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1、Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the fi rm may have a confl ict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making
2、 their investment decision. For Reg AC certifi cation and other important disclosures, see the Disclosure Appendix, or go to Analysts employed by non-US affi liates are not registered/qualifi ed as research analysts with FINRA in the U.S. The Goldman Sachs Group, Inc. EQUITY RESEARCH | 12 October 20
3、18 | 12:39PM EDT eSports are moving into the mainstream. The immense popularity of survival-based games like Fortnite, growing prize pools for eSports tournaments, the rise of live-streaming, and improving infrastructure for pro leagues have all paved the way for eSports to reach nearly 300mn viewer
4、s by 2022, on par with NFL viewership today. For game publishers, we believe eSports will not only help to increase audience reach and engagement, but also drive direct revenue through established leagues. We see further tailwinds to the broader eSports ecosystemincluding online video platforms, har
5、dware manufacturers (core and peripheral), and chip makersopportunities we outline in this report. From Wild West to Mainstream Heath P . Terry, CFA +1 212 357-1849 Goldman Sachs Masaru Sugiyama; Piyush Mubayi; Toshiya Hari; Heath P . Terry, CFA; Alexander Duval; Heather Bellini, CFA; Drew Borst; Li
6、sa Yang; Donald Lu, Ph.D.; Garrett Clark; Charles Long; Wendy Chen; Yusuke Noguchi; Jacqueline Morea; Michael Ng, CFA; Daniel Powell; Hameed Awan The following is a redacted version of GS Researchs report “The World of Games: eSports: From Wild West to Mainstream” originally published June 26, 2018
7、(59 pages). All company references in this note are for illustrative purposes only and should not be interpreted as investment recommendations. Executive Summary As defi ned by the Oxford English Dictionary, a sport is “an activity involving physical exertion and skill in which an individual or team
8、 competes against another or others for entertainment. ” Under this defi nition, we believe eSports are as much of a sport as any other, and one that at the highest levels requires intense training and focus. Professional eSports teams train for up to 8 hours a day, have coaches, trainers, and nutri
9、tionists on staff, and players receive base salaries, just like any pro sports league. In the U.S., there are roughly 50 colleges that have varsity eSports teams, and eSports are under discussion for inclusion in the 2024 Paris Olympics, according to the BBC. To play a traditional sport, one typical
10、ly needs access to an appropriate venue (fi eld, court, etc.), and to be successful, it almost always helps to be big, fast, strong, or coordinated - or better yet some combination of all four. To play multiplayer video games, all that is necessary is the requisite hardware and an internet connectio
11、n and there is a community of millions of players online that are ready to play at any hour of the day. Also, to become successful at eSports, physical stature is not as important, in our view, as reaction time, focus, and strategic thinking. Therefore, we believe professional video game play can be
12、 appealing to a massive global audience of people who can watch and learn from pros and try to improve their own gameplay something that we believe isnt as possible for most traditional sports fans. And because the distribution of eSports are nearly 100% digital, fans can stream eSports content for
13、free anywhere in the world, unencumbered by traditional TV rights that for most Western-based pro sports leagues have been segmented by geography and are often lumped into an expensive cable subscription. In short, we believe eSports are at the cross-section of some powerful trends: social connectio
14、ns being formed and maintained online, digital consumption of video, and global growth in the gaming audience. Looking ahead, we see numerous public and private investment opportunities that we believe will benefi t from the structural growth of eSports, both in terms of audience and, increasingly,
15、monetization, as the requisite infrastructure is built to transition eSports from the “Wild West” of sports to a full-fl edged professional sport. We summarize our key takeaways below. The audience opportunity. In 2018, we estimate the global monthly audience for eSports will reach 167mn people, bas
16、ed on data from NewZoo, larger than that of Major League Baseball and the National Hockey League. We estimate the total online population is over 3.65bn people globally, to go along with 2.2bn gamers, but eSports viewers represent just 5% of the online population TAM, which suggests that there shoul
17、d be plenty more runway for audience growth. By 2022, we estimate the eSports audience will reach 276mn, similar in size to the NFL today. Due to the growing popularity of survival-based games Fortnite and PUBG, we believe eSports viewership is moving more into the mainstream, which should support a
18、 14% audience growth CAGR for the next 5 years. Recently, Epic games announced that it would set aside $100mn in prize pool for the fi rst year of Fortnite eSports tournaments, nearly the size of the entire eSports prize pool in 2017 . With growing incentives for 12 October 20183 Goldman SachsThe Wo
19、rld of Games eSports players, and by extension more interest from the casual observer, we believe the eSports audience should continue to outpace the growth of traditional leagues. League infrastructure is creating meaningful opportunities for direct monetization. In the early years of eSports, ther
20、e was little organization or infrastructure, and as a result, the massive audience of eSports did not translate into meaningful revenue streams for players, team owners, etc. But in 2017 , Riot Games created the North American and EU League of Legends leagues, while in January of 2018, Blizzard laun
21、ched the Overwatch League. We believe these leagues created the requisite infrastructure that will allow eSports to fi nally start to close the monetization gap relative to other established sports leagues. In 2017 , we estimate eSports generated $655mn in annual revenue, including 38% from sponsors
22、hips, 14% from media rights, and 9% from ticket revenue. But by 2022, we expect media rights to reach 40% of total eSports revenue - comparable to the average of the four major Western sports leagues today - as massive audiences and associated revenue for established online video platforms like Twit
23、ch, YouTube, Douyu, and Huya will be able to support a growing pool of media rights fees paid to top publishers for their content. As media rights and sponsorship continue to grow, along with the formalization of pro sports leagues, we expect total eSports monetization will reach $3bn by 2022. Fortn
24、ite and the “Moneymaker” effect. In 2003, Chris Moneymaker, an accountant and amateur poker player from Tennessee, outlasted a fi eld of 839 players to win the World Series of Poker. His victory sparked a meteoric rise in the popularity of online and tournament poker. Just 3 years after his victory,
25、 the fi rst place prize money for the WSOP increased to $12mn in 2006, up from $2.5mn in 2003. The relevant lesson here is that Moneymaker elevated pokers profi le as a sport to the mainstream and we believe Fortnite is doing the same thing for video games and eSports. The Fortnite phenomenon has be
26、en well-documented, but by way of background, the title has reached more than 125mn players on across console, PC, and mobile. According to SuperData, as of April the game generated $296mn of revenue across platforms, an annual run rate of $3.6bn more annual revenue than any major console or PC game
27、 today. As Fortnite brings more new gamers to the ecosystem, particularly those in younger demographics, we believe the eSports audience - and associated revenue streams - will benefi t over time. Exhibit 1: Our key estimates eSports audience, prize pool, and monetization (2018E-2022E) 2018E2019E202
28、0E2021E2022E Audience (mns)0276 y/y growth %17%16%16%12%10% Prize Pool ($ mns)$170$256$307$359$413 y/y growth %50%50%20%17%15% Monetization ($ mns)$869$1,184$1,592$2,173$2,963 y/y growth %33%36%35%37%36% Source: Goldman Sachs Global Investment Research, Newzoo 12 October 20184 Goldman Sac
29、hsThe World of Games A new paradigm for distribution. Unlike traditional sports, the vast majority of eSports viewership is online, the same medium where multiplayer game play takes place and through which the eSports audience consumes media content. In the coming years, we believe eSports content (
30、particularly live) will continue to grow in value, not only due to its audience reach but also the engagement it commands, creating an opportunity for advertisers to target a captive and young demographic. In the West, we believe Twitch and YouTube Gaming are the primary distribution channels for li
31、ve and recorded eSports content. Because Twitch captures 84% of live-streaming viewership in North America, we currently estimate that it over-indexes on revenue relative to YouTube, with 54% of gaming content gross revenue market share in 2017 relative to 22% for YouTube. There are three major mone
32、tization channels: advertising, tipping, and sponsorship. By 2022, we model eSports industry advertising revenue of $429mn (25% 5-year CAGR), tipping revenue of $372mn (24% 5-year CAGR), and sponsorship revenue of $1.1bn (34% 5-year CAGR). Asia is leading the way for eSports globally. Chinas eSports
33、 market is built upon the largest gamer base in the world, with approximately 442 million gamers as of 2017 , a 57% penetration rate of Chinese internet users, according to CNNIC. By 2018, China will contribute one third of the global game industrys total revenue, according to NewZoo. For Asia more
34、broadly, there are 89 million eSports viewers, according to NewZoo, roughly half of global audience in 2018E. We believe the popularity of eSports in this region could be a leading indicator of what is to come in Western markets, as markets like China and Korea already outpace the North America in s
35、ome measures of technological change like smartphone penetration. Venture investment in eSports has stepped up meaningfully this year. Since 2013, there has been $3.3bn of venture capital investment in eSports-related start-ups. In 2018 YTD, we have already seen $1.4bn of investment, a nearly 90% y/
36、y increase from from the total amount of funding in 2017 . The uptick was largely driven by two outsized investments made by Tencent in Chinese online video platforms Douyu and Huya of $630mn and $461mn, respectively. We believe these investments in particular underscore two key trends: 1) the oppor
37、tunity for live-streaming to monetize the growth in eSports in a way that few other eSports-related businesses can, and 2) the popularity of eSports in Asia in particular. 12 October 20185 Goldman SachsThe World of Games eSports in Numbers 12 October 20186 Goldman SachsThe World of Games The Audienc
38、e Opportunity eSports have been around for as long as the video game industry itself, and collectively refer to competitive video game play by professional and amateur gamers. But in recent years, growth in the gaming audience and player engagement has elevated eSports into mainstream culture as a l
39、egitimate professional sport with a massive global following. In 2018, we estimate the global monthly audience for eSports will reach 167mn people, based on data from NewZoo, larger than that of Major League Baseball and the National Hockey League. By 2022, we estimate the eSports audience will reac
40、h 276mn, similar in size to the NFL today. Unlike many existing pro sports, the eSports audience is young, digital, and global: more than half of eSports viewers are in Asia, 79% of viewers are under 35 years old, and online video sites like Twitch and YouTube have a larger audience for gaming alone
41、 than HBO, Netfl ix and ESPN combined. In 2017 , the world fi nals for one of the most popular eSports titles, League of Legends (LoL), attracted 58mn unique viewers, according to Riot Games. We assume total unique viewers for LoL are equal to total cumulative viewers for TV viewership, a metric tha
42、t is used to describe a broadcasts total unique audience. According to data from Nielsen and Rentrak, total cumulative viewership was as follows for major sports fi nals in 2017: The Super Bowl (124mn), League of Legends (58mn), The World Series (38mn), The NBA Finals (32mn), and the Stanley Cup Fin
43、als (11mn). Its worth noting, however, that these audience fi gures for the traditional leagues are U.S.-only while the LoL fi gure is global. Therefore, the global audience fi gures for the traditional sports championships are likely higher than the numbers we show in Exhibit 5. While established p
44、ro sports leagues are mostly watched through traditional media like TV, nearly all of the eSports audience is online, with the exception of some broadcasts that have taken place on ESPN and Turner networks. As measured by concurrent viewership, a recent live stream of Fortnite gameplay by celebrity
45、Twitch personality Ninja attracted 628k concurrent viewers, almost double the average concurrent viewership of the NFL s Thursday Night Football on Twitter and Amazon Prime (though that was a subset of overall TNF viewership). While traditional pro sports leagues in Exhibit 2: Twitch and YouTube Gam
46、ing have a larger audience than many entertainment platforms Exhibit 3: The eSports audience is similar to the average of large professional sports leagues Audience size by sports league (2017A) 0 50 100 150 200 250 300 Audience (mns; 2016A) 167 270 231 114 65 170 0 50 100 150 200 250 300 EsportsNFL
47、NBAMLBNHLAvg. ex. esports Audience (mns) Professional sports league Source: SuperData, Goldman Sachs Global Investment ResearchSource: Nielsen, CBS, ESPN, Goldman Sachs Global Investment Research 12 October 20187 Goldman SachsThe World of Games many cases may need to shift their business models towa
48、rd online distribution from TV to reach younger and international demographics, eSports is already reaching this audience in the West through OTT platforms like Twitch, YouTube Gaming, and in China through Douyu, Panda TV, and Huya, among others. According to NewZoo, there are over 2.2bn active game
49、rs globally. Today, the eSports audience represents just 5% of the total online gaming population, which suggests that there should be plenty more runway for eSports audience growth. Even in Asia, which contributes more than half of the global eSports audience, penetration is just 5%. As younger demographics increasingly communicate via online channels, and social interactions take place online, we believe eSports as an interactive and social form of sports viewership should continue to take share of traditional sports, thereby supporting a 14% 5-year audience growt