Are eSports the next growth sector for institutional investments?

eSports could be the next big growth sector, drawing the attention of institutional investors, according to a new report by Greystone Managed Investments Inc.

The sector includes competitive video-gaming companies, as well as streaming services because they target both those who play the games and people who watch others play them as entertainment.

The firm noted it holds stakes in various public equities within the competitive video-gaming sector, including gaming publishers Tencent Holdings Ltd. and NetEast Inc., gaming equipment companies Microsoft Co., Nvidia Co. and Samsung Electronics Co., as well as video-streaming service providers Inc., which in turn owns Twitch and Alphabet Inc., the owner of YouTube. 

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As interesting players in the sector today, Greystone highlights Tencent, a Chinese game publisher, and Nvidia, a U.S. gear maker. Tencent is also the owner of the popular Chinese messaging app WeChat, Chinese music-streaming service QQ Music, which dwarfs both Apple Music and Spotify Inc. 

Tencent has been growing, building a strong portfolio of games, according to the report. Originally interested in eSports as a way to extend the popularity of its titles, the company is now focusing on the new entertainment phenomenon as a larger part of its overall strategy, noted Greystone.

While Tencent has had phenomenal success in recent years, it saw major trouble in August as Chinese regulators froze the approval of new games as the government rearranged some of its agencies, causing the company’s profits to drop for the first time in a decade, Bloomberg reported.

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For Nvidia, which produces graphics processing units and gaming software, the growth outlook is improving due to the rising popularity of eSports, noted the Greystone report. It estimated that a vast majority of eSports players are using a particular Nvidia product line called GeForce.

As well, as these games evolve and improve, they require players to upgrade their equipment if they wish to play the latest edition. With 74 million gamers already using Nvidia products, there are serious potential gains to be made as customers upgrade, noted Greystone. Specifically, revenues at Nvidia are growing at a rate of 40 per cent per year, according to the report.

While it sees great possibilities for eSports as a growth industry, Greystone noted it’s still early days for the market and, as with other technology trends, rapid change is to be expected.

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