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China Internet - eSports: more than just games

作者: Leo LIU,Matt MA
时间: 2018年12月06日
重要性: 一般报告
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摘要: Report title:China Internet - eSports: more than just games
Analyst:Leo LIU,Matt MA
Report type:Industry
Date:20181206
[Summary]

■ On Dec 4, we hosted a panel with experts from GDESA and Banana Culture to discuss about China eSports industry’s Now and Future
■ With mature ecosystem, Tencent (700 HK; BUY; TP HK$414) benefits most from eSports’ booming development; Huya (HUYA US; NR) also enjoys strong upside as major eSports content distribution channel
■ eSports leagues/clubs possess great potentials given current small revenue share and gradually increasing monetization channels

eSports’ booming development is sustainable with supportive policies
China’s eSports industry has been growing rapidly since 2017, driven by government’s supportive policies and gaming companies’ active investment in game development and eSports leagues. According to CNG, the entire eSports market size is expected to grow from RMB 77.3bn in 2017 to RMB 88.7bn in 2018, in which 93% of revenue contribution will come from online gaming revenue and 5.6% from live broadcasting, but only 1.2% from leagues and 0.1% from clubs. We believe this structure will hold in the MT, given gaming companies’ major target is to extend game lifecycles and expand gamer coverages, and live broadcasting platforms will still be the only eSports content distribution channels. Professionalization, regionalization and monetization channel diversification are the major trends for eSports leagues, which will ensure the LT healthy development of the whole eSports sector.

Tencent and Huya as beneficiaries of booming eSports development
We believe, as the largest eSports game company in China, Tencent should benefit most from the booming development of eSports industry. Company currently operates the most popular eSports games both on PC and mobile ends, namely League of Legends and Honour of Kings, and also operates other popular titles including PUBG mobile, DnF, Clash Royal, and CrossFire. In term of contents, Tencent has made early strategic investments in major game live broadcasting platforms Huya and Douyu to streamline its content distribution. It also has strong content producing capability leveraging its own eSports platforms Penguin eSports and TGA. Due to the well-established ecosystem, it can partake the biggest share in eSports sector. Huya also enjoys strong upside as one major eSports content distribution channel, along with the continuously increasing eSports influences among viewers.

Leagues and clubs are the next blue seas in the eSports industry chain
According to CNG, eSports leagues and clubs revenue will reach market size of RMB1.1bn in 2018, only accounts for 1.3% of entire eSports market, much lower than traditional sports with tournament rev accounts for ~8%/19% of China/U.S.’s entire sports markets. Given leading eSports leagues such as LPL and KPL now have larger fan base and user engagements, and have shown even greater impacts than NBA, we believe there are still huge potentials for eSports leagues and clubs. We observed that many traditional brands had already shifted more ads budgets to sponsor eSports leagues and clubs, and rapidly growing audience base provided more diversified monetization channels. In the LT, leagues and clubs should enjoy bigger revenue share thus provide significant incremental growth to the sector.

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