eResearch | On July 26th, the Fortnite World Cup, an annual eSports competition based on the game Fortnite, took place with a total of US$30 million in prizes.
Fortnite is an online third-person shooter video game in which up to 100 players drop into a circular zone which closes in on the players while they are fighting, until only one player is left, and the rest are knocked out. The “last person standing” mass shooter type of game mode was coined the term “battle royale” by Fortnite and competing gaming companies are now starting to develop their own battle royale games.
The Fortnite World Cup attracted over 40 million players and was restricted to players 13 years of age or older. Players participated in a series of matches played over 10 weeks, to have a chance to qualify as one of the 100 solo finalists who fought it out to take home US$3 million for first place, US$1.8 million for second place, or US$1.2 million for third place.
Kyle “Bugha” Giersdorf, a 16-year old from Pennsylvania, U.S., was this year’s Fortnite World Cup champion, becoming a teenage millionaire overnight. The US$3 million prize to Giersdorf is more than the US$2.8 million Novak Djokovic received for beating Roger Federer in the Wimbledon final, and more than the US$2 million Tiger Woods received for winning the Masters golf tournament.
Fortnite was developed in 2017 by publisher Epic Games, which is more than 50% owned by Tim Sweeney, Epic Game’s CEO, and 40% owned by Tencent Holdings Ltd (HKG: 0700; OTC: TCTZF; LSE: 0Z4S; DB: NNND), a Chinese multinational tech conglomerate.
In February 2019, Electronic Arts Inc. (NASDAQ: EA; DB: ERT), the second largest gaming company in North America, announced the launch of Apex Legends, a similar battle royale style game, to compete against Fortnite. On July 31, 2019, Electronic Arts reported FQ1/2020 earnings with revenue increasing to US$1.2 billion compared with US$1.1 billion year-over-year, which Chief Executive Andrew Wilson attributed to the growing Apex Legends community.
For those interested in investing in small cap opportunities within the gaming and eSports industry, here’s a newly merged company focused on eSports:
Enthusiast Gaming Holdings Inc. (TSXV: EGLX; OTCQB: EGHIF)
Headquartered in Toronto, Canada, Enthusiast Gaming is a Canadian digital media company that specializes in journalism for eSports and video games.- On May 31, 2019, Enthusiast Gaming announced a merger with gaming companies Aquillini GameCo and Luminosity to form a new company focused on eSports, which would include 7 eSports teams, 40 eSports and gaming influencers, 80+ gaming media websites, and 900+ YouTube and twitch channels.
- The merged companies project US$22 million in pro forma revenue, US$36 million in cash, and approximately 200 million viewers.
- Enthusiast Gaming currently trades at C$1.40 per share with a market capitalization of C$58 million.
Video game tournaments and professional eSports continues to build traction as Epic Games announced in May that it will provide US$100 million to fund Fortnite prize pools throughout 2019.
Companies such as 100 Thieves, an eSports organization with professional teams in Fortnite and other major games, received US$35 million in a Series B funding round to build a 15,000 square-foot training facility and HQ for its gaming teams.
It will be interesting to see how quickly investments in eSports grow in the near future as more and more gamers become millionaires.
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Electronic Arts Inc. (NASDAQ: EA; DB: ERT)
- Headquartered in California, United States, Electronic Arts is a video game company best known for their EA Sports titles which include FIFA, Madden NFL, NHL, NBA Live, and UFC.
- In February 2019, Electronic Arts released its own “battle royale” style game called Apex Legends to compete against
- EA currently trades at US$89.69 per share with a market capitalization of US$26.9 billion.
Tencent Holdings Ltd (HKG: 0700; OTC: TCTZF; LSE: 0Z4S; DB: NNND)
- Headquartered in Shenzhen, China, Tencent is a multinational investing conglomerate focused on internet-related services and products.
- Tencent operates in the video game industry through its ownership of Riot Games and Epic Games, which hold game names such as League of Legends and Fortnite.
- Tencent currently trades for HKD368.20 per share with a market capitalization of HKD3.51 trillion (US$ 448.4 billion).
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