FN Media Group Presents Microsmallcap.com Market Commentary
New York, NY – December 18, 2019 – Video games used to be something teenage boys played in their parent’s basements, but technological advancements and widespread smartphone adoption have completely transformed the gaming landscape. What used to be considered a niche market is now competing with and taking over social media, providing companies in the gaming world with major growth potential. Now, nearly one-third of the entire global population consider themselves gamers and companies like DouYu International Holdings (NASDAQ:DOYU), Enthusiast Gaming Inc. (TSX-V:EGLX) (OTCQB:ENGMF), Huya Inc. (NYSE:HUYA), Tencent Holdings (OTCMKTS:TCEHY), and Activision Blizzard (NASDAQ:ATVI) are taking their share of the $152 billion USD market.
Up until recently, China held the title for the world’s largest gaming market by revenue, aiding in the continued success of Chinese social gaming companies like DouYu International Holdings, Huya Inc. and Tencent Holdings. However, after a nine-month licensing freeze and screen time laws in China, the United States gaming market is emerging as a market leader. The opportunity for North American gaming companies to shine is here.
One company, in particular, Enthusiast Gaming (TSXV:EGLX) (OTCQB:ENGMF) is making waves in the North American gaming sector and was recently verified as the largest gaming network across North America and the United Kingdom. The Enthusiast Gaming empire now includes over 100 gaming-related websites and 900+ YouTube channels, all of which are generating revenue. What’s more, the company is bringing in more monthly active users globally than its counterparts and generating over 30 billion ad requests per month.
Average Revenue Per User Offers Big Money for Gaming Companies
One of the most important monetization metrics for companies operating in the gaming industry is average revenue per user (ARPU), which is the amount of income produced by one active user over a specific period of time. At present, games are generating significant average revenue per user, but social gaming and streaming platforms are gaining traction. In 2019, the ARPU for mobile games in the US was $54 USD, while online games averaged $56.53 USD per user and downloadable games saw an ARPU of $23.97 USD.
For live streaming and gaming website properties, Enthusiast Gaming (EGLX.V – ENGMF.QB) is leading the charge with 200 million active monthly users when compared to DouYu’s 163.6 million users and Huya’s 146.1 million, but the company’s ARPU is still catching up.
Enthusiast’s next best competitor has 22% fewer active monthly users, but it’s only generating a mere $0.11 per user based on a proforma revenue of $22 million in 2018. This number is tiny when you look at DouYu International Holdings, which is expected to bring in $1.02 billion USD this year (or $14.43 USD ARPU), and Huya Inc.’s $1.17 billion revenue (or $26.69 USD ARPU). Of course, Enthusiast Gaming has only recently taken the top spot so it has some catching up to do to reach the level of its competitors.
Meanwhile, Activision Blizzard has continued to see a drop in its revenue throughout 2019. The company’s net earnings in Q3 2019 were $1.28 billion compared to $1.396 billion in Q2 2019, representing an 8.31% decrease. This means Activision is bringing in roughly $4 USD per user. Moving forward, Activision Blizzard could drop further if rival games like Fortnite continue to gain traction.
Chinese tech giant Tencent Holdings could also see a slowdown in its growth as competition heats up in the Chinese gaming market. The industry leaders’ main competitors include NetEase, one of the largest mobile, desktop games and internet tech companies in China, and ByteDance, the creators of TikTok.
Unlike Activision and Tencent, Enthusiast Gaming (EGLX.V – ENGMF.QB) and its user base growth potential isn’t reliant on game popularity and is also fairly immune to competition due to its ever-growing network of users, which span over 100 gaming websites. What’s more, Chinese screen time laws and licensing freezes won’t have an effect on North American companies.
Sure, Tencent Holdings (OTCMKTS:TCEHY), DouYu International Holdings (NASDAQ:DOYU) and Huya Inc. (NYSE:HUYA) are dominating China’s gaming market, but North American companies like Enthusiast Gaming (EGLX.V – ENGMF.QB) and Activision Blizzard (NASDAQ:ATVI) are certainly making waves in the North American market.
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