Despite its global revenue growing about 50% from 2015 to 2016, eSports is still a frontier market.
That's according to a report published this week from Pacific Crest Securities, which cited estimates from NewZoo, a video-game and eSports analysis firm, that reported 2017 will see more than 40% growth in eSports revenue to nearly $700 million internationally. Identifying opportunities for growth, analysts located potential in advertising, sponsorship and media rights.
While Activision Blizzard (ATVI - Get Report) , Tencent Holdings' (TCEHY) Riot Games and Valve mostly dominate the publishing market, further formation of eSports leagues will draw more consumers and create competition, the analysts said.
Regularly, 190 million people are expected watch eSports in 2017, up by 20% from 2016. With that scale, and 79% of participants under the age of 35, eSports is an attractive opportunity from which to generate revenue for streaming platforms, the Pacific Crest Securities researchers said.
Here are three companies with potential to benefit from the growing eSports fandom, according to the report.
Editors' pick: Originally published June 9.
Activision Blizzard is a video game developer based in Santa Monica, California. Pacific Crest found it to be the most direct investment in eSports, producing Hearthstone, which has 70 million players, and Overwatch, which has 30 million. Its other games, such as Call of Duty, also are growing in popularity in the eSports arena.
Activision Blizzard has plans to start a competitive league for Overwatch, however, the report casts doubt that the league will start in 2017. With few other places to play the game competitively and for money, the analysts note postponing could decrease the game's popularity.
Although Electronic Arts' (EA - Get Report) FIFA and Take-Two Interactive Software's (TTWO - Get Report) NBA 2K and WWE lend themselves to eSports, their followings are small, according to the analysts.
Amazon's (AMZN - Get Report) Twitch, with 10 million viewers watching two hours a day, is the largest streaming platform for eSports, but the analysts said because of Amazon's size, it does not have enough force to increase the company's stock price for now. Google's (GOOGL - Get Report) YouTube has a similar challenge, though it did nab exclusive streaming rights to the eSports Championship Series from Twitch.
Pacific Crest, however, sees Facebook's (FB - Get Report) investment in video as an opportunity for it to capitalize on eSports more than traditional sports because they are already online. The company recently acquired the rights to 5,500 hours of content from ESL, an eSports competition organizer, and 1,500 hours were exclusive to the site. It has also signed with teams to stream on Facebook Live. With its data and billions of users, Facebook could drive greater interest from advertisers in the niche entertainment, the analysts said.
Major League Baseball's BAMTech, which is supported by Disney (DIS - Get Report) , may also become a dominant player globally after a $300-million deal with Riot Games to stream the League of Legends championship on its MLBAM streaming site.
Since Xbox Live is a material part of Microsoft's (MSFT - Get Report) business, the analysts said it has a strategic advantage. Most eSports gamers play on PCs, because consoles typically have less advanced graphics and a more casual gaming community. The analysts, however, said they see potential growth in console gaming. Microsoft's new console, Xbox Project Scorpio, may offer new technology to better compete with PCs when it becomes available in the fall.