Esports Investing and Stock Picks
The esports boom shows no signs of stopping, and both junior and senior investors are looking to get in now rather than feel like they missed out on great investments early on. For junior investors, there’s more risk of “FOMO”— fear of missing out. The creation of the Overwatch League and Dota’s International tournaments have already passed, so investors everywhere want to get in on esports investing before this gets even bigger.
Esports Investing – Analyzing Forbes Stock Picks
Here are the two biggest things that matter for where esports-centric stocks would sit on a portfolio:
Esports is compared often to alternative entertainment. – Forbes’ comparison was to WWE, and it’s kind of easy to see why in recent years. WWE pivoted from being a TV program to a streaming service, effectively becoming its own “channel” in an era of streaming replacing conventional cable television. Esports can be the same way, with Generation Z kids sitting down in front of a Twitch channel the same way they used to sit down in front of cartoons.
Esports is tied to larger holding companies, but may not be for long. – Twitch, for example, is held by Amazon, YouTube Gaming is not its own offering. The buzz about esports has led to plenty of startups, though, and people are paying attention. Investors are curious about Twitch competitors from China, who have their own stocks that aren’t held by larger holding groups. Esports is not currently its own slot on an investment portfolio, but it may be sooner rather than later.
Speaking of parent companies, Forbes’ three top picks were NVIDIA Corporation (NVDA), Activision Blizzard (ATVI), and Tencent Holdings (TCEHY). These are companies involved with esports in substantial ways, but these companies certainly aren’t marketing themselves entirely as esports companies. NVIDIA is a hardware tech company, Activision Blizzard are game developers, and Tencent is an investment conglomerate.
The apparent reason for picking NVIDIA is due to the new known importance of graphics card manufacturing as a standalone industry as well as their steadfast foothold in PC gaming. They have “behind-the-scenes” power and sway, but that isn’t easy to pay attention to if you’re not inside the industry yourself or at least have insider knowledge.
The reason for picking Activision-Blizzard is even more apparent. The Overwatch League threatens the throne as the most significant esport tournament. With global influence, using cities to connect itself familiarly to traditional sports, and a slot on prime-time ESPN means that pro Overwatch is enormous and far-reaching. Blizzard oversees the Overwatch League, but it’s not all they do, and they’re not the only ones involved in its inception.
Tencent is huge. They’re so big that esports is a tiny fraction of what they do. Of course, they own pretty much every favorite Chinese-exclusive game, but they also make fortunes in smartphones, payment systems, e-commerce, social media, and music. They do everything in technology. It would be like investing in Amazon purely for its esports arm.
Marketwatch had similar separations for traditional investment, dividing it by developers, manufacturers, etc. They also added alternatives in the form of ETFs, but those aren’t relevant as dedicated esports stocks.
The problem with investing in stocks like these is that aren’t entirely dedicated to esports as a platform, only minorly. Its that you might be knowledgeable about some of their corporate or consumer-facing news but not all of it. This is similar to what Sony experienced in the PS3 era. People were focused on their PlayStation announcements, not aware of the percentage of the company focused on the PlayStation. The same held true for Microsoft and the Xbox, Xbox 360 and Xbox One.
The good thing is that these are mostly safe stocks that benefit in small percentages from events and announcements. The Overwatch League doing well is going to boost Blizzard’s capital, although not by huge amounts. They aren’t blue chip stocks (safe, trustworthy stocks from stable companies) by any means, but in the gaming world, they’re relatively safe. That means they’re relatively safe as esports stocks, too.
Alternative Organizations for Esports Investing
However, young and new investors looking into esports investing probably aren’t focused on companies like this—they want to make trades and get in on new startups that they think will become huge. They probably don’t want to invest in a game development company, but rather a dedicated esports company. There are plenty of these around, but you have to dig if your only familiarity with esports is as a consumer (or even a player).
Splyce may be a bit past its FOMO period, but it will continue to rise. Splyce is a professional esports organization that is back in the news for being part of a deal to secure new teams for the Overwatch League. Splyce, a Rochester, New York organization, which is close to the obvious esports hotbed, but they are known for spreading around the world as fast as possible. It is easy for investors to follow Splyce because they already participate in esports as a hobby by supporting the most popular esports already like Overwatch, Dota, and League of Legends. Go to their official webpage and their social media–you’ll see why they’re such a contender and an obvious choice when considering in esports investing.
PlayVS has been in the news in previous weeks as well for similar reasons. College esports is starting to take off from organizations like Tespa, and PlayVS is making sure that high school esports leagues are up next. This is potentially just as big, and they’re leaders in a modern trend. It’s risky, though, because it might just fall flat on its face “in comparison” to college esports—but they’ve already been successful recently.
Immortals LLC, a Los Angeles based company, has been operating for three years and currently owns the Los Angeles Valiant team in the Overwatch League. They’re a global esports company, but they’re popular among investors following the trend set by former eBay CEO Meg Whitman, who invested in Immortals while the going was good. They don’t currently have an IPO that you can go and buy the same way you’d buy NVIDIA stock, but investors can still get in on it if they have significant amounts to spare. These kinds of people aren’t hard to get into contact with, and it’s likely that they soon might have a publicly-traded initial public offering (or IPO).
Modern Times Group is not as well-known in America, but they are very popular in Europe. Dreamhack and ESL, two tournament pillars of the esports community since even before the glory days of MLG, was been acquired out by Modern Times in 2015, and they are continuing to expand. Their parent investment company, Kinnevik AB, owns significant investments in growth markets. This stock is indeed safe when considering esports investing, even though it might not be meteoric, and it’s easy to follow from continents away.
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