Move over professional sports, here comes eSports! For many Stockhouse investors, this would sound like a preposterous assertion. Think again. By 2024; eSports could be a medal event at the Paris Olympics.
The numbers don’t lie. The total prize money being offered in eSports tournaments is mind-boggling. The Top-10 overall prize pools in these tournaments are listed below.
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Equally astounding is the speed with which these tournaments are increasing in size. Today, the world’s premier eSports tournament is “The International”. In 2013; the total prize pool for The International was $2.87 million (USD). Four years later; this year The International featured total prize money of $24.69 million – nearly a ten-fold increase.
In comparison, the 2017 Masters Golf Tournament offered a total purse of approximately $11 million (USD). That’s hardly chump-change, but it’s not in the same league as The International.
Some investors may argue that it is silly to hand out so much prize money to people sitting at a game console, playing virtual sports. Other readers might suggest it is equally silly to award $11 million in prizes for hitting a small ball into a small hole. The bottom line is that regardless of how investors perceive eSports (or pro sports), this is by far the fastest-growing investment opportunity associated with the world of sports.
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Of equal importance is that this is an industry that is not solely focused on the competitors. This is also a major spectator industry. Older investors may find this impossible to believe. Again, the numbers don’t lie, as illustrated in this article in The Guardian from two years ago:
Set to take place in a sold-out Key Arena, the fifth edition of ‘The International’ broke its own record this week when its prize-pool bubbled above the $US 11 million dollar mark after another surge in funding support from fans. That number could balloon to as high as $US 15 million on current trends before the tournament takes place in August - a staggering amount of money indeed.
To put that in context, Golf’s US Masters paid out $US 10 million this year, while tennis’s French Open will pay competitors across both men’s and women’s fields $US 36 million.
Since that time, prize money for The International now dwarfs The Masters golf tournament. It is rapidly catching up to (and will soon pass) the French Open tennis tournament. And even two years ago, these events were already selling out large sports arenas with eSports spectators.
The competitions are intense. The spectators are rabid. The prize money being offered is huge. What’s missing? An investment vehicle for investors to capitalize on this exploding sector. Enter Millennial Esports Corp (TSX: V.GAME, Forum).
GAME is not targeting the entire world of eSports, at least not initially. That’s simply too much to bite off for a junior corporation entering this space. Instead, the Company is aiming at a specific eSports niche with its current business strategy: e-racing.
There are several reasons for Millennial Esports selecting e-racing as its initial focal point:
- E-racing is one of the most popular eSports, for both competitors and spectators.
- Auto racing is a sports industry with a global reach.
- There are already exciting synergies and specific business opportunities linking real auto-racing with virtual racing.
How serious is e-racing as a competitive sport? This Globe & Mail article from January 2017 provides a glimpse of the size and importance of this virtual sports niche:
Quick, name a form of racing that boasts the support of no fewer than five major manufacturers, with more looking to follow suit. One with a forward-thinking, technologically sophisticated set of rules, world-famous team owners and races that take place in major cities such as Berlin, Paris and New York.
Formula One? Nope. NASCAR? Also incorrect. Ditto for Le Mans or MotoGP or rallying or drag racing or even jet-plane racing. The correct answer: the FIA Formula E Championship.
Now in the midyear break of its third season, the series is gaining in the collective consciousness and has lured Audi, BMW and Jaguar into the fold. It’s also staking a claim to being the most important form of motorsport when it comes to sustainability.
Many investors will undoubtedly find this surprising. “The most important form of motorsport”? Major auto manufacturers looking to become active in this space?
The FIA Formula E Championship is serious business. Now McLaren-Honda has announced a competition to find “the World’s Fastest Gamer”. The prize for the victor? The winner of the competition will become an official “driver” for McLaren-Honda – an F1 simulator driver.
Readers who view such simulators as mere games are not giving enough credit to either the technology or the competitors. For decades, commercial airlines have trained their pilots with “video games”: flight simulators that teach pilots how to fly commercial airliners. This technology is already a part of professional auto racing.
The winner will become one of McLaren’s official F1 simulator drivers, to help improve car design. These responsibilities are usually handled by official reserves. As well as competing across different platforms, contestants will be required to demonstrate their engineering knowledge, teamwork skills and physical and mental capabilities.
Will e-racers ever cross over to the point that they start to climb into the cockpits of actual race cars? Perhaps. Will would-be Formula One drivers who can’t catch on with an official team be lured into e-racing by the large prize pools and rapidly growing audiences? More likely.
The eSports sector is huge, and growing rapidly. Millennial Esports’ mission is to provide a broad spectrum of turnkey solutions for the eSports space. More specifically, management is looking to integrate gaming technology, event management, production and broadcasting.
Through both vertical and horizontal integration, GAME is seeking to capture various revenue streams associated with this industry and to leverage the existing synergies. As part of its consolidation strategy, the Company has already announced several key acquisitions.
- Eden Games (August 8, 2017 – racing game developer)
- Stream Hatchet (April 24, 2017 – data analytics, streaming)
- IDEAS + CARS (June 27, 2017 – branding, partnerships)
- (strategic investment in) Alt Tab Productions (July 25, 2017 – eSports programming/events)
The focal point in these acquisitions is Eden Games. The Company is acquiring a majority interest (82.5%), with the option to acquire a 100% interest. Eden Games is a French-based game developer specializing in racing video games. In the August news release, CEO Alex Igelman was emphatic about what Eden brings to the table.
“Eden Games has an almost unrivalled reputation as an independent racing game developer with the huge critical and commercial success of both Test Drive Unlimited and V-Rally. Their successful recent move to mobile games with their first title Gear.Club brought them to our attention.”
Gear.Club is a mobile racing platform that already boasts a subscriber base of 6.3 million users. This acquisition will provide GAME with an instant, major presence in e-racing. Supporting this acquisition are several additional puzzle pieces.
Stream Hatchet is the data streaming/analytics branch of GAME’s operations. Based in Spain, Stream Hatchet’s data services have various applications – and revenue streams associated with those applications. Who will pay for Stream Hatchet’s data analytics?
- eSports users: “holistic” data from Stream Hatchet helps users optimize their gaming experience
- Video game streamers: supplying analytics and “business intelligence”
- Additionally: content creators, eSports teams & organizations, sponsors, and related brands can all derive value from access to better data analytics
- Current users of Stream Hatchet: streamers, eSports organizations, video game producers, and advertising agencies
The of IDEAS + CARS is all about branding and building relationships in the e-racing and racing industries. It is a co-sponsor (with McLaren) for the World’s Fastest Gamer competition. IDEAS + CARS has forged relationships with high-profile brands and rights-holders in the automotive/motorsports spheres. Clients have included Aston Martin, Formula E, and Moto GP.
The interest in Alt Tab Productions will provide GAME with a foothold in the broadcasting segment of the eSports industry via its Ogaming.TV. Alt Tab is also based in France. However, GAME plans on utilizing Alt Tab’s experience and expertise in eSports broadcasting to enhance its North American operations as well.
Meanwhile, helped by the World’s Fastest Gamer competition, Gear.Club established new user records, with more than 600,000 downloads over the course of the competition. This leads to another one of the strong appeals for eSports – for participants and spectators alike.
Unlike professional sports, the competitors in eSports are not “professionals” per se. While prize money is more than enough to support many of these competitors, by and large these eSports participants are just part-timers – with regular day jobs like the rest of us.
Professional sports center around elite multi-millionaires. Conversely, eSports are based around the “everyman”: an opportunity for ordinary people to compete at an elite level, in competitions viewed with just as much interest by spectators as participants.
Put together, these various parts comprise an integrated business model to penetrate this huge e-racing market. What’s missing? A base of operations.
ESports is already a big spectator sport. Early in the Company’s planning, management made the strategic decision to construct their own studio/arena: “theE Arena”. Which location did GAME choose as its eSports base of operations? The gaming capital of the world: Las Vegas.
Located in the Neonopolis entertainment complex in Las Vegas, thE Arena has already been the setting for Millennial to host its own eSports tournaments: a “Madden NFL” tournament in March, and a Halo Championship Series in May.
Of course any reference to Las Vegas immediately brings to mind gambling. Gambling on professional sports is already a huge gaming industry.
A CNBC article from April 2016 reveals that eSports gambling is already big business, and expected to become a huge business, projected to reach $23.5 billion by 2020. Lorien Pilling, research director of Global Betting and Gaming Consultants framed the potential in simple terms.
“There is no reason why e-sports should not become a meaningful and profitable part of a sportsbook's portfolio. E-sports tournaments are competitive, exciting, fast-paced events, with a live crowd creating atmosphere, just as at a 'traditional' sports event like a football match.”
…and eSports gambling is now fully legal in the State of Nevada, as of June 2017:
Last weekend, Nevada governor Brian Sandoval officially signed a bill that makes wagering on professional video gaming, known as eSports, legal within state lines. Senate Bill 240, which was written up by Nevada senator Becky Harris, makes an amendment to the state’s existing parimutuel wagering that includes “other events” including eSports, horse racing, animal races, etc.
Are eSports going to replace professional sports? Of course not. Are eSports ultimately going to assume a position beside professional sports, in terms of both popularity and economic potential? Given the speed with which these virtual sports are gaining in appeal, it sounds like a solid bet.
FULL DISCLOSURE: Millennial Esports Corp is a paid client of Stockhouse Publishing.