Esports, Gaming and Gambling Bi-Weekly Update Volume 1 - October 11, 2019
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Esports, Gaming and Gambling Bi-Weekly Update Volume 1 - October 11, 2019 With this issue we are inaugurating our Esports, Gaming and Gambling bi-weekly update report which includes industry news and delves into an in-depth feature story. It also covers global industry-wide and company specific Feature Story news, including our current coverage of The Stars Group, Inc. (TSGI-TSX, Tender), Score Media and Gaming, Inc. (SCR-TSXV, $0.60, Speculative Buy, PT $0.90/shr) and Cineplex, Inc. (CGX-TSX, $23.58, Buy, PT $34/shr). Our Drill Down into Twitch recent esports industry white paper explored the ecosystem, trends and investments in detail. (LINK) Monetization Streams Esports: Global Viewership and Partnerships Remain as Top Headlines Understand How Twitch and Its Content Creators Monetize Viewership – There are five dominant ▪ ESL’s (formerly Electronic Sports League) Joint Venture with Huya for Potential China Expansion – methods to monetize Twitch viewership including The JV brings competition to Twitch’s 75.6% streaming market share and will enable ESL to host channel subscriptions, donations, sale of branded Chinese tournaments and competitions. (Bloomberg) merchandise, advertising and sponsorship. (JUMP TO THE DETAILS) ▪ US President Donald Trump Joins Twitch; Twitch Tops the Chart in Q319; Gaining ~2% Market Share Q/Q – Subsequent to signing exclusive deal with former Twitch personality Ninja, Mixer’s Q319 total ---------------------------------------------------- hours watched declined 6% from Q219 reflecting in part on lower seasonality. We believe that Ninja’s Trivia Time move garnered meaningful media attention for Mixer, especially in the streamer’s community What Were the Top Three Most Watched Titles exploring broadcasting mediums other than overcrowded Twitch. (CNN, Stream Elements) by Live Esports Hours on Twitch and YouTube in 2018 (In Order)? ▪ Activision Blizzard’s Overwatch Leagues Grand Finals Broke Last Year’s Global Viewership Record A. Fortnite, League of Legends, Counter-Strike: with a 16% Boost – Additionally, the live event sold-out the 19,500 seat Walls Fargo Center in Global Offensive Philadelphia, home of the NHL’s Philadelphia Flyers and NBA’s Philadelphia 76ers, and was attended B. League of Legends, Counter-Strike: Global by a diverse demographic of fans. (Esports Observer) Offensive, Dota 2 C. Fortnite, Apex Legends, League of Legends ▪ Call of Duty: Mobile Game Surpassed Record 100M Downloads Worldwide In Just A Week, (Answer on pg. 10) Outshining PUBG and Fortnite – With average gross revenue per download at $0.17, the game brought in $17M in player spending. We view this as a positive catalyst for the title’s further ---------------------------------------------------------------- mainstream adoption. Meanwhile, the esports industry welcomed the newly franchised Call of Duty Snapshot: Market Performance 25/09/2019-10/10/2019 - 2 League (“CDL”) to join the League of Legends and Overwatch franchised leagues in 2020. Enthusiast NA Europe APAC weeks return Gaming (EGLX-TSXV, NR) and OverActive Media (private) have secured franchise teams in the Publisher -6.6% -10.4% 0.5% recently formed league. EGLX acquired non-controlling interest (NCI) in the Overwatch Leagues’ Hardware 2.1% -3.6% -4.7% Media -5.2% -6.8% -0.6% Vancouver Titans and the Seattle-based Call of Duty team. NCI represents a new strategy for Gambling -4.5% -0.9% -0.5% publicly listed companies to gain exposure to franchised teams. (Sensor Tower) Tournaments -13.9% 0.0% -9.4% Streaming -2.9% 0.0% -2.4% Gambling: Regulations Surrounding Online Betting Continue to Evolve Investment Firms -14.0% 0.0% 0.0% Simple Average Return -4.7% -3.2% -1.0% ▪ The Stars Group, Inc. (TSGI-TSX, Tender) Agreement to be Acquired by Flutter Entertainment (FLTR- Weighted Average Return - LON, NR) in a Mega Merger – See Technology & Gambling Analyst, Gianluca Tucci’s recent note. by Market Capital -2.0% -4.3% -1.3% S&P 500 0.0% ▪ Fnatic Announced Continued Multi-Year Partnership with Rivalry.GG – Rivalry, the esports betting S&P/TSX -0.4% Nasdaq Composite 0.5% platform, signed a six-figure deal with Fnatic’s CS:GO team. Partnerships between teams and betting platforms is not new, Betway, a global bookmaker, has partnerships with various teams including the Ninjas in Pyjamas CS:GO team, Invictus Gaming Dota 2 team, among others. (Esports Observer) All the figures in the report are in US$, unless stated. Rob Goff, CFA | 416.933.3351 | [email protected] Gianluca Tucci | 647.794.1926 | [email protected] Pooja Sharma, MFIN, B.E. | 647.794.1922 | [email protected] Karolina Kosior | 604.647.4379 | [email protected] Page 1 of 30 Top Highlights More than $6M in Prizes Announced for Activision Blizzard’s (ATVI-NASDAQ, NR) 2020 Season of Call of Duty League (CDL) – The prize money for the 2019 tournament series was at $6M. The tournament series was discontinued in favour of franchise-based league under the official Call of Duty League. The 2020 franchise league is a city-based league with twelve teams from eleven cities (Atlanta, Chicago, Dallas, Florida, London, Minnesota, New York, Paris, Seattle, Toronto and two Los Angles teams). The inaugural event will play the soon-to-be released Call of Duty: Modern Warfare, exclusively on Sony PlayStation 4 (event co- sponsor) in 5v5 format. Additionally, the league will have the franchised teams travelling between cities. No additional information on the format of games was provided or if the games will resemble the Overwatch Leagues homestand format. (IGN) The Overwatch League Grand Finals Drew 12,000 fans in Philadelphia with Global Viewership of 1.12M – The San Francisco Shock defeated the Vancouver Titans to win the 2019 title. ESPN reported the Overwatch League grand finals reached 1.12M global AMA (Average Minute Audience), which represented a 16% increase from the previous year. AMA is calculated by dividing the total minutes watched by the total minutes broadcast. In the US, AMA was up 41% and up 13% for the 18-34 demographic, specifically. Activision Blizzard partnered with third-party data measurement firm Nielsen earlier in the year to track both the Overwatch League and Call of Duty League viewership. The key differences from last year was that the 2018 competition was two days and broadcast on ESPN as well as DisneyXD, while this year ABC/ESPN network television had linear broadcast rights for the one-day event. The Finals were also exclusively streamed on Twitch, which entered into a $90M media rights deal with Activision Blizzard to digitally stream Season 1 and 2 of the Overwatch League. The sold-out Overwatch Finals live event was held at the Wells Fargo Center, home of the NHL’s Philadelphia Flyers and NBA’s Philadelphia 76ers and attended by a diverse community of Overwatch fans. (Esports Observer) The Overwatch League Media Rights are in the Market for Possible Renewal or New Deals – The Overwatch League has seen increased interest from bidders in negotiations, more than it is first media rights cycle two years ago, according to Overwatch Commissioner, Pete Vlastelica. Although details have not been revealed. The second year of the Overwatch League has media deals with ABC/ESPN for linear TV and Twitch for digital streaming in place, the deals end after the second season. (Esports Observer) Anzu (Private), an In-Game Advertising Platform, Appoints Mike Cookson, Former Head of Brand Media for Nike, as CSO – The appointment of Mr. Cookson as chief strategic officer follows the Company’s $6.5M Series A funding led by BITKRAFT Esports Ventures in late August. The Anzu platform integrates brand ads into gameplay with real-time data and programmatic tracking technology to make gaming accessible to marketers. Mr. Cookson was previously responsible for Nike’s brand and digital advertising media across Europe. (Esports Observer) Just Chatting Category Top Content by Hours Watched for the Year on Twitch – The “just chatting” category has reportedly led all content on Twitch eight out of nine months this year, except for February when Apex Legends was first released. The category was watched on Twitch for 1.1B hours from Oct/18-Sept/19 more than 200M higher than Fortnite at 905.8M hours watched, that came second. The just chatting category was created as a spinoff of Twitch’s “IRL” category. (Esports Observer) Red Bull Will Be the Official Energy Drink Partner for Global League of Legends – Red bull will support the League of Legends Mid-Season Invitational, All-Star Event, and the World Championship. Financial terms were not disclosed. Red Bull will have broadcast placements in video content, specifics were not disclosed. In addition, Red Bull will produce drink bottles with game artwork to be featured on stage and a Red Bull Area will be provided at events for competing teams. An amateur player will also be selected to compete in the All-Star event by qualifying through the Red Bull Player One Competition. Other LoL global partners include, Mastercard, Alienware, State Farm, Secretlab, Chinese mobile phone brand OPPO and Louis Vuitton. (Esports Observer) 2 North American Developments Canada Enthusiast Gaming Holdings (EGLX-TSXV, NR) ▪ Hired Sales Team to Drive Direct Advertising Sales Across its Platform – Enthusiast has hired an executive team including, Jon Dwyer, SVP, Head of Sales and Special Partnerships; Amanda Rubin, VP Sales, East Coast and Rob Frohling, VP Sales, West Coast, which combined bring experience in gaming media sales with brands such as EA, PlayStation and Sony. ▪ Closed Acquisition of Steel Media for a Total Consideration of ~US$3.4M – Steel Media adds 20 mobile gaming websites and 25 live mobile events worldwide to Enthusiast’s network of over 100 websites. The Company paid $1.9M upfront in cash and issued EGLX common shares in aggregate of $500,000, in closing the transaction.