E-Sports and Gaming: The stars of the entertainment industry

The Sony PlayStation 5 finally reached the European market on 19 November last year, after gamers in the USA and Sony’s home country of Japan had been able to enjoy the long-awaited release of the Next-Generation game console. However, videogame fans had more to be happy about than just the release of the PlayStation 5 at the end of 2020. They were also treated with a product from the competitors Microsoft. Microsoft’s product came onto the market on 10 November 2020, shortly before the new PlayStation was launched. Gamers were faced with an important decision. Not everyone can afford both consoles. The PlayStation 5 is available for €499, while a slimmed-down digital version without a disk drive costs €399.

The Microsoft Xbox Series X costs €499, while the cheaper Xbox Series S variant comes in at €299. Besides the price, however, there are also other aspects to consider, such as games that are exclusive to the console in question.  This important decision is difficult enough for gamers. But they have to weigh up other alternatives. Nintendo launched their Switch console to the market at the beginning of 2017. The Japanese have always scored points with innovative game concepts and some of the most popular characters in video game history. They include Super Mario, Donkey Kong or the Zelda game series, for example. In addition to the stationary consoles, there are handheld consoles, PC or browser games and mobile games, which gamers all over the world can play to pass time. Accordingly the industry has experienced a real boom in recent years. Coronavirus has only intensified this.

A distraction from coronavirus

In an effort to contain the global pandemic, governments around the world adopted lockdown measures. Often, people are only allowed to leave their houses for essential reasons. COVID-19 patients remained quarantined in their own homes. Suddenly home office was the new normal. We even had to spend our free time at home. There was a choice of series, films or documentaries on streaming services such as Netflix. And there was of course the opportunity to escape into the most incredible fantasy worlds with the help of the latest graphics. The gaming industry enjoyed an increase in demand.

For example Nintendo revised its forecasts for sales of its Nintendo Switch up from an original 19 million to 24 million consoles for the coming year. Therefore the industry has still been forecasting growth even before corona. Research firm Mordor Intelligence estimates that the gaming industry will grow by an average of just over 9 per cent per year between 2020 and 2025, to around US $257 billion in 2025. Video games already generate significantly more revenue than films at the worldwide box office. This change has not just been due to coronavirus causing empty cinemas and giving the gaming industry an additional boost as a “stay at home” industry.

A real sport?

The boom in the gaming industry has not been fuelled by coronavirus. Some trends have been observed for years. Faster internet connectivity and new cloud technologies have boosted the industry of cloud gaming. This means that games are stored on central servers, which are responsible for their proper operation. A particularly important factor for growth is e-sports. Electronic sports are in many respects in no way inferior to ‘real’ sports. E-sports events host thousands of players and millions of spectators worldwide. The best players of the most popular e-sports games become stars, much like the world’s most famous sports stars. These e-sports events are reported and become topics of conversation in private circles, which further raises the profile of these games.

Just how far the trend is going is shown by the fact that e-sports are to take part as an official sport in the Asian Games in 2022 and it is even being discussed as a possible 43^rd discipline in at the 2024 Olympic Games in Paris. In terms of prize money, e-sports events can now rival some of the biggest sporting events in the world in terms of prize money. For example, there was a prize pot of 100 million US dollars at the “Fortnite” World Championships. Just like in ‘real’ sport, the e-sports sector has become a strong magnet for big name sponsors. This is a case that is especially reinforced by the fact that e-sports reaches a particularly important target group. Teenagers and young men are increasingly difficult to reach through traditional television. Instead, they use online video platforms such as Youtube, streaming services such as Netflix or watch e-sports events on online channels such as Twitch.

Conclusion

E-sports events can now compete with real sporting events. However, the increased popularity of e-sports is not the only reason why the gaming industry has boomed in recent years. In addition, COVID-19 has reinforced many of these trends. For investors who are convinced of the success of the gaming and e-sports market, the Vontobel E-Sports and Gaming Index could be of interest. This is an actively managed strategy index of companies active in the gaming and e-sports sector. This includes among others, cloud gaming, chip manufacturers, game developers as well as equipment, gaming technology and video streaming. Vontobel’s specialists analyse a wide range of gaming stocks and select the most potentially promising ones onto the index.