Whether
or not investors actually believe the field is a sport, "eSports" have
gained enough global attention for the debate to at least be warranted. With
the industry gaining national media coverage and is officially defined in
Dictionary.com; it only makes sense that a notable investment firm would break
down this sector of the video game market.
Enter
the Macquarie equity research team, who analyzed the industry inch-by-inch.
Macquarie analyzes third-party industry research, highlights derivative
vertical growth opportunities (aka gambling & fantasy sports), as well as
key calls in analysts' coverage universe.
While
the report is expansive, there are a few important highlights to be aware of.
“Show
me the money,” a classic line, but also a fair statement asked by those
skeptical of eSports as a growing sport.
According
to SuperData research, by year end the market will be a $612 million dollar
sport with a billion dollar valuation by 2018. While that billion dollar mark
in 2018 only comprises 1.3 percent of the video game industry, it tallies a 29
percent compound annual growth rate, which is the third best outlook compared
to gaming video and virtual reality.
SuperData
research also shows that total viewership should increase from 2014’s 117
million to 322 million viewers by 2017. Video consumption is also expected to
rise with viewership from 3 billion hours in 2014 to 6.6 billion hours in 2018
according to IHS.
Macquarie
analysts also examine one of fans' favorite “verticals” of American Football,
fantasy sports and gambling. Though many who play fantasy football can relate
to how fantasy sports drives viewership in games, they may not watch regularly.
The
same would be applicable to the relationship between fantasy sports and
eSports, as viewership and engagement in Twitch.TV and Youtube grows, Macquarie
analysts note. Payout size and economic impact may not be as large as
conventional sports, they add, but the vertical has gotten support from notable
investors. Vulcun, the biggest fantasy eSports platform, has received $13
million from notable firms in investment community such as Sequoia and Matrix
Partners.
Related
Link: A Look At Activision's New eSports Revenue Play
Even
eSports betting like Unikrn has gained $3 million in capital investment.
Pinnacle
Sport, a global bookmaker for eSports, says eSports beats golf and rugby in
terms of betting volume, placing it as its seventh-biggest market. Analysts at
Macquarie believe that with eSports gambling gaining attention, ad revenue and
sponsorships will follow.
Winners
Lastly,
Macquarie highlights companies that are best set to capitalize on the eSports
competitive scene. In terms of media, Amazon.com, Inc.
AMZN
's
Twitch.TV and Google Inc
GOOG
's
YouTube are poised to capitalize on ad dollar share going forward.
Twitch
and Youtube’s focus to stream live eSports events could capitalize on the
extremely valuable millennial and Gen Y audiences who don’t use traditional TV
media.
In
terms of publishers, Activision Blizzard, Inc.
ATVI
is by far best set, and most established to
grow with eSports moving forward. Long standing games such as
"StarCraft" and "StarCraft II" along with the "Call of
Duty" franchise have made Activision a giant in the space. Young game
titles like "Hearthstone" have surprised many by generating $200
million to $300 million in annual revenue, while Activision’s "Heroes of
the Storm" looks to take on Riot Games MOBA titan "League of
Legends."
The
key to success of both new and old eSports titles is clear: Build strong gaming
communities that are continually active and engaged, according to Macquarie
analysts Ben Schachter and John Marrick. While Electronic Arts Inc.
EA
has many traditional sports games, they
haven’t found its footing in the eSports scene quite yet.
Nintendo
Co., Ltd (ADR)
NTDOY
was actually against competitive games, but
has since changed its tune and reinstated its Nintendo World Championships at
the latest E3. The company's mainstay eSports game is "Super Smash
Brothers" franchise, but Macquarie analyst David Gibson says to watch out
for casual shooting game "Splatoon" as next big hit.
Publishers,
as well as media, may need to increase their activity in the space. A rising
eSports tide may not lift all companies to equal heights without management
focus in this aspect of the gaming industry, the analysts explain.
Investing
Take
In
the report, Macquarie affirmed its Outperform rating and $26 price target for
Activision as analysts are “long-term bulls on both the industry and
ATVI."
Macquarie
has an Outperform rating and $68 price target for Electronic Arts.
Read
more:
http://www.benzinga.com/analyst-ratings/analyst-color/15/06/5620492/esports-are-now-being-analyzed-on-wall-street#ixzz3e4u9SFOp
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