Digitalization of leisure time: eSports are captivating the world
Digitalization is taking over the gaming world. eSports attract an audience of millions of people and result in sold-out stadiums. The prize money is in the seven-figure range. How eSports are becoming more important in Switzerland and how investors are investing in eSports equities.
From traditional video games to eSports
Developed in 1958, «Tennis for Two» is regarded as one of the first ever video games. However, it was initially played in a laboratory with analog computers and oscilloscopes. Thanks to slot machines, video games first became accessible to the public in the 1970s. In the 1980s, after home-computers were made available for private households, videogames followed quickly. Over the next 30 years the segment saw one development after another. Smartphones and tablets opened up totally new opportunities. Access to video games became easier and, more importantly, cheaper.
Describing video games as a type of sport might sound strange to a lot of people. Yet interest is growing strongly, despite what the critics may say. eSports are played on a computer or console. A closer inspection actually reveals a host of similarities with traditional sporting disciplines. As with other types of sports, events are staged in front of a live audience or watched online via streaming. Thanks to real prize money and sponsors, it’s even possible for the most successful players to make a living from eSports.
eSports changes consumer behavior
Video games are not only becoming more varied but also increasingly interactive. In some video games for the personal computer or console, players can assume different roles and even actively determine how the game progresses. Interaction between gaming manufacturers and consumers is steadily increasing at the same time. The consequences of these developments result in even greater interest in video gaming and eSports within society at large. So, it’s hardly surprising that in 2016 video games were already the second most popular participation sport after soccer.
Economic significance of eSports and the gaming industry
Contrary to what many people assume, it isn’t only young players that are interested in video games. In fact, «silver gamers», or people aged over 50, constitute the biggest group of players. However, these people are usually looking to train their mind with Sudoku or card games rather than get a kick out of racing or adventure games. Nor is it correct to assume that only male players are interested in video games: The proportion of female gamers has also increased in recent years.
In emerging-market economies such as China in particular, eSports have developed from a niche into a lucrative business over the past 10 to 15 years. Fall 2017 saw the championship final of the strategy game «League of Legends». The event took place live in front of 80,000 spectators at a packed Olympic Stadium in Beijing. No fewer than 40 million viewers watched the final via live stream. Total revenues in the worldwide eSports sector amounted to around 557 million euros in 2017. Estimates suggest revenues will rise to around 1,4 billion euros by 2022 – that is, more than a doubling over the next four years.
Interest in eSports is growing in Switzerland
But what’s the situation in Switzerland? Zurich Game Show, Switzerland’s biggest gaming trade fair, was held at the exhibition center in Oerlikon in mid-September 2018. With 27,000 visitors, the total was up 50 percent from the previous year. The beginning of this year saw the founding of the Swiss eSports League, an organization that aims to offer a platform for successful gamers and enthusiastic fans in Switzerland too. Interest has also been aroused among Swiss football clubs and in the world of motor sport. FC Basel, for example, has a dedicated eSports team. Meanwhile, the Sauber motor racing team has set up an eSports training.
Purchase attractive eSports equities
Total revenues for the worldwide video games market amounted to 122 billion US dollars in 2017 – a figure forecast to rise by 30 percent by 2021. The innovative companies that publish and distribute the video games are likely to be the main beneficiaries. The world’s largest player in terms of gaming revenues is China’s Tencent, with a market capitalization of 374 billion US dollars. By way of comparison, Nestle’s market capitalization currently stands at around 255 billion Swiss Francs. Two other very attractive, well-known players from the US are Activision Blizzard and Electronic Arts. Along with other manufacturers, they are likely to benefit from the growing popularity of video games and gamification in everyday life and therefore represent attractive investment opportunities.