eSports Insights:Making Sense of the Economics

Bottom line: Beyond Activision, we expect to see more publishers such asNintendo and EA to also focus on their own eSports leagues (LINK). This willdrive increased industry engagement, leading to higher revenue from game sales,tournaments tickets, media rights, team franchises, merchandise, and other.

We have included a model on page 5 to give investors a better sense of theeconomic drivers behind the valuation of a typical eSports team. Key conclusions:1) eSports team economics are similar to that of professional sports and this isattracting sports team owners that look to leverage their expertise in teammanagement and player development as well as VC/PE investors that are looking tocapitalize on an emerging theme, and 2) publishers (and sports leagues) are bestpositioned for the emerging economics of eSports leagues given their IP ownership.

Finally, our proprietary Twitch data (page 12) indicates that engagementgravitates towards consistent regular season games, evidenced by League ofLegends’ LCS. We expect the upcoming Overwatch League to see similarviewership benefits from its weekly regular season once it scales up.

Key calls within Macquarie’s Global Coverage UniverseActivision, EA, Take-Two, Capcom, Nintendo, CyberAgent, NetEase andTencent among publishers given their IP and benefits from eSports media rights.

Asustek, Sony and Lenovo in hardware & technology as key beneficiaries of higherdemand for gaming PCs and game consoles.

Facebook, Amazon, Google, and theScore in digital media due to risingviewership and ad dollar flow into eSports.