The Fastest Growing Industry You Should Ask Your Kids About

a couple playing video games

A sold-out crowd packed into Seattle’s KeyArena in August last year. They were about to watch the world’s best compete at an elite level.

The scene was exactly what you’d expect at a sporting event. Jersey-clad patrons screamed with anticipation, florescent spotlights shot around the arena, and a ‘hype man’ revved up the crowd with hyperbolic excitement.

But the crowd wasn’t going crazy over touchdowns, dunks or homeruns. They were all cheering their favourite team sitting at desks playing computer games.

This is the world of eSports (electronic sports).

A new profession your kids will love

The main attraction at eSport events is usually Dota 2, a free-to-play multiplayer online battle arena (MOBA) video game.

In this event alone, teams have the chance to win more than US$9 million. The five-man Chinese team that won last year’s event took home $1.87 million each for an afternoon of work.

Because these events draw so many eyeballs, sponsors and advertisers now want to get in on the action. They pay millions for gamers to use, wear or endorse their products. But it’s not just eSports events that businesses are taking a shine to. Games of all kinds are receiving huge amounts of attention.

For example, just recently, online gambling giant Aristocrat Leisure Ltd [ASX:ALL] bought the Israeli social gaming company Plarium.

Plarium develop a bunch of social MMO (massively multiplayer online) games. One of them is Vikings: War of Clans. It’s free-to-play, but has many in-game paid features allowing it to be monetised.

Aristocrat paid US$500 million for Plarium. As reported by The Australian Financial Review:

The deal implies a multiple of 10x earnings before interest tax depreciation and amortisation at year end.

Aristocrat said the deal would be earning per share positive and that Plarium CEO and co-founder Avraham Shalel, will continue to lead Plarium post acquisition and that he and 12 other members of the firm’s management team would stay on and had agreed to deferred consideration arrangements with Aristocrat.

New Aristocrat chief Trevor Croker said:

Aristocrat has continued to deliver significant growth and outstanding results in our Digital social casino business. The acquisition of Plarium allows Aristocrat to expand our addressable market into logical adjacent segments in the fast growing mobile gaming market.

Aristocrat will fund the acquisition through existing cash and a bond issuance. The stock is up 5.2% today, to $21.9 per share.

Regards,

Härje Ronngard,

Junior Analyst, Money Morning

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Harje Ronngard

Harje Ronngard

With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation.

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