Jul 21, 2021
[5 min Read]
Esports is a huge industry and is only forecasted to continue rapidly growing in the coming years both in terms of viewership and revenue. While there is not a whole lot of esports ETF's out there, what makes $NERD ETF stand out is its low expense ratio, and its higher stake in growth stocks such as $HUYA and $EGLX, as well as China-based companies. To top it off, it has a high annual dividend yield of 1.07%.
Electronic sports (esports) is an industry where skilled video gamers play competitively. Esports encompasses competitions across a variety of video games such as Fortnite, League of Legends, Call of Duty, Overwatch and many more. These gamers are watched and followed by millions of fans across the world who either watch live online or on TV. An interesting fact is that more people actually watched the 2016 world finals of League of Legends (43M viewers) than the NBA Finals Game 7 that year (31M viewers).
The Roundhill BITKRAFT Esports & Digital Entertainment ETF (NYSE:$NERD) “tracks a tier-weighted index of global companies that are actively involved in the esports and other digital entertainment industries” involving video game publishing, development, streaming, leagues and tournaments and gaming hardware and technology. The total value of assets under management for $NERD is $93.2M.
Top Holdings (Ticker, $NERD ETF Exposure):
Huya Inc (NYSE:$HUYA, 5.5%) - China-based holding company engaged in the operation of game live streaming platforms. Their game content includes gameplay, esports tournament events and other esports game shows.
Modern Times Group (STO: $MTG-B, 5.1%) - A Swedish-based entertainment company operating in esports and gaming and providing experiences through live events, pro leagues and international tournaments all available to follow live online and on TV.
Tencent Holdings (OTCMKTS: $TCEHY, 5.1%) - A China-based investment company heavily involved in talent and technology innovation. Most notable investments include Riot Games (League of Legends) with 100% stake, Epic Games (Fortnite) with a 40% stake and Bluehole (PUBG) with an 11.5% stake. Other investments worth noting are Supercell (Clash of Clans) with 84.3% stakes and also being an investor of growing messaging software Discord.
Activision Blizzard (NASDAQ: $ATVI , 5.0%) - This company was the first independent video game software developer and distributor in 1979 and has since created some of the most iconic and memorable game experiences of all time. They operate on various gaming platforms such as console, PC and mobile through their many segments. Some of their most notable games include the Call of Duty series, Overwatch, World of Warcraft and Candy Crush Saga.
Corsair Gaming (NASDAQ: $CRSR, 4.8%) - A leading global provider and innovator of high-performance gear for gamers by helping them perform at their peak and for content creators to produce studio-quality content. Being in the market for over 2 decades now, they have capitalized on customer loyalty due to their brand authenticity and reputation of finely engineered products that deliver an uncompromising level of performance.
Audience Expansion and Viewership
As the largest esports market in the world, China is really capitalizing on the emerging industry. In 2020 alone, the Chinese esports market generated US$85M and was estimated to grow at a CAGR of 17% until 2023. The metrics tell us that revenues generated by the Chinese market alone are 35% of total estimates for the global esports industry.
Some key trends that are helping to shape the Chinese esports landscape are:
What to Look Out for:
The statistics above really showcase the rapid growth of esports to come which I think has been amplified due to the COVID-19 pandemic that has seen viewers and new audiences spend more time than ever at home. The pop-culturalization and growing awareness of esports will only drive viewership growth and contribute to revenue growth in the industry. From an investment perspective, while esports is competitive gaming, it is ultimately a digital media and investment opportunity which is what $NERD ETF encompasses.