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This must come as a shock to all the naysayers of competitive videogames, as following the year of downturns in the global economy, esport stocks and other traded assets are seeing immense growth across the board.
The Pandemic Effect
COVID-19 brought the global economy to its knees. Since the first wave of the pandemic hit around March this year, it has brought with it a trend of massive corporate downsizing, complete shutdowns, and ultimately, job losses. This is because companies have had to drastically reduce their profit outlays for the year as a result of reduced demand mostly for nonessential products and services. Industries like tourism and air and sea transportation services, for example, have been among the most affected, with airlines, during the thick of the pandemic, having to operate at record lows in terms of passenger capacity.
With any slump in economic activity, stocks and commodity markets are usually the first to respond – and respond they did. Apart from a few outlier companies (like Apple and Samsung) that still managed to react in time and eke out great profit years, stock values and returns were pretty much down across the board.
Esports Stocks Defying The Odds
In the backdrop of a serious global emergency, one industry is bamboozling investors and traders everywhere. Esports, the industry that focuses on competitive gaming, tournaments, and merchandise, is seeing record returns on investment over the course of 2020s three quarters.
Two of the chief Exchange Traded Funds (ETFs) for esports and gaming, ESPO and HERO, have grown by 59% and 64% respectively this year when compared to 2019. In comparison, NASDAQ, the New York-based stock exchange, has seen its 100 index rise just 29% YoY.
ETFs are investments in the corresponding portfolio of a company’s stocks as opposed to an actual company. They are available in most industries and offer retail buyers a relatively easier alternative to traditional balanced portfolio investments.
The magnitude of this achievement by esports becomes more apparent when you consider the fact that many exchanges (like NASDAQ), over the years, diversified their portfolios to include mega-profitable tech-focused companies. Some giants like Uber, Google, and Facebook have their stock traded on the floors of these traditional exchanges.
Out-Bitcoin’ing Bitcoin
Bitcoin has always been seen by investors as a safe asset in times of economic uncertainty, however, even the famous cryptocurrency hasn’t performed as well as esports ETFs, growing by a slightly lower 54% average YoY.
ESPO and HERO – A Comparison
Whilst these two exchanges might look the same, there are slight differences in their portfolio of company stocks and even the companies whose stocks they carry.
ESPO is valued at $541 million while HERO has a $360 million valuation. Both exchanges host almost the same crop of gaming-focused companies, but a few outliers from HERO’s end make a crucial difference. Notably, companies like Tencent, AMD, Bandai Namco, CD Project, Micro-Star, and Kingsoft are all absent from HERO’s portfolio.
Whatever the difference between the two exchanges, it is clear that the future of esports is bright. Its stock performance shows that not only is it an industry with high entertainment value, but one that can return profits on investment.