and it’s possible to invest in them.
What Are Esports?
Esports are professional video game tournaments. While StarCraft, the game that started it all, still commands a respectable following, team-based combat-style games dominate much of today’s market. Titles like Fortnite, League of Legends, Overwatch and Defense of the Ancients are some of the biggest games around. They are games of speed and skill that demand complete mastery of the rules along with extensive practice and the coordination of a well-functioning team.
As the defenders of esports will tell you, these games are no less a competition than football or baseball, even if the competitors don’t tend to break a sweat.
Esports have become major spectator and professional events. Most people stream their favorite matches, watching them at home, but they often fill arenas and conference centers as people watch teams on monitors sized for movie theater audiences. They also command very real money. In 2019 the winner of the Fortnite World Cup collected $3 million in prize money, while the world champion of Blizzard’s popular Hearthstone digital card game wins $1 million each year.
A generation ago teenagers marveled over two vertical jots on boxy television screens. Today video game players compete for some of the largest stakes, in front of some of the largest audiences, in the world.
Investing in Esports
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There are two primary ways to invest in esports.
The most direct way to trade on this market is through mutual funds and exchange-traded funds. Several companies have set up funds tied into the esports world. Some build their funds around the specific companies that manufacture these games. These funds will invest heavily, for example, in software companies such as Activision Blizzard or the companies which manufacture the computer hardware to power high-end gaming machines. They anticipate that esport competitions will generate sales as spectators rush to try out their favorite games, in the same way that watching a basketball game might inspire someone to join a pickup match or a rec league.
Other funds invest in the area around esports. These funds, such as the NERD ETF, invest in the products and companies that they expect to do well around the area of competitive gaming. They may invest in companies that make high-end headphones, for example, or the energy drinks often favored by competitive gamers.
Investing in one of these funds is like investing in the product placement around a sporting match, or in the vendors who run the concession stands. It is an investment in sales surrounding the competition as much as the competition itself.
The other main way to invest in esports is by purchasing shares of related companies directly. For example, this would include software makers and hardware manufacturers, which could certainly do well by esports. Nintendo, Sony and Microsoft, to name three, all own the hardware behind their consoles and so will tend to profit off any rise in related sales. However, esports tend to focus more on computer games, that is, games played on a computer rather than on a dedicated video gaming console.
The computer hardware field is extremely diverse, and as an investor it may be difficult to identify one specific company that will benefit from game-related purchases. The one exception to this might be NVIDIA (NVDA), which arguably dominates the market for graphics-related processors, making them highly demanded for gaming machines.
Software companies, on the other hand, own their titles. Possibilities for investment include Activision Blizzard, Tencent Holdings or Electronic Arts, which make some of the most popular titles. You could also invest in companies with broad portfolios in computer gaming such as Paradox Interactive.
The Bottom Line
Esports have become a global experience. Competitive gamers have millions of fans and collect prizes equally as large. While entertainment stocks are usually highly speculative, as an investor this may be an industry well worth considering.
Tips for Investing
- Investing in esports is risky, but that doesn’t mean you shouldn’t explore the activity. Nor does it mean you should ignore the warning signs. A financial advisor can help you avoid pitfalls and spot opportunities. Finding a financial advisor doesn’t have to be hard. SmartAsset’s matching tool can help you find a financial professional in your area, within minutes, to help you weigh these questions. If you’re ready, get started now.
- Let’s be clear: speculation can be very good for a portfolio. The question is how to speculate and when – or if – you should do so. With SmartAsset’s asset allocation guide, you can learn how to start thinking about the role that riskier investments should play in your portfolio … both now and in the future.
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