Esports is one of the fastest growing forms of entertainment in the world and has one of the lower capital requirements for team ownership in the world of professional sports. How can an individual or company invest in a team or league and what are the potential benefits and risks?
This understanding of esports is certainly correct – it is indeed a rapidly growing form of entertainment. Equally important, it attracts a demographic that is overall youthful, tech-savvy, highly communicative, loyal, and willing to spend. It is also correct to say that the initial cost of a typical eSports franchise (considering that not all eSports operate on a franchise model) is generally lower than the price of a professional sports team in a national premier league or international league one established traditional sports (e.g. hockey, baseball, football, basketball, etc.). But I would argue that such a difference in price correctly reflects differences in brand awareness, fan base size, venue ownership, broadcast licensee allocation, merchandising sales history, event ticket sales history, etc. For example, you can’t fairly compare the Toronto Defiant (an Overwatch League franchise) — a team that’s been in existence for four years and playing a game that’s six years old — to the Toronto Maple Leafs (an NHL franchise), a 105 year old team playing game 150 or more years old. However, it is clear that some parties are certainly counting on a steady convergence of these assessments over time, even if the situations are not entirely analogous. For example, no one “owns” the hockey game – but Activision Blizzard certainly owns the Overwatch game.
From an investment perspective, just like in other professional sports, many esports teams are privately owned. In these cases, a direct investment opportunity is not viable unless one party can provide a very large amount of money. However, some teams (or their corporate owners) are publicly traded and in these cases a fractional interest can easily be bought on the open market. In the context of these cases, it would be inappropriate to attempt to summarize in a few brief words the applicable “risk factors” associated with such investments (and to suggest that a prospective investor spends several hours scrutinizing the applicable prospectus). , but suffice it to say that they include all the factors that would normally apply to a sports store along with a few extra ones that reflect the unique nature of esports. As is common in the investment world, the potential financial benefits associated with it reflect such risks.
Do you have any other insights into any part of the gaming industry in Canada that you think would be of value to our readers?
The gambling industry is a complex and rapidly evolving industry in many ways – operationally, competitively, technologically and, last but not least, legally. This makes it an exceptional opportunity in many respects, but also a risky one. Fortunately (for the legal profession), this is an environment where lawyers often thrive and are always a necessity.