eResearch | On June 17, 2019, Evolve Funds Group (“Evolve”), a new Canadian Exchange-Traded Fund (ETF) provider that specializes in providing Canadians with innovative ETF’s, launched Canada’s first global e-Gaming ETF which will be available on the Toronto Stock Exchange (TSX), under the ticker symbol HERO. Evolve started in 2017 and has since included a Marijuana ETF, a Cyber Security ETF, and a Future Cars ETF into their offering.
eGaming or eSports is organized competition amongst professional video game players. According to Vie eSports, in 2018, prize money totaled US$149 million across almost 4,000 tournaments, which has since attracted more players, fans, and investors. Millions of fans follow and watch eGaming through both streaming sites (Twitch and YouTube) and live ticketed stadiums. The key driver for eGaming revenue is viewership and, according to NewZoo, viewers are expected to increase to 454 million in 2019, a 14% Year-over-Year growth.
The increase in eGaming viewership globally has attracted growth in sponsorship and franchising within the industry, which accounts for majority of the revenue. According to Goldman Sachs (NSYE: GS), total revenue from sponsorship exceeded US$250 million in 2017 compared with US$161 million in 2016 (55% increase Year-over-Year). Franchising has opened opportunities for electronic games such as OverWatch, in which franchise teams sell for US$20 million and has grossed US$400 million in revenue from 20 registered teams in 2018 for the OverWatch’s publisher, Activision Blizzard (NASDAQ: ATVI).
Moving forward, as live eGaming competition continues to build traction in global viewership, revenue from media rights, which, according to GS was currently only 14% of total eGaming revenue in 2017, is expected to increase to 40% of total eGaming revenue by 2020. In 2017, Asia and North America represented the largest market shares within the eGaming industry, in which Asia is leading globally with US$406 million in total revenue compared with North America which accounted for US$392 million.
Industry attention continues to focus on the eGaming industry because of its audience growth rate compared to media streaming platforms and traditional broadcasters. According to GS, YouTube Gaming had over 250 million viewers in 2016 compared to Spotify and Netflix which each had around 100 million viewers. Celebrity Twitch streamer, Ninja, attracts almost 700,000 concurrent viewers, which is almost double the concurrent viewership of the NFL’s Thursday Night Football. The quick comparable growth in viewership is mainly due to the accessibility of viewing eGaming competitions online compared with established pro sports leagues which are watched through traditional media such as TV.
Evolve’s strategy is to replicate the performance of the Solactive eGaming Index, an index that includes eGaming companies such as Nintendo Co., Ltd (TYO: 7974), Electronic Arts Inc. (NASDAQ: EA), Tencent Holdings Ltd (HKG: 0700), and Activision Blizzard, Inc (NASDAQ: ATVI). HERO has a NAV of $20.00 as of June 14, 2019, a 0.70% management fee, and is hedged to the Canadian dollar. This ETF is catered towards medium risk Investors who seek capital appreciation in public equities involved in hardware, software, and services related to the electronic gaming industry.
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Nintendo Co., Ltd (TYO: 7974)
Founded in 1889, Nintendo is a Japanese multinational consumer electronics and video game company headquartered in Kyoto, Japan. Nintendo is known best for their classic games and characters such as Mario, Pokémon, and Zelda, which are some of the best-selling franchises amongst video games. Nintendo currently trades at US$355 a share on the Tokyo Stock Exchange with a market cap of US$46.84 billion.
Electronic Arts Inc. (NASDAQ: EA)
Founded in 1982, Electronic Arts is an American video game company headquartered in California, U.S. Electronic Arts is best known for their EA Sports titles which include FIFA, Madden NFL, NHL, NBA Live, and UFC. Electronic Arts currently trades at US$96.95 a share on the NASDAQ with a market cap of US$28.73 billion.
Activision Blizzard, Inc. (NASDAQ: ATVI)
Founded in 2008 through the merger of Activision and Vivendi Games, Activision Blizzard is an American video game company headquartered in California, U.S. Activision Blizzard is known for their diversified portfolio of games including Call of Duty and Overwatch on console, StarCraft and World of Warcraft on desktop, and Candy Crush Saga on mobile. Activision Blizzard currently trades at US$46.58 a share on the NASDAQ with a market cap of US$35.73 billion.
ETFMG Video Game Tech ETF (NYSE: GAMR)
Launched on March, 2016, GAMR was one of the first ETF’s that focused on eGaming. GAMR focused on hardware and software game developers in addition to IP holders that support these developers. GAMR is currently trading at $42.57 a share (67 percent growth since inception), has a 0.75% management fee, and has US$93.1 million of assets under management.
Vaneck Vectors Video Gaming and Esports ETF (NYSE: ESPO)
Launched on October, 2018, ESPO is a diversified ETF across a larger spectrum in the eGaming industry. ESPO invests in any eligible company that generates at least half of their revenue from relevant industries including game development, related hardware and software, streaming, game events, and league operators. ESPO is currently trading at US$32.99 a share (21 percent increase since inception), has a 0.55% management fee, and US$26.4 million of assets under management.
Figure 1: Included companies within HERO ETF portfolio
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