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First Esports College Program In The Philippines

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First esports college degree in the Philippines now in the works

“ Metro Manila (CNN Philippines, February 21) — Online gaming might not be an after-school pastime anymore in the future as the first degree program in electronic sports (esports) in the country is being developed.

The Lyceum of the Philippines University (LPU) and esports and gaming agency Tier One Entertainment collaborated to develop the curriculum of the four-year degree on Bachelor of Science in ESports. It will be offered this coming school year once approved by the Commission on Higher Education.

“We will be passing the curriculum to the Commission on Higher Education (CHED) on March this year. If this goes well, we might have a full course available by 2020,” said Tier One Entertainment in a post on social media.

The gaming agency’s chief executive officer Tryke Gutierrez said that the new degree program will have two tracks namely: game development and esports management. However, he did not disclose yet the subjects under the program.

“The goal has always been to create more opportunities for gamers in Asia. If this curriculum gets approved, we won’t just be providing post career opportunities for gaming, but we will have a new generation of graduates ready to work in the esports industry,” However, Gutierrez reminded future students that the program will not be as easy as a simple hobby.

“I also want to take this time to personally ask all the future enrollees to please take every subject seriously and learn whatever you can learn from the experts of the industry. We’ll do our best to push this industry forward but we need more help. Study hard, train hard. We need you. See you in 4 years!!,” he said.

It was a dream come true for online gamers as esports made its debut in the international sporting event like the Southeast Asian Games last year. The country’s own Team Sibol bagged several gold medals in the event. Meanwhile, several universities abroad, particularly in the United States and the United Kingdom, are already offering degree programs in online gaming.

In the Philippines, nine universities and colleges offer only game development degree program. These are the Asia Pacific College, CIIT College of Arts and Technology, Colegio de San Juan de Letran (Laguna), De La Salle-College of Saint Benilde, De La Salle University Laguna Campus, FEU Institute of Technology, iAcademy, Mapua University Makati campus, and the University of the East- Manila.

 

Esports Adderall Drugs

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‘Nobody talks about it because everyone is on it’: Adderall presents esports with an enigma

 Aspiring to become a full-time streamer and make a career out of his love for gaming, former semipro Halo player Matthew “MellowMajik” Murphy follows a weekly ritual. Every Friday and Saturday night, he comes home and gets on his new favorite game, Fortnite. But before he logs on, Murphy swallows a pill he thoroughly believes will aid him in becoming the best player he can be.

“Typically I would be exhausted, tired and lose motivation after only a couple hours,” Murphy said. “With Adderall, I am able to play better than I ever have for up to 12 hours.”

The use of Adderall, a drug often prescribed by doctors to treat patients with attention deficit hyperactivity disorder (ADHD), or other substances that help people focus like Vyvanse and Ritalin, has long been associated with students pulling all-nighters and cramming for a test or finishing a research paper. More recently, though, they’ve been used by competitive gamers as a kind of performance enhancer to sharpen their response times and reflexes during gameplay. While at least one esports league regularly tests for these as banned substances, others have left them unchecked. As the appeal of competitive gaming continues to rise — with robust prize purses and lucrative sponsorship deals hanging in the balance — gamers across multiple esports properties have recounted stories of Adderall use by themselves or others.

The use of such drugs has introduced significant questions into esports. What exactly constitutes a performance-enhancing drug? Could their use potentially disturb a league’s competitive balance? Should prescribed substances be regulated by a league at all? These questions are not so easily answered.

‘Nobody talks about it because everyone is on it’

Professional Counter-Strike player, Kory “Semphis” Friesen, admitted in a YouTube interview that he and his entire team had taken Adderall while playing in a tournament with a $250,000 purse. Timo “Taimou” Kettunen claimed during a live stream session that “like 20 players or so” in the Overwatch League use Adderall. In response to that claim, Jimmy “HighDistortion” Moreno, former Gears of War (GoW) pro turned Fortnite streamer, tweeted that “the GoW community has easily over half the players using it.”

According to a number of professional gamers who spoke with The Washington Post, Adderall has been an open secret in the esports community for years. “Nobody talks about it because everyone is on it,” former Call of Duty World Champion, Adam “KiLLa” Sloss said. When asked if Adderall abuse at events was something he had ever witnessed personally, Sloss replied, “Witnessed? Yeah, very frequently and a lot to be honest. It’s a major problem.”

After an eight-year career, Sloss stepped away from professional play in early 2019. Sloss said a big reason he has stopped competing was due to the rampant drug abuse. “The Adderall abuse was too much to keep up with,” Sloss said.

The drug’s use presents a complicated problem for leagues and tournament organizers. Shortly after Friesen publicly admitted that his Counter-Strike team used Adderall during an Electronic Sports League (ESL) sanctioned tournament, the ESL employed the help of the Esports Integrity Coalition (ESIC) and began conducting drug tests. As of February 2016, all ESL tournaments are subject to the ESIC’s Anti-Doping Code. Included in the Anti-Doping Code is the ESIC’s prohibited substances list. The list is made up entirely of stimulants commonly used to treat ADHD such as Adderall.

In comments to The Post, the ESL and the ESIC said they believe testing is crucial because it acts as a deterrent and discourages competitors from using PEDs. Ian Smith, Commissioner of the ESIC, said there have been zero anti-doping rule violations since testing began. Those with prescriptions for ADHD medications can be granted a waiver for a positive test. Smith acknowledged that this only applies to Counter-Strike and that “no other game gets tested by any other tournament organizer.”

Most leagues do not fully prohibit or test for, Adderall or similar substances. For example, the policy of Epic Games, which administers competitions for Fortnite, states, “Prescription drugs may be used only by the person they are prescribed to, and in the manner, combination, and quantity as prescribed.” It does outlaw the unauthorized use or possession of prescription drugs, as well as alcohol or illegal narcotics.

The Overwatch League follows a similar policy, stating in its code of conduct that “prescription drugs may only be used to treat the condition for which they are prescribed and may not be used to enhance performance in a game, match or tournament.”

Asked for comment on the use of Adderall by players, Epic Games and Activision Blizzard, the parent company of the Overwatch League and Call of Duty League, both provided their league policies and declined further comment.

Riot Games, which operates the League of Legends esports leagues, stated that its rules prohibit the use of illicit substances by players. “We regularly review these rules for compliance with local laws around substance classifications and player privacy rights. We will continue to consult with medical experts, regulators, and player representatives to properly safeguard the well-being of our players and the long-term health of the sport.”

A common argument against banning Adderall and similar substances is that there is no proof the medication makes the user better at video games. When asked if the Overwatch League would consider drug testing in a 2018 interview, former commissioner Nate Nanzer responded that “Adderall is a legal prescription in the United States of America and … there’s no data that suggests that it makes you better at playing Overwatch.”

The costs, and disputed benefits, of performance enhancement

Gamers themselves have mixed opinions on whether Adderall is a performance enhancer or not. Professional Counter-Strike player, Emma “Emy” Choe, doesn’t think drugs like Adderall play much of a role in a player’s potential for success.

“Countless players below pro take Adderall but will still fail to beat the best of the best,” Choe said. “If there was a huge difference between players on Adderall and not, I think people would make a bigger deal about banning it at all gaming events.”

In fact, Choe believes Adderall even has the ability to make a player worse. “They get too focused on one aspect of the game and forget other important/crucial game-winning factors such as communication,” she said.Murphy, the Halo pro turned Fortnite streamer, admits the drug has its limits. “The drug can only have such an effect on your game … it’s not some magical pill that instantly makes you amazing at a game. You still need the skills to compete.”

But some pros believe they have a clear benefit. Aspiring Fortnite pro, Jack Watson, told The Post he often takes either Adderall or Vyvanse when he competes in the various online Fortnite competitions such as the Cash Cups and the Winter Royale. Watson, who has prescriptions for both Adderall and Vyvanse, has over 41,000 eliminations on Fortnite — a number that at one point ranked him third in the entire state of Maryland, according to Fortnitetracker.com. Watson attributes much of his success to these ADHD medications. “I notice very significant differences in my gameplay,” Watson said. “My reaction and processing time is exponentially greater than playing without [Adderall]. It feels like steroids for video games.”

“It just kinda makes people do better jobs,” said Yeonjoon “ArK” Hong, a professional Overwatch player for the Washington Justice. “While others don’t use it and [stay] underrated.” The motivation for players to take Adderall, in Hong’s opinion, is derived from personal gain. “[It’s] not like peer pressure or, ‘I should do it for the team!’” the Overwatch All-Star claims. “It’s more like ‘f— it, I just wanna [destroy] that guy.’”

Sloss agreed with Hong. “A lot of these kids are hearing [that] some of the best players in the world are taking Adderall. They wanna either experiment and see if it helps or just do what it takes to be the best.”

Maria St. Pierre, a Clinical Project Manager in the Neurological Clinical Research Institute at Massachusetts General Hospital, worked as a Laboratory Manager and Lead Research Assistant for the Teaching and Gaming Lab during her graduate and undergraduate studies at Towson University. She, too, believes there are clear advantages to those using the medication.

“It is like PEDs in sports. They use it as an enhancer to gain an advantage over their opponents,” St. Pierre said. “This is why steroids and PEDs are banned from traditional sports. … Those taking Adderall have an unfair advantage over someone who is not taking Adderall or any other stimulants.”

St. Pierre believes that Adderall and drugs like it should be banned from competitive gaming events, as they have been by the governing bodies overseeing traditional sports. Both the World Anti-Doping Agency (WADA) and the U.S. Anti-Doping Agency (USADA) consider Adderall to be a performance enhancer. The NFL, NBA and MLB all have Adderall on their banned substance list.

As with any drug, abusing Adderall can have long-term consequences. “Taking any medication that is not prescribed to you can have long-lasting, detrimental effects,” St. Pierre said. “Physically, Adderall is like taking speed or meth. … Psychologically, not only is it a highly addictive drug, but it can also cause psychosis and paranoia.”

The problem of where to draw the line

On the surface, it might seem like the obvious solution for leagues and tournament organizers is to just copy the ESL; mandatory drug testing at tournaments and if you are prescribed, you get a pass. But some, like Murphy, said that obtaining a prescription for Adderall under false pretenses is relatively simple.

“It’s everywhere and it’s easy to get,” said Murphy. As an owner of both an Adderall and Vyvanse prescription, Watson agreed he didn’t think it would be hard for gamers to get a prescription for these drugs.

Another concern is the cost and difficulty to implement drug testing. In a behind the scenes video on the ESIC YouTube channel, Smith claimed that the ESL spends an excess of $40,000 per year on drug testing. While that sum would be more than manageable for a publisher-backed league like League of Legends’ League Championship Series or Overwatch League, smaller tournament operators would find it much more of a burden.

Thomas Schofield, CEO of Smash.gg, a platform used by tournament organizers to operate events for a broad mix of game communities, explained that while there are large organizations and leagues that use Smash.gg, most of the events on the platform are amateur tournaments with fewer than 32 participants. Very few tournament organizers have the means necessary to implement drug testing at their events.

There’s also the problem, if not the impossibility, of administering testing for online tournaments and events not held in one physical location. In late December of 2019, Epic Games hosted the annual Fortnite Winter Royale. The total prize pool for the tournament was a whopping $23 million. Participants in that tournament’s qualifying rounds all played from remote locations, where there is no feasible method for Epic or another governing body to know if the participants are using PEDs.

Banning Adderall and similar drugs outright could lead to a slippery slope when it comes to other legal substances like caffeine. Professional Call of Duty player Zach “Zed” Denyer said in a direct message exchange with The Washington Post that he used caffeine pills. WADA has caffeine on its prohibited substances watch list and the NCAA currently limits caffeine consumption for college athletes. But caffeine products and energy drinks are often frequent sponsors of esports competitions. Banning those could carry a financial cost for leagues and tournament runners.

Esports leagues and tournament organizers must grapple with these questions and arguments, and clear-cut solutions are in short supply. An outright ban on ADHD medications risks hurting players with legitimate prescriptions. But if organizers begin testing for Adderall but allow those with a prescription to use it, they risk encouraging players to seek a prescription illegitimately. Ignoring the issue completely may lead to competitors, fans and spectators questioning the integrity of esports as a whole — not to mention any consequences surrounding the overlooked dangers posed to players through abuse of these drugs.

“People are destroying their lives and futures,” Sloss said. “There’s no limit … one of these days you’re gonna see somebody have a heart attack or something serious happen.”

A correction is unlikely to come from the players themselves. As Murphy said, competitors will do whatever it takes to make it big in esports, myself included.

 

Esports Doesn’t High Risk

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Esports doesn’t have to be high risk

 Last week I was chatting with a new investor who came into our company and I asked him, “What was the main reason you deciding to invest?” He told me that last year, the stocks that I suggested outperformed the ones he picked himself and therefore felt comfortable coming into our company. While I was flattered, I humbly mentioned to him that the S&P 500 was up 29% in 2019 so everyone should have had a great year. #Perspective.

It’s for this reason that I hate making stock recommendations because I have no idea where the broader market is going to go. Black Swan events which have been sparse in the past decade seem far more plausible with Coronavirus, trade wars and political instability. Not to mention the fear of mockery if my picks turn out to be duds.

Generally speaking, in uncertain times, investors tend to avoid small caps, and perceived higher risk sectors, such as crypto, cannabis, esports, etc. (not that I agree). But there must be a way to have your cake and eat it too. It got me thinking, what would be a ‘low’ risk stock pick that would still give investors exposure to the esports and gaming sector.

My Methodology

Criteria # 1:  Esports, video game, and media exposure

It’s hard to just pick a pure-play esports company given that the video gaming market is ~$150 billion compared to ~$1.2 billion for esports. It’s important that a company has both exposure to esports, which will drive higher growth but still has gaming and media diversification. 

Criteria # 2:  Global reach

2020 is the year where esports brands will go truly global. Between Activision, Riot and Valve game titles, the competitive scene and fan base transcend borders and thus the big winners will be those that monetize this trend.

Criteria # 3:  Monetize multiple verticals.

The esports industry is not a monolith and its parts are all very different and sometimes completely unrelated. You have venues, content, media, teams, franchises, technology, betting and game publishers who are all vying for a piece of the pie.

Criteria # 4: Liquidity + Market cap

To pick a more ‘defensive’ esports play, we need to see a min. $500 million market cap and a company that has been trading for at least 1 year.

Criteria # 5:  Mobile gaming

In my opinion, this will be the biggest part of the industry over the next 1-2 years and can’t be understated. Mobile gaming is here to stay and will surpass traditional PC and console gaming in that timespan.

After going through about 20 companies and rating them on the 4 criteria, there was a clear winner, but not the one I wanted. So, I went back to the drawing board and added another 10 companies, hoping I could find something better and more creative to write about. But it was not meant to be. There is one company that truly meets these criteria and that company is none other than Tencent (OTC: TCEHY).

With a market cap of nearly $500 billion, this is as large of a cap as it gets in the gaming world.

Who is Tencent?

In short, they own almost everything. Many of their best gaming titles are very unknown in North America, but one title that should be on everyone’s radar is Honor of Kings. The game falls into the multiplayer online battle arena genre, known as MOBA, and has the accolades of the highest-grossing and most downloaded app of all time. Outside of China, the game is known as Arena of Valor. They have continued to build on their mobile strategy having launched PUBG Mobile and Call of Duty Mobile which are two of the top games in the Battle Royale genre.

While there are a lot of top game publishers in the market, at the end of the day, Tencent has a piece of almost all of them including:

  • RIOT Games; League of Legends,– 100%
  • Ubisoft; Rainbow Six Siege – 5%
  • Supercell; Clash of Clans – 84%
  • Epic Games; Fortnite – 40%
  • Activision; Overwatch, Call of Duty – 5%

The list goes on and on, and that’s just games. I’ll touch on social media, and media platforms as well. All you need to know is Tencent is the largest game publisher in the world…by a long shot.

Overall Financial Performance 

They had a blowout Q3 with revenues of USD$13,748 million and profits attributable to shareholders of USD$3,451 million, representing a 21% and 24% YoY increase respectively. Not only was there a 27% YoY increase in operating profit, an operating margin of 29% also showed a 1% increase from the previous year. There are some concerns under the IFRS basis as the operating profit was down 7% and the margin showed a significant decrease of 7% as well. However, this is largely due to the net gains from investee companies as Q3 2018 had a large gain from these other businesses, and do not necessarily reflect the core earning potential of Tencent. The adjusted EBITDA of USD$5,495.84 million (an adjustment of USD$395.72 million were made for equity-settled share-based compensation) also shows a 29% YoY increase, reflecting Tencent’s great performance over the year. Furthermore, the cash flow from operations has also seen a 34% YoY increase even though capital expenditures were 11% from the previous year. This indicates a 36% YoY increase in FCF, which is a positive given relatively stable short and long-term debt. 

Online Games 

Online Games produces the largest amounts of revenue for Tencent. In Q3 2019, online games saw revenues of USD$4.12 billion, a YoY increase of 11%. This growth was driven by smartphone gaming (not including games attributable to Tencent’s social media applications) as it represented almost 60% of total gaming revenues for the company. With popular mobile gaming titles such as PUBG mobile, Call of Duty Mobile, Honour of Kings and Peacekeeper Elite to lead the charge, Tencent witnessed a 9% YoY growth in mobile gaming revenue in Q3 2019. On the PC side of things, the revenue is down by 7 % YoY and represents only USD$1.66 billion (40%) of the total. The reason for this is most likely the cannibalization of PC gaming by mobile and reduced revenue of popular titles such as Dungeon Fighter Online. Not all is lost in the PC domain, however, as other large titles such as League of Legends and TFT, another Riot Games IP, continues to bring increasing amounts of revenue for Tencent. 

Communication and Social Media 

During the Q3 the MAU (monthly active users) of QQ, Tencent’s IM service and web portal for social media, games, blogs, shopping, etc. saw a YoY decrease of 8.9% and 6.4% for desktop devices and smart devices respectively. Tencent claims this is largely due to enhanced security protocols that actively delete spam and bot accounts. WeChat on the other hand, perhaps of the biggest stand-alone applications in the world, has a total of 1.151 billion MAUs, an increase of 6.3% from Q3, 2018. This may be largely in part due to the implementation of the “Growth Program” which trains Mini Program owners to run their business through WeChat and is backed by a fully blown analytical tool to allow these owners to gain valuable insights. This explains why DAU (daily active users) for Mini programs has increased past 300 million and why commercial transactions have doubled YoY. Their fee-based subscriptions for digital content, which totals 170.6 million also saw a YoY increase of 10.7%. This includes the growth of Tencent video and music subscriptions by 22% and 42% YoY, respectively. Recently, Tencent has announced a 10% stake in UMG effectively increasing its capabilities. Tencent even highlighted the integration and improvement of these services as one a focus in their strategic highlights. Overall this synergy of the sector has allowed it to grow alongside many of Tencent’s other verticals and has allowed it to achieve revenues of USD$3.175 billion by Q3 2019, a YoY growth of 21%.

FinTech and Business Services 

The FinTech and business services sector had revenues of USD$3.857 billion by Q3 2019, a 36% YoY growth. This immense growth was possible due to an infrastructure that takes advantage of all the different monetization verticals coupled with the improvement of their cloud services. Within Fintech, the growth of WeChat’s Mini Programs in terms of the numbers of transactions and the DAU helped flood the payment ecosystem. Their business services grew as a result of expanding their cloud services to cover education, financial, municipal and retail sectors. The Tencent Cloud not only contracts the Luohu School district of Shenzhen with the largest software project in China but also provides SaaS for various other businesses. This has allowed its cloud revenues to grow by 80% over the same time period.

Online Advertising 

With large amounts of users on its platforms, it is only natural to see an increase in advertising revenue. Even though Tencent took a hit through its media advertising, in which revenues were down 28% YoY in Q3 2019, the social media advertising revenues were quick to rekindle that flame. Overall this sector also experienced revenue growth of 13% to total USD$2.65 billion. 

Exposure in Esports 

As mentioned above, esports and gaming do in fact have a point of separation. Esports is fueled by these popular games yet operates in an industry of its own. This vignette is best described by a quote from Wei Jizhong, former secretary-general of the Chinese Olympic Committee and honorary life vice president of the Olympic Council of Asia, saying “the most significant symbol is that we start to differentiate what is esports and what is just playing video games. So that esports has developed its own field”. Tencent understands this unique relationship which is evident in its partnership with the Global Esports Federation and has dedicated considerable resources to further esports. These resources include investing in all the different esports verticals including media companies, publishers, streaming sites, infrastructure, education and talent acquisition to just name a few. The company is also backed by various Chinese governments and helps to develop a professional and amateur infrastructure in China. For example, in the summer of 2019, Tencent and Hainan government held the Tencent Global Esports Annual Summit where Tencent and the local government would relay their plans for esports prosperity locally and globally. Now I understand that to build a global esports ecosystem will take a lot of work, but Tencent will be in the fourth year of its five-year plan and continues to show its dedication towards esports progression. Also, if there was a business that had the resources to pull off such a feat, it would be Tencent.

Games and Their Prize Pool 

Now for the fun stuff, the games, tournaments and their prize pools. Tencent already caters to a plethora of esports titles including League of Legends, Honour of Kings, PUBG mobile/ Peacekeeper Elite and Clash of Clans. They not only continue to support professional leagues but amateur leagues and competitions as well. The company runs its own Chinese league for League of Legends called the LPL which is sponsored by Nike. Furthermore, Riot a wholly-owned subsidiary of Tencent, puts on one of the largest esports events in the world, the League of Legends World Championships. In 2020, Tencent also has plans to develop the professional league for Honour of Kings called the Kings Pro League (KPL) with six home team venues. The game already has a winter and world championships that Tencent hopes to make global mobile esports events. To provide support for amateur competition, the league will have 6 open slots that will be filled via its semi-pro league, the KGL. The game also supports a Korean League which Tencent will change to a global format with a new name (King Pro League Global Tour) to attract talent worldwide. With a global reach in mind, Tencent focuses on PUBG mobile due to its immense popularity, announcing a USD$5 million prize pool for 2020 and Clash Royale, which has an established league in China, Asia and the Western World. With the emergence of 5G, it does not seem like mobile esports will slow down, and Tencent seems well-positioned to capitalize on this trend.

Largest Tournaments/Events 

Games Tournament Peak Viewership Prize Pool
League of Legends World Championship 2019 3.9 Million USD$2.225 Million
Honour of Kings World Championship 2019 0.764 Million USD$4.533 Million
Peacekeeper Elite Championship 2019 0.130 Million USD$0.429 Million
PUBG Fall Split Global Finals 0.525 Million USD$0.5 Million
Clash Royale CRL World Finals 2019 0.133 Million USD$0.4 Million

2020 could be another extension of the longest bull market in history, or we could see a pullback, no one knows. But market uncertainty shouldn’t stop any investor from investing in some of the highest growing industries in the world, like esports and video games. In a maturing industry, there are still ways to play the sector and reduce some of your risks by picking companies that have a diversified strategy in the industry. For the exhaustive list of reasons above, my pick for 2020 is Tencent. 

 

How Esports Athletics Research And Business

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How esports, athletics, research, and business blend together at NYIT

 “ ZDNet caught up with NYIT’s athletic director Dan Velez to talk about the university’s esports program, the CyBears, and the intersection of business, technology, and sports.

New York Institute of Technology has launched an esports program that could meld athletics, wins and losses with data, cross-department collaboration and ultimately careers for its students. We caught up with NYIT’s athletic director Dan Velez to talk about the university’s esports program, the Cybears and the intersection of business, technology, and sports.

Here are the takeaways from our chat:

THE START

It was a very organic process. We started our CyBears from our gaming club. We had a bunch of kids here on campus that was students that were playing video games already, and they wanted a more competitive and more structured place to do that. They approached us. They found a willing partner in our athletic director at the time, so we said to them, “Hey, we need certain things from you to see if this is something viable, something feasible for us to do.” We were keeping an eye on what was happening in the gaming world already, because it was four years ago, so not that long ago. And they did. They met every step. They took every step along the way. They filled out all the information. They came back to us with budgets and schedules and roster makeups.

One of the neat things about that was, they gave us a parts list for their initial machines, which are still around today, and they’re still being used. And they built those from scratch. 

THE METRICS

Wins and losses are important. They are just as competitive as a baseball player, basketball player, lacrosse player. There’s no doubt about that. They don’t take losing very lightly. So, they do want to win. But you start to look at participation numbers. There are numbers out there that over 70% of students are interested or associate as a gamer, and they’re playing video game, whether it’s Madden, or FIFA, or Overwatch, or League of Legends, or whatever it may be. Those numbers are high. It’s a billion-dollar industry. You have to pay attention to that. There are job opportunities here. There are internship opportunities here. We’re very fortunate here, in the New York area, that the Mets and Wilpons, they have two professional esports teams, so there’s a marketplace for it.

STUDENT RECRUITMENT

I think the other piece of it, on a college campus, is from an enrollment standpoint and a retention standpoint. We’re always looking for ways to attract high quality students, as well as keep those students here. I think at the high school level, you’re looking at ways to engage with your students. I think that you’re starting to see more and more at that grassroots level, where kids are getting involved in something where previously, that stereotype, that stigma out there, that gamers are loners or playing by themselves, this is giving an avenue to be able to make friends, and there’s a social component.

This year we’re in, this 2019-2020 year, is our first cycle of being able to go out and actively recruit students, and we grabbed 10 new students to New York Tech that have stated that they came because of what we were doing in the gaming world. We want that number to keep growing. Obviously, I do have to worry about that. I’d be lying if I didn’t. But we don’t single them out in the sense of, “Oh, you’ve got to be this major or that major.” We use it a lot of times as a conversation starter, and to get you engaged. And then once we get you here, then we start talking about the other avenues that can be pursued.

COLLABORATION

We’ve got a medical school here on campus. We’ve got a Center for Sports Medicine, which handles all our research and wellbeing of our traditional student-athletes. Well, when I approached them about esports, they jumped right in, because they realized there was little research. So, they launched the Center for esports Medicine. And there are doctors over there, there are clinical therapists, there are occupational therapists. They’re looking at those repetitive use injuries, which is really what these athletes suffer from. They’re sedentary, so they sit for a while. They’re constantly looking at a screen. So how does the chair need to be designed? How does the tabletop need to be designed? How does the keyboard need to be designed? How can we train them to be at their best? We know how to do that with a lacrosse player or basketball player or soccer player, but how do we do it with these athletes?

CAREERS

We’ve been able to expose our students to professional level gaming through volunteer opportunities and internships, all with the goal in mind of, “Listen. Go ahead, pursue your dream of being a professional gamer, but if that doesn’t work out, let’s expose you to the educational side and the business side of all of this. Because there is a big business here that’s going to need employees, and we want you to be as well trained as possible to go out into that workforce.”

PRODUCT DEVELOPMENT

One of the things that I’ve said here on campus is I’d love for the research that our medical folks are doing to then go talk to our engineering students, and possibly come up with projects that, “Hey, let’s work on the next generation of displays.” Because we’re realizing that the way the displays are done now, maybe there’s some impact to vision, and it’s impeding how well we can see what we’re doing, and then process that information. The seating, again, let’s talk to our design students, and talk to them about designing the next generation of the gaming chair. Does it need more padding, less padding, angles, straight up, vertical, horizontal, whatever it may be. But let’s use that scientific data that we have in collaboration with the physical results we have, to make it better.

 

All Megatrends ESports

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The Alpha Of All Megatrends: ESports

eSports is quickly becoming a dominant force across the world entertainment industry.

With growth set to continue, monetization will follow to around an easy $10 billion.

The industry is young, and so is the target audience. Decades of profits are ahead.

I don’t use the word ‘megatrend’ lightly. It is a precarious word, full of hype and unrealistic expectations. People often think that they can invest in any one of the companies exposed to one of these trends and make bank. Such strategies have lost many people a lot of money over the decades. Think of railroads, airlines, and solar, all boasted as megatrends. Sweeping cemeteries could be filled with the remains of companies that had remarkably short lifespans, their megatrend status notwithstanding. That’s not to say that some companies haven’t ridden those waves to tremendous profitability. There are some. But it takes time, the maturing of the industry, one or more shake-outs to scrub the losers, and finally stability. Good luck picking the winners.

Most recently, the aging of America and the swelling senior population has been often cited as a megatrend. Yet, the situation is stuffed with nuance, which I wrote in detail about herehere, and here.

I mention all this to underscore the fact when I use the word megatrend, it is not some loose label or click-bait. When it comes to eSports, or the competitive video gaming industry, there is plenty of data indicating how huge the rise has been and will yet be. That isn’t to say that there is no nuance here and you can just grab an eSports ETF and have your retirement secured. No, granularity and wisdom are always mandatory for true investing. Nonetheless, of all the megatrend waves to try and catch, I think this one is the easiest.

A Little History

Esports goes farther back than you might think. Ever heard of Spacewar!? It was developed in 1962 and features two spaceships dog-fighting around a gravity pulling star. This was the game featured in the first documented instance of an eSports tournament, hosted by Stanford University in 1972. Competitors played for a year-long subscription to Rolling Stone magazine.

Fast-forward to 1980 and we find the first large scale tournament, with 10,000 competitors showing up to clash in Atari’s Space Invaders. Then in 1983, the U.S. National Video Game Team was formed and took a bus tour around the country challenging arcade gamers to bouts and even tried organizing contests with other countries.

As the sport grew, so did the number of tournaments. From the Evolution Championship Series (“EVO”) to the Nintendo World Championships (OTCPK:NTDOY), both players and spectators started flocking. EVO is of particular mention. Since its inception in 1996, it has occurred every year since 2000, with each year showing considerable growth in a variety of metrics. Featuring only fighting games such as Street Fighter, Smash Brothers, and the like, EVO has garnered a tremendous popular following. EVO 2019, held at the Mandalay Bay for three days in Las Vegas, had 9,000 participants and was streamed to millions of others via various streaming sites. Viewed hours totaled 5.73 million.

The internet has revolutionized the gaming industry. Consoles gave way to personal computers. The prevalence of computers naturally rose to a prevalence of computer gaming, with players able to compete, alone or on teams, against opponents thousands of miles away.

Esports has become so popular that an arena was constructed at The Luxor in Las Vegas to host gaming events:

The 30,000-square-foot, multilevel HyperX Esports Arena is designed to host every form of competitive gaming, from daily play to high-stakes esports tournaments, and features a competition stage, 50-foot LED video wall, telescopic seating, PC and console gaming stations, and a network TV-quality production studio.

A new $50 million dollar facility is under construction in Philadelphia. This is in addition to dedicated eSports facilities in Honolulu HI, Arlington TX, and Burbank CA. Other facilities are outfitting themselves to host eSports events occasionally like Boardwalk Hall in Atlantic City. The worldwide architectural firm HOK, with 24 offices on three continents, is dedicating ever more personnel and resources to the field, imagining high tech and interactive eSports stadiums. HOK was in fact involved in the renovations to Boardwalk Hall mentioned above, as explained in a New York Times article:

HOK, a sports-focused architecture firm with a growing e-sports practice, which helped reconfigure the stage, change the lighting and set up a broadcast studio for live streaming, said Rashed Singaby, a firm senior associate whose previous work includes the Mercedes-Benz Stadium, home of the Atlanta Falcons.

HOK, based in Kansas City, is funneling more resources into the growing field. Two years ago, it had no designers working on e-sports; today, it has 15, said Mr. Singaby, who added he has had commissions for five e-sports projects in the past year.

Developers are now knocking on HOK’s door, including owners of empty big-box stores hoping to repurpose them, Mr. Singaby said.

“The numbers don’t lie,” he added. “The commitment to this ecosystem has been gigantic in the last 10 years. We don’t think this is going away.”

The parallels to professional physical sports are apparent. Interestingly, eSports has attracted the attention of professional athletes. Back in 2016 previous NBA star Shaquille O’Neal and MLB players Alex Rodriquez and Jimmy Rollins invested in NRG eSports, a professional group that plays League of Legends and Counter-Strike:

I am not suggesting that we use professional athletes as a gauge for whether or not an investment should be made. Rather, my point is that eSports is getting noticed. It is huge and growing. What was once a corner for people to point and laugh it is becoming mainstream, credible, competitive, and scalable.

Massive institutions are in on the action. eSports sponsors include Intel, Toyota, Coca-Cola, Comcast, Red Bull, Mountain Dew, T-Mobile, Audi, and Airbus. eSports events have occurred in London, Madrid, Hong Kong, Paris, and many others.

A Word On League of Legends

This particular game has become so important it deserves a section all its own. League of Legends, currently the most popular game in the world, is one I have personally had considerable experience with as a player and as a spectator. As most who have played will attest, it is addicting. Launched in 2009 by Riot Games [acquired in 2015 by Tencent (OTCPK:TCTZF) (OTCPK:TCEHY)], League of Legends has 80 million monthly users and 27 million daily users across 145 countries. From 2011, that is a CAGR of 36% and 33% between monthly and daily users, respectively. The 2018 League of Legends world championship had more viewers than the NFL Superbowl from that same year. The LoL Esports page on YouTube has 3.2 million subscribers. The video of the 2019 World Championships on that same page has had 5.1 million views. While it is free to play, the game relies on micro-transactions to earn revenue. For example, people can pay to get different “skins”, outfits if you will, for the characters they play. Riot brought in $1.4 billion of revenue in 2018. As they and other platforms continue working on monetizing their products, hefty profits will follow. A dedicated eSports facility, complete with dining area and gift shops, sits adjacent to Riot’s headquarters in Los Angeles.

So it’s popular. But is it profitable?

This is the question that investors want answers. While there is plenty of money involved in eSports, where and when it flows is tricky. An April 2018 article from gameanalytics explains it well:

eSports has come far in 20 years, but while it might be rivaling professional sports leagues in terms of viewership, the financials are a different story. The NFL was expected to generate $14 billion in revenue in 2017, with the NBA hitting $7.4 billion. At its most optimistic level, Newzoo forecasts that global eSports revenue could reach $2.4 billion in 2020.

Video games can be hard to monetize, especially those offered online. The list is long of free to play titles: League of Legends, Fortnite, World of Tanks, Apex Legends, and Hearthstone among many others. These games require people to spend money on extras, which is not necessarily a given or consistent.

That being said, higher education is catching on to the trend, indicating that the space has moved from hobby to profession, as told by a Forbes article:

Ohio State will debut an 80-seat facility in the fall (of 2019) around the time it debuts what it calls “a first-of-its-kind comprehensive esports program” that will include “undergraduate and graduate degrees; an elective course in esports content production; online certification programs for specialized credentials; and a gaming speaker series.”

Smaller schools such as the University of North Texas have been engaged in esports for even longer. UNT opened a $200,000 esports facility in 2017, open to any student or faculty member but designed specifically for competition training.

And the 40-year-old private Full Sail University is building a significant portion of its campus life and work opportunities around a new esports arena, team and club, said the school’s esports strategist Bennett Newsome.

What the Future Holds

We have established that eSports is ridiculously popular and will very likely continue to grow. We have also established that the monetization of video games has been elusive, and currently sits at a pretty low level. But if the popularity can be coupled with profitable monetization, you have a true megatrend. That was the topic of a fascinating article from venturebeat that is worth reading in entirety, but I will quote and summarize. The article was based on a webinar wherein industry experts held a panel discussion to address the issue of monetization. Some main points:

– Like professional sports, eSports can earn money from media distribution rights, live events, advertising, sponsorship, merchandising, and prize winnings. Unlike professional sports, however, the games themselves are owned, which introduces another avenue of monetization. No one owns football. No one owns basketball. They are without copyright. This is in stark contrast to video games, which are intellectual property and which are owned. Robb Chiarini, director of eSports at Ubisoft, spoke to this in some detail:

If you’ve ever heard me talk about these things, I talk about how traditional sports have to sell media rights. They have to have sponsors. They have to have advertisers. They have to have all this influx of money, because they don’t have anything, at the end of the day. They don’t own the ball. You and I could start up a new football league tomorrow if we wanted to and no one can stop us from using that sport as a vehicle for a program. We’d get our own sponsors, do our own things, and we could do anything we wanted. Nobody owns the IP of the football.

With video games, we’re in a very different place, in that we can look at things differently if we choose to. As many esports start up, they look at it going, hey, this is a marketing a vehicle, a messaging vehicle, an engagement vehicle, a community retention and engagement vehicle, rather than a P&L against a thing to provide an entertainment that creates profit. For us, owning the game gives us the opportunity that every activity we do, every dollar we spend on an esport, is actually a way for us to engage with our existing communities, create viewership, create playership, create opportunities for monetization within the game and on the game itself.

All of that is super interesting. I believe esports has the biggest leg up against traditional sports in that way. Adding to that-I agree with your list, merch and media rights and things. There are some other things that are interesting. Gambling is out there in the space, not that I’m a proponent or otherwise, but that’s a revenue stream that’s out there in the world. Fantasy leagues, gambling sites, things like that. Another thing we do in esports, or in gaming in general, is interactive money. When you look at things like Twitch Bits and things of that nature that allow people to purchase around the game, that’s different from the traditional sports. That’s another revenue opportunity within the ecosystem, and for all of gaming.

Revenue for eSports was $906 million in 2018, broken down as follows:

Jonathan Singer, industry strategist at the content delivery network, cybersecurity, and cloud service provider Akamai mentioned the following to elaborate on that above graph:

I have a little bit of a bomb to throw, which I feel is a good way to start off a panel. That is, we talk about where the revenue is growing to. I think it’s supposed to be $904 million this year and then a billion soon enough, with 380 million global viewers. That’s a nice size of audience. But when you do the division there, you’re talking about $2.60 a user… Is that enough money to go around? It’s not a lot of money yet. I know we’re growing as an industry, but when we’re talking about revenue models, you have to talk about how we’re getting there and how we get-everyone’s fighting for a slice of that pie.

While today that sounds bad, it also underscores the opportunity, as Kent Wakeford, chief operating officer at eSports organization Gen.G pointed out:

I think what you just framed up is one of the most exciting opportunities in esports. Goldman Sachs had a report recently where they showed that the average esports consumer monetized to about $3.94. Whereas the average consumer in traditional sports is monetizing to about $54. That means there’s a 10X opportunity within the esports market to grow and build those connections with fans, to bring them things they’re willing to pay for, for their excitement and their fandom and their engagement with teams and players. I view that as an opportunity.

When I look at the revenue growth drivers in esports, I think they’re all way under what the reality is going to be. We see it in the viewership. We see what’s happening on a global basis with stadiums being built all around the world – in the U.S., in China, in Korea. We see brand sponsors coming in. We see bigger media rights deals happening. We see merchandise. We just saw the announcement with the Overwatch League and Fnatic doing merchandise. It’s moving at a much faster speed than a lot of the industry reports have been putting out. That’s the opportunity. That’s why you see so much capital coming into esports.

The Silver Screen

Another avenue for profitability is turning video games into full-length movies. This has already been happening to some success with the titles “Pokemon: Detective Pikacho”, “Rampage”, and “Angry Birds 2”, “Tomb Raider”, and “Prince of Persia”. I imagine the trajectory here being similar to how sports have become inexorably tied to cinema. What with hugely popular movies like “Field of Dreams”, “Hoosiers”, “Miracle”, “Rocky”, “Rudy”, “Remember the Titans”, “Radio” and others, don’t be surprised to see movies based on video games taking their place among the most popular movies. The difference with video games is that, as was mentioned before, no one owns the rights to football or basketball. I could make a sports movie today and not have to pay a dime of royalties. However, if I tried to make a movie about one of the champions from League of Legends without getting the rights and paying a handsome fee, I could be sued. This could be a vast source of revenue and growth.

See, League of Legends has considerable lore surrounding each of the 146 characters you can play as. Their stories are distinct, yet many are tied to one another. The structure is already in place to make full length features films derived from this lore. In fact, the folks at Riot have already put some stories to cinematics. Feel free to conduct a YouTube search of your own, but this clip tells the story of one Lucian seeking to free the soul of his deepest friend, Senna, who was killed by Thresh, a soul collector:

As the popularity of League of Legends continues to grow, expect big-name studios to start launching themselves into these gamer worlds.

Even the mighty Amazon (AMZN) is getting heavily involved. They purchased the video gamer streaming service Twitch in 2014. Twitch has 15 million daily active users.

Asia

In all my talk of megatrends, I have to mention Asia here. Everyone has talked about Asia, and China in particular, as the next big growth markets. Successful investing in these regions has been challenging as the situation is filled with complications. As it relates to video games, it is valuable to understand the cultural role technology and video games have there. Traditional sports, as we would term them, don’t have a huge place in Asian culture. Children are encouraged to study rather than exercise. In contrast, video games are massive in the region. eSports professionals are celebrities. Regarded as the best League of Legends player in history, “Faker” of South Korea is paid $2.5 million dollars a year to play for the eSports squad SK Telecom T1. He dropped out of high school to get on the team.

China alone makes up 57% of the global eSports audience. Ann Hand, CEO of Super League (SLGG), an eSports community and content platform said, “The first place you should go if you care about gamers is Asia, and specifically Greater China, as fast as possible.”

If Asia is the next big growth market, video gaming is the industry that will be among those to lead the way there.

Where Traditional Sports and eSports collide

Never ones to look down their nose at potential profits, the world of traditional sports is hitching their wagon to eSports. Nike recently disclosed a four-year sponsorship of the League of Legends Pro League (“LPL”) in China. They are to provide shoes and apparel to 16 teams in the region. Of the deal Nike said:

Since its inception, Nike has always believed that in all sports, a strong body and will make athletes better. As China becomes a new e-sports cultural center, Nike is pleased to support the next generation of athletes and establish a long-term cooperative relationship with e-sports to contribute to the future development of sports ecology.”

This isn’t all. Adidas has signed agreements with the French team Vitality. Puma has linked up with North American team Cloud9 to create signature apparel for gamers. While not necessarily inevitable or to happen soon, eSports may even become part of the Olympic games. A forum was held by the International Olympic Committee and the International Sports Federation last July to discuss the matter. They are steering clear of involvement for now, but the fact that the discussion was had at all is revealing. The proverbial ball is rolling.

Brief Exploration and Conclusion

The final point to make is that the audience for eSports is young. The average video gamer is between 20 and 25 years of age. There are many decades of monetization ahead as these fans age and bring up their own children in the video gaming culture. This is in contrast to traditional sports, where recent data has shown considerable waning interest. The average NFL viewer is 50 years old. MLB is 57 years old. MBA and NHL is 49. This is amid a backdrop of plummeting viewership and emptier stadiums. eSports is young. It is growing. Money is flowing into it. But the best part is that the ship has not set sail yet, as it were. Remember the stats from above where the average eSports consumer monetized to about $3.94 vs. the $54 for traditional sports? Recall also that people are watching eSports more than they are watching the Superbowl. As eSports monetization closes the gap on traditional sports, lucrative might be an understatement. As firms figure out how to monetize eSports, and they are, it is going to be fantastically profitable.

The opportunity exists because profitability has lagged popularity, for now. A quick look at some of the top names in the space shows that market participants are concerned about growth. Tencent currently trades at $43, well off the all-time high of $60 back in the first part of 2018. Activision Blizzard (ATVI) is trading around $55, while back in mid-2018 they were above $80. The breather is an opportunity to buy while monetization takes shape.

As it relates to valuations, value investing purists might shy away from the high P/E ratios of Tencent at 32 or Activision at 25. I prefer to consider these ratios in context, and for both companies, their respective P/E ratios are well off their five year average P/Es of 43 and 51. In that respect, they are cheap. In fact, all the other traditional valuation measures (P/S, P/FCF, etc.) for Tencent are below 5-year averages. Activision is more of a mixed bag. If value is your thing, Tencent may be the better choice. Activision Blizzard owns Call of Duty, Overwatch, and Candy Crush. Tencent owns League of Legends and has a 40% interest in Fortnite. It terms of the most popular games and in demand content, these two are the winners. That should be a good starting point for individuals to conduct their own due diligence.

For exposure to a more pure eSports model, Super League Gaming is interesting in that it doesn’t own any games but rather operations in the content delivery and interactive platform space. It connects players through its cloud. They specifically market themselves to the sub-pro audience. The CEO is aiming to create a “Little-League” for eSports. This niche player might be interesting to explore. They had their IPO earlier this year at $8.50 but currently trade at $2.74.

In light of that brief overview, in my upcoming articles, I am going to start jumping into this sector head first. I will begin by exploring several eSports and video-gaming ETFs (NERD) (ESPO) (VIDG) and then move on to individual companies such as Activision Blizzard, Tencent, and Super League Gaming. I hope you join me. For now, the best way to play the trend is to either A) buy one of the above mentioned ETFs or B) buy the stock of the companies who own the more popular titles in the eSports and gaming world.