DBS bank bullish on esports investments in Asia

Hou Wey Fook, chief investment officer, DBS Bank. (Image credit: DBS Bank)

  • Bank’s investment office is recommending investments in esports and gaming.
  • Says Covid-19 will accelerate sector growth in Asia-Pac.
  • Sees game developers as the biggest beneficiaries of growth.

Esports is catching the attention of Asian investors. The chief investment office at Singapore’s biggest bank, DBS, last year highlighted the sector as part of its ‘Millennial Wave’ research series, looking at businesses trending with younger generations.

It wrote that its bullishness was premised “on the enormous growth potential for esports in the year ahead, propelled by the rise of live streaming and the emergence of esports leagues and tournaments”.

This year, the bank sees that report as vindicated by a surge in engagement with gaming and esports during the Covid-19 lockdowns. It points to a 53-per-cent increase in viewership on gaming streaming platform Twitch in April, and a 75-per-cent increase in online gaming reported by US telco Verizon since lockdowns began in the country. Although these are not specifically indicators of growth in Asia, DBS believes they point to global growth that Asia will be a big part of.

“We believe Covid-19 will accelerate the growth of esports, especially in Asia-Pacific,” DBS chief investment officer Hou Wey Fook told SportBusiness this week.

The values of esports companies have “defied gravity” in the last year, DBS says. On a year-to-date basis, the MVIS Global Video Gaming & eSports Index, a global index that tracks the performance of the global video gaming and esports segment, has gained 9.3 per cent. At the same time, global equities have fallen 15.9 per cent, translating to an outperformance of 25.2 per cent by the gaming and esports sector.

DBS recommends that investors looking for esports opportunities start with games developers and publishers, the “biggest beneficiaries” of the growth in the sector.

“They are involved in almost every facet of esports – from games publishing to the creation of leagues and the hosting of tournaments,” Fook says. “Such end-to-end involvement allows them to benefit from sponsorships, media rights, and merchandising/ticketing.”

The bank notes that some of the world’s biggest games developers and publishers are based in Asia. Chinese firms Tencent and NetEase are among the biggest games publishers by revenue. So are Japan’s Nintendo and Bandia Namco, although they are not as heavily involved in competitive esports as some other game developers. PlayerUnknown’s Battlegrounds (PUBG), one of the world’s biggest online multiplayer ‘battle royale’ games, and a significant esports title, was created by Korean firm Bluehole.

DBS also notes the relatively young populations in Asia-Pacific, and believes these mean esports growth can be even stronger than in other parts of the world, with older populations.

“Asia-Pacific has a higher percentage of young people and this will translate to more esports fans,” Fook says.

Over the next 25 years, research and consulting firm Cerulli estimates $68tn (€69tn) in wealth will be passed from older generations to millennials, making them the richest generation ever, with Generation Z not that far behind. This bodes well for the outlook of esports and gaming.

Crossover initiatives between esports and traditional sports are seen by DBS as an endorsement of the growing virtual sector, and something that will continue, especially with the Covid-19 shutdowns fresh in the mind.

“Such initiatives are timely as they allow sporting bodies to stay engaged with their fans and sponsors, while at the same time diversify their revenue streams,” the bank said in a recent report.

It added: “The key strength of esports lies in its resilience, as internet connectivity is all it needs. Sporting bodies and corporate sponsors understand that. Hence, we expect esports to be an important complement to traditional sports in the years to come.”

Fook notes the infancy of esports as a commercial proposition: “Compared to traditional sports that have been around for decades, we think esports is still in its initial stage of development”, adding it “currently lacks the revenue-generating power of traditional sports”.

In a trend that might help accelerate revenue growth, sports marketing agencies in Asia are stepping up their involvement with esports. Lagardère Sports’ partnership with South Korean esports organisation T1 Entertainment & Sports, and Reddentes Sports’ work with Riot Games, are examples.

Finally, DBS is confident that the growth in esports and gaming witnessed during Covid-19 will not abate. It says: “One common concern among investors is whether the esport euphoria will disappear once traditional sports return to normalcy post-pandemic. We think not.”

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