S1: Hello and welcome. Esports or competitive video gaming is on
S1: track to be a billion dollar industry. It is also
S1: a sector that presents plenty of investment opportunities for corporate
S1: and retail investors. I have chubby germ seeing from the
S1: money my team, Etzioni and I'll be looking at the
S1: five things you need to know about investing in East.
S1: But joining me now is Larkin White, co-founder of tournament
S1: organizer E-sports Players. Oh yes, Powell and Kelvin Wong, market
S1: analyst at CMC Markets. Welcome to the show. Hi. Good
S1: to be here. Hi, everyone. E-sports has huge potential, especially
S1: in Asia. The region generated nearly half of all global
S1: esports revenue in 2019 at about half a billion dollars
S1: in the Asian region. Some market watchers are forecasting double
S1: digit revenue growth this year. Kelvin, could you talk us
S1: through some of the factors driving growth?
S2: Well, actually, there are a couple of factors.
S3: Number one is let me talk about the acceptance of
S3: e-sports as a professional
S2: sports e-sports in a couple of years, with about 10
S2: to 20 years, it's been around. It's only that recently.
S2: In the last five years, we began started recognized as
S2: a professional
S3: sporting legal team as being competitive
S2: sports as recognised by the Asian Games, as well as
S2: the Southeast Asian Games and the next particular. Although EA
S2: Sports got a goal pass, will be the Olympic Games.
S3: It's a big
S2: labour of feature at the fringe spots upcycled in mobile
S3: competition. These sports and due to
S2: the external environment, we're actually being reinforced by the
S3: pandemic. Most of
S2: us are being locked out of the kind
S3: of caveman situation
S2: where people got nothing else better to do, start a
S2: being and grow
S3: and start to find out more about
S2: how it was. This is possible. These are the two
S2: actually main factors as a
S3: rethink
S2: the growth of e-sports in
S3: the last one or two
S2: years, as well as the coming years ahead.
S3: I agree.
S4: For myself, it's also the consumer behaviour factor that is
S4: driving e-sports. The global pandemic lockdowns
S3: UK should actually accelerate that. The consumer behaviour, things that
S3: consumers are now very
S4: engrossed,
S3: fees, very lofty online. I estimated this digital
S4: behaviour that has been accelerated a good five to seven
S3: years because of that
S4: pandemic situation. So there are more people who are
S3: playing games as a form of
S4: entertainment.
S3: But aside from that, the lockdown
S4: situation, I think many people
S3: are also engaging in games to
S4: socially interact online with their friends and family that used
S4: to interact online.
S3: It's also driving e-sports.
S4: You can play games frequently with your friends, but after
S4: a while, you may look at
S3: how to compete on a friendly
S4: basis, on a competitive
S3: manner, within the
S4: community, against your friends. And I think all those are
S4: driving esports.
S1: Acceleration in consumer digital behaviour has also attracted the attention
S1: of corporates to e-sports, and now we're also seeing non-endemic
S1: brand pump cash into esports. Why is that?
S4: We are in a day and age
S3: where
S4: consumers want to interact with brands that understand their lifestyle,
S4: so it's no longer adequate just to pace
S3: a logo on ATS.
S4: Whether it's digital or physical, brands understand that they want
S4: to be involved in activities that consumers like. They want
S4: to be
S3: part of that digital lifestyle.
S4: So hence you see what is endemic and non-endemic brands.
S3: They really
S4: tried to understand the lifestyle, the digital lifestyle consumers and
S4: gaming is a very, very big
S3: component in that
S4: digital lifestyle.
S3: On top of this, we will have a significant
S2: government push as well towards
S3: e-sports because if you look
S2: at the situation right now, the growth of esports in
S2: the next couple of years, the people come in our region,
S2: especially the Asian region. We, I believe, close to, I think,
S2: 50 percent.
S3: The growth will be sort of seen a reason.
S2: Yet, especially
S3: in China just right now, obviously,
S2: it depends how you look at things. The number two, well,
S2: largest economy. Some of us may debate about that, but
S2: nevertheless you start to see a big push for Beijing,
S3: especially annual
S2: League of Legends, which is one of the
S3: premier competitive
S2: e-sports competitions around the world to be hosting in the
S2: next two consecutive years in China. And there's lots of
S2: incentive or subsidy scheme to for into hosting of this event.
S3: So if this can be
S2: pretty much
S3: successful, we may start to see several Asian
S2: countries in
S3: Singapore to start
S2: taking a look at this e-sports as another driver of
S2: economic growth.
S1: If you look at how e-sports has grown in Asia,
S1: the region now has the largest audience of aespa players
S1: and fans in the world, with half a billion esports
S1: fans and almost 600 million e-sports gamers keen. Why would
S1: such a huge audience pool? How can you possibly be?
S4: You can see as the sector
S3: matures, the
S4: revenue and business model are starting to diversify, and you
S4: are seeing very interesting business models that are coming up.
S4: We also have some. What conventional revenue
S3: model like sponsorship
S4: and advertisement, that's definitely a mainstay in the
S3: e-sports industry,
S4: you have now
S3: also content
S4: premium
S3: content that potentially aired across OTT pay TV network consumers
S4: are subscribing to. You have online
S3: e-sports courses that
S4: are
S3: produced by entertainment
S4: providers,
S3: merchandise, EA Sports
S4: merchandise in the form of gaming chairs. Those are all
S4: coming on stream as well
S3: in that area. There will be
S4: providers on legalized
S3: sports betting. That's a new sector. You have little item
S3: premium subscription on some of
S4: these e-sports websites that's also coming on very quickly. So
S4: I think the whole range of revenue models are all possible,
S4: and because e-sports itself is a digital native activity digital
S4: business model that
S3: has worked for many parts of the world could be
S4: continuously translated into the e-sports sector.
S1: Quinoa You built your business around fan engagement on
S3: your e-sports platform.
S1: What can traditional sports learn from e-sports?
S4: Yeah, the very important differentiation of e-sports versus many traditional
S3: sports is e-sports is
S4: actually a
S3: digital native event.
S4: So during the pandemic period, you see a lot of
S4: early adopters,
S3: event
S4: organizers in e-sports,
S3: they were suffering very badly because physical events
S4: are almost impossible. That as she drove a lot of
S4: people to move online and the tournament organiser like ourself,
S4: which is
S3: completely beat flourish, flourishes
S4: very well during the pandemic event. People realise that it's
S4: actually a much bigger platform to run e-sports online and
S4: digitally because after all, imagine you could
S3: have many events
S4: over weekends or Friday nights just putting on a smartphone
S4: device or a PC.
S3: Literally, the whoa, it's the
S4: audience you could engage with, getting them to participate in tournaments,
S4: getting them to look at live streams. So those are
S4: all very, very easily done on these
S3: bases in the e-sports.
S1: While an estimated 70 per cent of gamers are kin.
S3: Wait, what
S1: are you doing to encourage more women to play e-sports?
S4: We actually what we've brands who are interested in either
S4: gender neutral audience or even
S3: female audience to promote some of the
S4: activities we have. For example, we are coming up with
S3: a female only e-sports
S4: league call Empress Arena that is very focused on encouraging
S4: female competitive
S3: gaming. Of course, the
S4: argument
S3: is also your gender equality. Maybe the emphasis
S4: should not
S3: be just female
S4: participation, but rather a gender
S3: neutral participation.
S4: We would very much like to see
S3: that, as you mentioned earlier, female
S4: participation, we currently estimate, is about 30 percent across grassroot
S4: e-sports activities, but this is growing fast. If you compare
S4: these
S3: to two or three
S4: years ago is probably half of that number. So we
S4: are seeing a lot of interest from the female fans
S4: who are now equally competitive.
S3: That will only grow because in general,
S4: that also
S3: ties to the wider
S4: gaming trend. So there are many game
S3: publishers who produce
S4: type, those that are more gender
S3: neutral. That adds a very different dynamic.
S4: I think good participation from all genders would actually give
S4: a very dynamic
S3: platform to competitive
S4: gaming.
S1: All right. Just to recap, e-sports is growing rapidly and
S1: it is increasingly being accepted as a professional sport. More
S1: brands are investing in e-sports, for example, through advertising and sponsorship.
S1: While traditional revenue models like advertising and sponsorship are here
S1: to stay. New revenue streams emerging, such as premium content
S1: for pay-TV networks and online courses I've been speaking with
S1: now can wife call fund up tournament organiser, E-sports Players
S1: League or SPL? And Kelvin Wong, market analyst at CMC Markets.
S1: And now let's talk about investment opportunities for retail investors. Kelvin,
S1: over to you.
S2: Yeah. So with retail investors can get exposure to the
S2: e-sports sector, whereas on par by a single name
S3: stocks, the whole e-sports ecosystem
S2: itself is pretty huge.
S3: So let's start with the
S2: upstream one first, which is from the game publisher companies
S2: that design and create the
S3: games like
S2: Active Visionaries at 8pm by the tech talk. So these
S2: are the popular one. On top of that, we have
S2: some hybrid company which is closer to Asia
S3: like Tencent, which also published
S2: games. But on other hand, you have other parts of
S2: the business like is on par with the global VP.
S2: Closer to home Singapore, we have to
S3: see which is the really coming off Shopee.
S2: So even though we are men, we are kind of
S2: more known to Shopee rather than being a game publisher
S2: because Asia
S3: itself at a moment. If I'm not wrong,
S2: they only publish one successful game. So on the other
S2: side of the spectrum, you have the hardware company to
S2: support the e-sports ecosystem. You are talking about the keyboard
S2: that used to.
S3: Play in combating sports esports.
S2: The mouse, this will come under Razer, you also have
S2: the semiconductor chip that actually powered the Games to
S3: have a better, higher
S2: consumer experience or competitive experience that you need to
S3: have a higher running a
S2: semiconductor chip, which is overkill. So these are the Veeva's
S3: spectrum investors,
S2: which you look at
S1: Calvin. Besides single nameplates, what are some of the e-sports
S1: exchange traded funds or ETFs?
S3: Investors can
S1: look at
S2: for investors once have a broader
S3: base approach to a more diversified basket,
S2: we'll explain. At the moment, actually free kind of a liquid,
S2: a popular ETFs exchange traded fund. The first one of these,
S2: so these factors beyond
S3: giving e-sport
S2: the ticker, then you have normal X video games,
S3: esports just right now.
S2: The Left is pretty much cheesy in because, of course,
S2: you
S3: know, and that's why we brought your
S2: Becroft Esports digital entertainment
S3: and they
S2: call it in any of the other actually offers a
S2: diversified approach in investing the esports ecosystem. Let me get
S2: sidetracked because e-sports itself are in terms of the industry
S2: that is being spent on, will be primarily on the
S2: consumer
S3: discretionary,
S2: the communications business and information technology. So these are the
S2: technology that most international investors use is
S3: actually being tracked by the S&P
S2: 11 key industrial sectors. So for investors, always have a
S2: better spread across these three sectors consumer
S3: discretionary communication service
S2: and input
S3: tech. The Hue, or the global
S2: ex-Beatle games will happen more evenly spread combat
S3: to sport,
S2: which is not that close video gaming, which tends to
S2: be more heavily skewed towards communication services because I think
S2: calls about 60 percent of weightage into that.
S1: Before we wrap up the podcast Kelvin, what are some
S1: of the risks investors need to be aware of?
S2: If you guys still want to invest in a particular
S2: is possibly the stocks you've got to see.
S3: What other revenues do they have
S2: with such
S3: a robust subject to
S2: any risk of regulatory clampdown as well as on board?
S2: Tencent is not really a
S3: pure play on e-sports
S2: because Tencent itself has other revenue
S3: stream.
S2: We pay
S3: WeChat. You've got a fintech business. So Southern
S2: China Big Tech stocks that has this
S3: company emphasis
S2: on e-commerce fintech. You see the share price correct quite
S2: a fair bit. Cross about 10 to 20 percent since
S2: the peak of February due to the ongoing clampdown from
S2: the Chinese authority on the fintech
S3: business, as well
S2: as the more the plastic
S3: e-commerce behavior.
S2: And a second one will be more related to its
S2: ongoing ESG
S3: template that fund
S2: managers worldwide are
S3: being embraced
S2: to either foster directly or
S3: indirectly. So some e-sports
S2: related, at least the company that went into the betting
S3: arena, like then Broxburn
S2: got itself as a very successful betting company by focus
S2: on football and other traditional games.
S3: So we have some other companies that has that still
S2: set up
S3: shop over the years.
S2: Growth was pretty
S3: significant, but that is a sticky
S2: subject to ESG reasons.
S3: Well, raise lots of money,
S2: potentially
S3: neutral due to a lower
S2: ESG
S3: score and the top
S2: one. The reason I talk about is more internal market
S2: related risk. So if we look at the share price
S3: of the broad based
S2: ETF is what are the ETF that show beyond not here? Yes.
S2: They have come down significantly since the February or January peak,
S2: about 15 to 20 percent decline until about May. And
S2: also actually, this decline is coincident with the rise in
S2: the U.S. Treasury piano, which actually has a direct correlation
S2: with inflationary growth. I see the start of this year
S2: pretty much point out where we see commodity prices that's
S2: hiking up and start to actually float down to manufacturing
S2: input costs. So it's more like an indirect discretionary approach
S2: to growth stocks because once there's a rise in the penny,
S2: you actually indirectly the inflationary is going to go up.
S2: It will impact growth stocks across the market. Why? Because
S2: growth stocks are actually seen as stocks that has higher
S2: gearing or higher leverage. That means they need to borrow
S2: more to grow their operation. But we know that. So
S2: then is bus stocks or e-sports equities? They are actually
S2: cash rich in nature. Unfortunately, e-sports is being fought under
S2: the category of growth stocks.
S3: So do the financial markets was due to this in discrimination.
S3: If you start to
S2: see inflation stock picking up in the second half of
S2: the year, I spent the next year.
S3: If you start to see the
S2: 10 year going to pick up to about two percent
S2: or more, the pressure in EA Sports related stocks in general.
S1: There you have it. The five things you need to
S1: know about investing in East. But Kenwyne Kelvin, thank you
S1: for being on the podcast.
S2: Thank you very much. It's my pleasure.
S1: Thanks, everyone. I've been speaking with Larkin Y, co-founder of
S1: Pokémon Organizer, The Players League of SPL, and Kelvin Wong,
S1: market analyst at CMC Markets. Thanks for listening and catch
S1: us again over the next five things you need to
S1: know Podcasts by the money, my team.