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Going Beyond the Numbers

Spotting Alpha In Esports

Capturing growth from increasing video game engagement.

Emily Scudder, Equity Investment Analyst

There is more to video gaming than sitting alone on the couch outscoring the bad guys. For today’s gamers, it’s a competitive sport. Gamers form teams and compete in front of live audiences, and the winners are rewarded with cash and a huge online fan base. “I was in a crowd full of people cheering for these players like you would any professional athlete,” says T. Rowe Price investment professional Emily Scudder, who assesses the investment potential of publishers that produce and market esports. “It’s an indicator of how big the esports opportunity is—and how serious the fans are.” Gaming companies that are monetizing the growing viewership in esports are on Emily’s radar. For certain, Emily’s data-driven research is a critical source for T. Rowe Price investors, but she also believes that going to the places where the gamers gather to compete gives her a competitive edge to help investors take advantage of the next big esport opportunity. “You’re constantly looking to challenge your views. That’s why it’s very helpful to go out into the field and get firsthand knowledge from experts, day in and day out.” 

Going beyond the numbers reveals the full story

At T. Rowe Price, our investment approach is to go beyond the numbers when evaluating which companies offer the best future investment potential. By meeting with executives, employees, and even fans, we can ask the right questions to get a deeper understanding of where a company or an industry stands and where it could go in the future. This rigorous research strategy is integral to Emily’s investment process, which focuses on IT hardware and services and video game publishers. 

Opening Quote You’re constantly looking to challenge your views. That’s why it’s very helpful to go out into the field and get firsthand knowledge from experts, day in and day out. Closing Quote

Building insight

When Emily meets with a company, she prefers to talk to people at different levels of management. “You hear what the strategy is, and how the company is executing on it. That helps inform whether or not the company management is actually putting into practice what they are saying.” When a new game launches, she often searches out passionate game critics and devotees to get feedback. Throughout the year, she attends the E3—Electronic Entertainment Expo—and other gaming conferences where, much like a reporter, she interviews gamers to find out how much time they spend playing, which new trends are at the forefront, and, more importantly, what kinds of additional game add-ons they buy. One of the ways that publishers can monetize their games is through the sale of enhanced digital content, a critical revenue stream, she says. “Gamers have told me that they have spent a thousand dollars or more for additional content.” Not too long ago, Emily was in the audience watching a raucous esport team league for “Overwatch,” a popular game in which players control a hero to battle another team of heroes. They had announcers, advertisers, and professional presentations at the event. By getting out from behind her desk and into the field, she could see that the potential is there to grow and increase revenue and profits. “It’s important to understand the trends within the industry,” says Emily. “At T. Rowe Price, I focus on what these businesses could look like and how they might perform several years out.” 

Positioning for change

Esports viewership is strong and growing, and game publishers are starting to show signs they can monetize that viewership with new revenue streams, including broadcast rights, says Emily. The investment opportunities are wide, but choosing the right companies with strong long-term potential is crucial. Emily is keeping a watchful eye on the industry to get ahead of the changes for investors. Combining fundamental analysis with her on-site research allows Emily to make better-informed investment recommendations. 

Important Information
This material is being furnished for general informational purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, and prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date written and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

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