Broadcasters Present the eSports Industry New Opportunities for Growth

The eSports industry has captivated hundreds of millions of viewers worldwide through large tournaments in dazzling arenas. Predominantly, viewers mainly watch casual or competitive events through YouTube and Twitch. And the two platforms together collectively have a larger audience than HBO, Netflix and ESPN combined, according to Goldman Sachs. Primarily, most of the viewers are from Asia and 79% of worldwide viewers are under the age of 35 years. In 2017, viewers logged a total of 355 billion minutes on Twitch, representing a 22% growth year-over-year. At the time, companies mainly monetized eSports through sponsorships, but by 2022, Goldman Sachs projects that media rights will dominate the overall revenue stream for the industry. Media rights provide broadcast stations with the rights to stream pro league events. For instance, Activision signed a 2-year USD 90 Million agreement with Twitch to distribute its Overwatch League throughout North America. Moreover, League of Legends distributed its rights to ESPN+, Twitch, and YouTube. As a result, global eSports monetization is forecast to reach upwards of USD 2.96 Billion by 2022. Now, in combination with growing audience numbers and increasing monetization, organizations are able to hold large-scale tournaments that payout millions of dollars. Notably, Dota 2’s The International tournament is a year-long tournament series that is expected to pay out over USD 30 Million in 2019. Similarly, Epic Games’ Fortnite World Cup paid out USD 30 Million in prize winnings, however, unlike Dota 2, the tournament for each individual event only lasted a single day. Nevertheless, players had to compete in open online qualifiers in order to advance to the World Cup finals. Overall, just like any other media industry, the audience is key to the future growth of this market. And with the accelerating popularity of eSports, the industry is becoming a source of mainstream media for millions of people. According to data compiled by Goldman Sachs, the global eSports audience is expected to reach 276 million by 2022, increasing from 167 million in 2018. UMG Media Ltd. (TSX-V: ESPT), Activision Blizzard, Inc. (NASDAQ: ATVI), Advanced Micro Devices, Inc. (NASDAQ: AMD), Cisco Systems, Inc. (NASDAQ: CSCO), QUALCOMM Incorporated (NASDAQ: QCOM).

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A major reason why people enjoy watching eSports is the social interaction between one another, said Serrento, an editor for the Asian Dota 2 League. Studies have proven that social interaction is a big factor when it comes to both traditional sports and eSports. Generally, eSport events are shown through livestreams on broadcasting stations and spectators are usually allowed to chat with and interact with one another from the comfort of their own homes. Overall, market research firm Newzoo expects that there will be more than 2.4 billion people playing games around the world by the end of 2019, meaning that the total addressable market is much larger than traditional sports, especially ones that primarily appeal to specific regions. In a survey conducted by Magid and Battlefy, 89% of eSports viewers said they would watch live events to get better at the game. Additionally, 83% say they enjoy watching events at a professional level because they actively play the game already. And while professional tournaments only attract several thousand people in-person, the online community is exponentially larger. “Although the audience for gaming content is predominantly found online, traditional television is also making a play for viewers. The appeal of reaching those massive online audiences has TV executives jumping out of their seats,” said Andrew Paradise, Founder and Chief Executive Officer of mobile eSports company, Skillz. “Why? Games that began as two people huddled over the same vacuum tube screen, and then went global thanks to the rise of internet gaming, are now coming back to bring people together in person. People are consuming esports everywhere – together.”

UMG Media Ltd. (TSX-V: ESPT) announced breaking news yesterday that, “it has entered into an agreement to acquire Activate Entertainment LLC (“Activate”). Activate is a creative management and production services company that specializes in esports events and activations.

• In 2019, Activate has produced a number of major esports events, including the “Esports Experience” at the National Advertising Broadcaster (NAB) Show in Las Vegas, and the “Panasonic Esports Arena” at InfoComm in Orlando
• Activate works with hospitality brands such as Marriott International and Caesars Entertainment on their esports initiatives
• Activate helps corporate brands such as Panasonic and Roland develop points of entry into the esports industry
• Activate has produced top-tier livestream productions for clients at major shows including E3, San Diego Comic Con, Dell Technologies World and The World Series of Poker

Activate has offices in both Las Vegas and Los Angeles and is led by Chris Iaquinta and Dirk Hagen, who have combined over 40 years experience in the event management and production industry, with a focus on turnkey, custom activations for a wide variety of entertainment industries, both gaming related and beyond.

‘Bringing Activate into UMG will greatly expand the services and expertise of UMG in the esports event management side of the industry,’ commented Dave Antony, CEO of UMG. ‘Being able to add the experience of Chris and Dirk will be invaluable as UMG expands.’

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Activate was responsible for the broadcast, production and execution of over three dozen live premium esports and video game activations in the last calendar year, bringing their nearly four decades of professional execution and delivery to bear. Activate also serves as the Director of Gaming and Esports for various entities, including NAB Show and the Metarama Gaming Festival. 

‘UMG represents the perfect structural partner that will allow our newly unified businesses to further raise the standard for esports livestreams and event productions’, said Chris Iaquinta, President of Activate Entertainment. ‘Together, our ability to provide professional results and deliverables to clients, partners and customers will be greatly amplified.’

In consideration for the acquisition of Activate (the “Transaction”), UMG will issue 2,333,333 Common Shares at a price of $0.30 per share. The shareholders of Activate have the ability to receive $3,000,000 in additional common shares (“Performance Shares”) of UMG. The Performance Shares will be earned over the 18 month period following the closing of the transaction. The number of Performance Shares to be issued will be based directly on the gross revenue of Activate and will be issued at the 10 day weighted average price of UMG shares at the time of issue. The Transaction is subject to due diligence and regulatory approval, including the acceptance of the TSX Venture Exchange. The Transaction is an arm’s length transaction.

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