Esports should be in your investment portfolio

Reuters/Wolfgang Rattay

The gaming and esports industry has gone from niche to mainstream over the past 10 years.

The rollout of smartphones and development of emerging markets has driven a surge of video game players from 200 million in the mid-2000s to around 3 billion today.

Games are set to be a central pillar of the mid-21st-century economy and society, with the global mobile gaming market expected to grow to $209.12 billion in 2026, at a compound annual growth rate of 15.77, according to Yahoo!Finance.

This growth offers plenty of opportunities. 

• The digital world increasingly feeds into the real world
• Jobs of the future: the e-sports sector is a game changer

Wearables and the Internet of Things

Wearables like VR glasses, game controller rings, gamer smartphone peripherals, esports fitness and health trackers, esports-specific sensors and AR glasses are starting to transform games and esports.

These technologies are mostly still early stage and not yet at mass-market maturity or cost, which will happen during the 2020s. They have the effect of bringing games off the chair into the real world – and bring real-world sports into digital and simulated online environments.

Internet cafes and tournament venues

Some regions, including developing countries in Asia, Africa, South America and the Middle East, offer internet cafes. This is in part because disposable incomes are often insufficient for PC and broadband connections at home, or the telecommunications infrastructure is yet to be fully built out to homes. 

Gamers go to internet cafes to download software for games. The icafes also often set up esports competition zones, where the tables and PCs are lined up for team-based play – sometimes there are even seats for spectators.

These icafes offer a social venue to go on a date, hang out with friends, form casual teams, practice, play, get to know each other and have fun chatting while gaming. 

Dominance of mobile esports

Mobile games have lower barriers to entry, more balanced demographics and higher install rates in comparison to PC and console games.

This means higher dollar-to-player value in producing tournaments. Another part of this equation is that mobile gaming reaches a wider demographic than PC gaming across age and gender. 

Women, for example, have historically been underrepresented in esports, both as players and as fans. Mobile esports reach a part of the gaming population that has not been well served by console and PC esports.

We are already seeing how powerful the mobile esports audience can be across Asia. There are a lot more gamers on mobile, and this translates to higher revenue for mobile titles.

Because esports remains a publisher or operator-driven industry, the value these players generate means higher investments back into esports.

Becoming an investor

More and more companies are investing in the esports and gaming sector. 

Luke Alvarez, founder of the games and esports venture capital firm Hiro Capital, said it looks for three key criteria when investing in a game studio or game technology company – “the quality and resilience of the team, the defensibility of the technology or content moat, and the scale size of the market it’s targeting.

He added: “Games and esports will be central to entertainment, economic, and social life. We seek out those innovators who are building the future.”

Lucy Chow is secretary general of the World Business Angels Investment Forum and general partner of the WBAF Angel Investment Fund. This column was extracted from her recently published book Changing the Game