Major Streaming Companies Threatened by Fortnite as Gaming Communities Capitalize on eSports Explosion

Major Streaming Companies Threatened by Fortnite as Gaming Communities Capitalize on eSports Explosion

PR Newswire

NEW YORK, January 23, 2019

NEW YORK, January 23, 2019 /PRNewswire/ --

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Analysts are now calling eSports and egaming the greatest investment opportunity of the past few years, and the proof is in the threat it poses to competitors. In a recent letter to shareholders, Netflix (NASDAQ: NFLX) wrote, "We compete with (and lose to) Fortnite more than HBO." Multiplayer video games like "Fortnite," which raked in a massive $2.4-billion in digital revenue last year and is one of the fastest-growing games of all time, have evolved into a popular spectator sport where gaming enthusiasts spend hours watching others play online. Major streaming companies such as Netflix are now in competition for screen time with eSports, and they're worried that the growing youth demographic is starting to find their primary source of entertainment from YouTube or Amazon's (NASDAQ:AMZN) Twitch. Chinese social media giant Tencent Holdings Ltd (OTC: TCEHY), which holds a 40% stake in Epic Games (Fortnite's developer), plans to invest $150-million a year in eSports, a burgeoning industry that's already generating up to $1-billion in revenue for Activision Blizzard Inc. (NASDAQ: ATVI). But for those who want to get in early on the eSports gold rush, investors should look at Enthusiast Gaming (TSX-V:EGLX) (OTC:EGHIF), who has managed to capture the largest gaming network in North America in three short years.

Online networks fuelling the growth of eSports 

Huge gaming networks such as Enthusiast Gaming (TSX-V:EGLX) (OTCQB:EGHIF) are best positioned to cash in on the upcoming eSports investment rush. Online gaming communities form the most crucial link within the eSports ecosystem. These networks are to eSports what the nation's sports bars and living rooms are to the NFL and MLB - serving as a crucial hub for the growth of a real community while propelling the eSports engine, driving the popularity of games such as Fortnite. Let's take professional sports as an analogy: A first-time viewer watching a baseball game, for instance, may have no notion of what's happening. Fans and enthusiasts are an outgrowth of a real community of passionate people, sharing their love and discussing strategies and techniques. With the Internet, gamers can now visit these forums and websites to get research on how to play the game better, finding like-minded peers to share their enthusiasm and build an authentic community.

These days, Gen-X, Millennial and Post-Millennial gamers frequent popular media sites such as Destructoid, Daily eSports, Operation Sports and the Escapist (all owned by Enthusiast Gaming) or on Twitch, a streaming network that Amazon (NASDAQ:AMZN) purchased back in 2014 for $1-billion. Within these networks, gaming enthusiasts become part of a wider community, sharing their passion for video games while discussing tips and strategies. This is why companies like Enthusiast Gaming (TSX-V:EGLX) (OTCQB:EGHIF) who understand the value of building a network have positioned themselves at the forefront of the video gaming market.

Cultivating these communities is how Menashe Kestenbaum, founder and CEO of Enthusiast Gamin, got his start when he began writing for a then-new gaming site called IGN. Connecting for the first time with people as passionate about gaming as he was, Kestenbaum went on to start a passion blog named "Nintendo Enthusiast", taking his followers with him, and organizing small meetups of gamers at a local Toronto pub.

It's a testament to the popularity of video gaming and eSports that over the next three years, this single blog grew into one of the largest network of gaming enthusiasts in North America. Enthusiast Gaming (TSX-V:EGLX) (OTCQB:EGHIF) now boasts a network of 80 sites and counting, drawing over 75 million visitors a month. High-performing sites become targets for buyouts from Enthusiast Gaming. It's on these online communities, where gamers actually learn how to excel at multiplayer games such as Fortnite and learn about their favourite teams and players. This record haul contributed to pushing digital games revenue up 11% to $109.8 billion last year.

Enthusiast Gaming (TSX:EGLX) (OTCQB:EGHIF) recognize the opportunity that lies in multiplayer games such as Fortnite, Overwatch and League of Legends. To truly grasp the size of this opportunity, we need to first understand that online gamers and the gaming community are essentially recreating the very thing that traditionally makes live television into a tremendously profitable ratings juggernaut. With multiplayer games, we can now have must-watch live eSports events seen by millions and then sell ads at these showcases. Currently, these events are streamed online through sites such as Amazon's Twitch, YouTube Gaming, and the Microsoft-owned Mixer, but there's been talk about streaming services such as Netflix (NASDAQ: NFLX) getting into streaming eSports too.

Live eSports events are now pulling in larger and larger amounts of marketing and sponsorship budgets, as brands jump at the opportunity to showcase their brand at events such as Enthusiast Gaming's (TSX-V:EGLX) (OTCQB:EGHIF) Enthusiast Gaming Live Expo (EGLX) pulling in over 55,000 attendees in 2018, smashing its own records year after year as the largest gaming convention in Canada. Approximately 39% of the total US gaming demographic is in the 25-34 age range, according to Gamescape, with 16% of 18+ viewers taking in an above-average $50,000-per-year income. This hard-to-target market is why the sponsorship and advertising funds in eSports continue to increase annually.

It's now the spectator sport of choice among the youngest generation-which is why well-known sports industry giants are also throwing their hats in the live eSports ring. In 2017, Robert Kraft of the New England Patriots and two of his fellow sports owners, the New York Mets' Jeff Wilpon and LA Rams' Stan Kroenke, all invested tens of millions into their own franchises within Activision-Blizzard's (NASDAQ:ATVI) Overwatch eSports league. Meanwhile, Tencent Holdings Ltd. (OTCPK: TCEHY), which has plans to create a $14.6 billion eSports industry in China, already owns a 40% stake in Epic Games, which publishes Fortnite, currently the world's most popular game.

eSports: an iPhone-class industry disruptor 

As shown by Enthusiast Gaming's (TSX-V:EGLX) (OTCQB:EGHIF) ascent, the growth of this industry has been absolutely staggering. From a small Sunday gathering of 120 gamers, EGLX is now the largest gaming convention in Canada. The live EGLX event also helps to fuel the growth of Enthusiast Gaming's (TSX-V:EGLX) (OTCQB:EGHIF) online network, lending it authenticity within the wider gaming community.

eSports is on the cusp of revolutionizing the gaming industry. ESPN has signed deals to broadcast hours of gaming on its main channel and affiliates. 2024 Olympics organizers are now in talks to include eSports as a "demonstration sport" at the Games in Paris. According to Newzoo, eSports is the "biggest disruption to hit the industry since the launch of the iPhone in 2007."

Meanwhile, Enthusiast Gaming's (TSX-V:EGLX) (OTCQB:EGHIF) continues to add to its online portfolio at a rapid pace, having recently announced an exclusive partnership with Blue Ant Media to represent all the United States online traffic of the 900-channel Omnia Media network, the No. 1 network for global gaming in terms of viewership. With such a diversified network, the company can now better cater to a fast-growing gaming segment, which allows advertisers to better target their gaming audience. A current comScore rank of No. 5 in gaming traffic and climbing puts them just behind corporate-owned sites such as Twitch, IGN, GameSpot and Curse. In its latest third quarter results, the company posted eye-watering YoY revenue growth of 625% year to date, with plenty of room for growth.

The communities within Enthusiast Gaming's networks are the birthplace of eSports and will continue to have the finger on the pulse of which new games will skyrocket in popularity. Companies such as Enthusiast are well placed to secure opportunities and position themselves to dominate the video game and eSports industry far into the future.

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