Associated Press
- The $3 million top prize at the Fortnite World Cup in New York went to a 16-year-old American, and it might attract more attention to the rapidly expanding field of esports.
- Will Hershey, cofounder of investment adviser Roundhill Investments, recently launched an ETF of companies involved in the sector. He compares esports to new versions of both traditional sports and social media.
- Some on Wall Street think this part of the video game market has enormous potential but isn't getting much attention given their popularity with younger people.
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The days of video games being seen as a waste of time might over just like the days of 25-cent arcade games.
In late July, the Fortnite World Cup awarded million-dollar prizes to eight gamers in their teens and 20s. The solo champion was a teenager from Pennsylvania who brought home $3 million. Almost as remarkable, the two-day event was held at 24,000-seat Arthur Ashe Stadium in New York.
Video games are a gigantic business where some of the biggest companies in the world play starring roles, but there's a growing consensus on Wall Street that esports are overlooked and just starting to break through.
"A 16-year-old winning $3 million is going to get parents to be more on board," said Will Hershey, the cofounder of Round hill Investments, which launched an esports-themed exchange-traded fund in June.
He says the win by American Kyle "Bugha" Giersdorf will help wake people up to the immense popularity of the games among younger people.
"You have a generation that really is growing up with gaming being a very much so important and relevant part of their life," Hershey said in an exclusive interview with Business Insider. "It's almost kind of a social media 2.0 type of vehicle."
A NewZoo report found that worldwide esports revenue will hit $1 billion this year, while also estimating the audience for the games will grow to 453 million people. In a note to clients in July, HSBC economist James Pomeroy underlined the popularity of esports with a reference to gamer Tyler "Ninja" Blevins.
"His YouTube videos receive more views in a week than most hit TV shows, with his most popular video being watched 40 million times," he said.
Both of those views conflict with the notion of online gaming as a solitary activity.
If your first thought after reading about the prize money is that you should quit your job and try becoming a highly-paid professional gamer, good luck. If that seems like a long shot, you can try investing in the sector.
Roundhill's BITKRAFT Esports & Digital Entertainment ETF - which launched in June - is the newest of a handful of options in the space, which also include the VanEck Vectors Video Gaming and eSports ETF and the ETFMG Video Game Tech ETF.
The ETFs include a mix of game publishers and console-makers, as well as chipmakers, and Hershey's fund adds a number of streaming and esports live-event companies. That said, the funds are still small, and their high exposure to Asia has made life difficult during the trade war.
What they don't include, perhaps surprisingly, are Apple, Microsoft, Amazon, or Google - all of which are involved in the industry in various ways but get the vast majority of their revenue elsewhere.
Hershey says that for younger people, esports have grown into an alternative to traditional sports. At least a few colleges agree, and they're now offering scholarships for video gamers.
The business implications could be huge: While a basketball or soccer player doesn't need much more than a ball and a field or court, there is an enormous amount of infrastructure, technology, and intellectual property built into any gaming setup.
"You and I could start up a pickup basketball league tomorrow," he says. "You and I can't go ahead and start the Overwatch league tomorrow. Activision owns that IP."
That means a lot of businesses can benefit from the growing popularity of these games and investors have a lot of avenues to make money from them in ways that don't apply to other sports.
And if these sports do take off in the US the way it has in other developed countries, Hershey says it's going to require enormous growth in gaming cafes and giant playing-and-practice facilities. He says there are hundreds of those in South Korea, which has one-sixth the population of the US.
"Kids are growing up desiring to be professional gamers and that infrastructure is in place," he said.