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The rapidly growing field of professional video game competitions, called esports, is not expected to be a huge business for game publishers for some time, but it’s already paying off for graphics-chip maker Nvidia, which makes processors for running high-end gaming PCs.
That’s one finding from a report on esports released Tuesday by Wall Street investment research firm Bernstein.
“While much of the focus (at Nvidia) has been on the AI (artificial intelligence) and data-center opportunity, gaming still makes up well over 50% of the business, and has been growing very strongly over the past several years,” Bernstein said in a note to clients. Gaming processor sales increased at a compound annual growth rate of 33% from 2012 through 2016, the firm said.
“Going forward we model gaming growth sustaining in the double digits,” Bernstein said. It estimates Nvidia gaming processor sales will grow at a compound annual rate of 16% through 2019. Nvidia shares touched an all-time intraday high Tuesday of 254.50 before retreating to a session loss of 0.8% to 247.71.
“While near-term demand from cryptocurrency (mining) has drawn some heightened interest on the gaming (chip) business, we believe there are larger and longer-term drivers that are being overlooked or underestimated, in particular with regards to esports,” Bernstein said.
Another early winner in esports has been streaming video service Twitch, owned by Amazon.com, Bernstein said. Twitch.tv is the most popular esports streaming platform.
Meanwhile, game publishers are in the early stages of monetizing esports through sponsorships, advertising, licensing, event ticket sales and merchandising, Bernstein said.
“Although a small portion of the overall video game market today, esports presents a potentially massive growth area for the industry,” Bernstein said. It estimates that esports accounted for about $700 million in revenue in 2017, or less than 1% of the $100 billion gaming industry. But the business is expected to see a compound annual growth rate of 36% through 2021, reaching $1.65 billion in sales.
Three game publishers currently dominate the esports field: Valve, Riot Games and Activision Blizzard. Valve publishes “Dota 2” and “Counter-Strike: Global Offensive.” Riot Games, a unit of Tencent Holdings , owns “League of Legends.” Activision’s Blizzard division owns “Hearthstone” and “Overwatch.”
Global viewership of esports is expected to grow from 143 million enthusiasts today to 250 million by 2021, according to research firm Newzoo. Esports fans tend to be younger, wealthier and have more job stability than the average online population, making them attractive to advertisers, Bernstein said.
In the U.S. market, esports viewers already outnumber those of the National Hockey League, and esports viewership is expected to surpass Major League Baseball by 2020 to become the second-most-watched sport, Bernstein said.
Source: European Gaming Media and Events