Video Gaming, Esports Taking Media and Entertainment to the Next Level - March 2019
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March 2019 Video Gaming, Esports Taking Media and Entertainment to the Next Level ESPO® VanEck Vectors® Video Gaming and eSports ETF
Video gaming evolution and the rise of esports
Technology advancements have made games more complex, interactive, and dynamic
Development and proliferation of video games mirrors the dawn of the internet, which featured a long
research incubation period, followed by explosive growth, as the public adapted to the new technology
Tennis for Two Activision Formed PC Gaming, Internet Rise of Esports
First known video game First third-party video 3D graphics, local area network Massive growth in viewership
created for entertainment game developer (LAN) parties, multiplayer online and big brand sponsorships
games
1958 1972 1979 1985 1990s 2000s 2010s
Atari 2600 NES - Nintendo Mobile Gaming
First home console with Entertainment System Introduction of “apps” and
game cartridges Revolutionized U.S. gaming multiplayer phone games
industry
Source: VanEck.
2What are esports?
Esports are a form of competitive video gaming, commonly held as
organized, multiplayer spectator events, often between professional players
A broad consortium of companies are actively investing in esports related ventures, with a growing number
of collaborations between video game developers, tech companies, and traditional sports franchises
Esports are a global phenomenon, with the most notable participation in Asia Pacific and North America
Type of Company or Organization (Example) Example of Esports Investment
• Develop and publish video games
Video Game Companies (Activision, Tencent)
• Develop and support professional esports leagues
• Franchise fees to league owners
Professional Esports Teams (Team Liquid, Cloud9)
• Corporate sponsorships
• Investing in new infrastructure projects
Esports Venues (Barclays Center, Staples Center)
• Utilizing existing arenas and venues for esports events
• Technology infrastructure to support massive online viewership
Online Streaming Services (Twitch.tv, YouTube.com)
• Facilitate sponsorship of individual streaming personalities
• Invested in streaming services
Tech Companies (Amazon, Microsoft)
• Build consoles, hardware used to play video games
• Scholarships to esports athletes
Colleges and High Schools (NYU, UC Irvine)
• Gaming tech labs
• Investments and sponsorships of professional esports teams
Professional Sports Organizations (Philadelphia 76ers, NY Yankees)
• Shared resources of team equipment and facilities
Cities and Municipalities (Arlington TX, Sydney AU) • Dedicated esports arenas built
Traditional Brands (Mercedes, Red Bull) • Advertisements targeted towards esports viewers and participants
Media Companies (Disney, Turner Sports) • Licensing rights for live tournament broadcasts
Source: VanEck.
3Video game makers winning in esports
Video game companies are becoming global entertainment powerhouses
Globally, video game maker revenues have grown 12% yearly since 2015
Game publishers develop and market video games and own the commercial rights to the games
Esports has created new potential revenue streams from game publisher fees, media rights, merchandise,
ticket sales, and advertising
Publishers are likely going to continue to invest in new technology developments while competing to
maintain market share and producing games people want to play
Global Video Games Revenues Esports Revenue Streams
as of 2018
2021*
19%
2020*
2019* 18%
Billions ($)
40% Esports
2018* revenues
generated
directly by
2017 13%
video game
11% publishers
2016
2015
Game Publisher Fees Merchandise & Tickets
Sponsorship Advertising
0 40 80 120 160 200 Media Rights
Source: Newzoo Global Games Market Report, 2016, 2017, 2018. Past performance is not indicative of future results; current data may differ from data quoted.
* Projected.
4Invest in the future of sports
The competitive video gaming audience is expected to reach 454 million people globally in 20191
— Esports investment is growing exponentially including audience, participants, sponsorships, advertising,
and team franchises
— Cultural paradigm shift as esports athletes and competitions are considered by many to be on par with
traditional sporting events
— Major investments by video game developers, broad tech companies, professional sports teams, local
cities, and municipalities
Esports revenue growth has averaged almost 40% yearly since 2015, supported by a young,
affluent audience2
— Esports revenue has nearly tripled over the last three years
— Evolving revenue streams as variety of investors seek to monetize esports’ exploding popularity
— Audience base is young, has money, and appears to be willing to spend over long time horizon
Dynamic, evolving revenue stream3
— As this segment evolves, companies from different industries continue to invest in new business lines
— Since 2014, the global average revenue per person of esports enthusiasts has increased by 175%3
1 Newzoo Global Esports Market Report, 2019.
2 Newzoo Global Esports Market Report, 2017, 2018, 2019.
3 Newzoo The Global Growth of Esports, 2014. Global Esports Market Report, 2018.
5Strong revenue growth
Esports revenue is forecasted to reach upward of $1.7 billion by 2021 from
a projected $1.09 million in 2019
Esports Revenue Growth
2015-2022
2,000
1,800
1,600
1,400
Millions ($)
1,200
1,000
800
600
400
200
0
2015 2016 2017 2018 2019* 2022*
Source: Newzoo. Global Esports Market Report 2017, 2018, 2019. Past performance is not indicative of future results; current data may differ from data quoted.
* Projected.
6Revenues are global
International esports leagues
Global leagues comprised of competing teams from local markets
Franchisees have paid up to $20 million per team to enter professional leagues owned by video game companies
Global investments into esports arenas
Private companies, municipalities, and cities around the world have built dedicated esports arenas
Locations include Las Vegas, Nevada; Arlington, Texas; Sydney, Australia; Chongqing, China
Esports Revenues by Region
as of 2018
18%
38%
6%
China
S. Korea
38% North America
Rest of World
Source: Forbes.com, Las Vegas Review Journal, ABC.net.au, SportsBusinessDaily.com, Newzoo Global Esports Market Report 2018.
7Viewership larger than traditional sports
League of Legends 2018 world finals attracted more viewers than the deciding
games of MLB World Series, NBA Finals, and the NHL Stanley Cup
US Sports Viewership vs eSports Unique Viewers
120
Esports events Traditional sporting events
100
Millions of Viewers
80
60
40
20
0
NFL Superbowl LOL World Mid-Season LOL World Intel Extreme CFS World College Football MLB World NBA Finals NHL Stanley
2018 Championship Invitational Championship 2017 Championship Championship Series Game 5 Game 4 Cup Finals
2018 2018 2017 2017 2018 2018 2018 Game 4 2018
eSports audience growth 2014-2022
700 645
600
500 454
Millions of People
395
400 335
281
300 235
205
200
100
0
2014 2015 2016 2017 2018 2019* 2022*
Source: Sports Media Watch, Statista.com, ESPN.com, ProgrammingInsider.com, Riot Games, dotesports.com, lolesports.com, Newzoo Global Esports Market Report 2018, 2017. Newzoo The Global Growth of
Esports 2014. Past performance is not indicative of future results; current data may differ from data quoted.
* Projected.
8Young and affluent audience
Captivated consumer with disposable income willing to spend on entertainment
— 43% of esports enthusiasts have annual household income over $75k
— 31% of esports enthusiasts have annual household income over $90k
Potential for long and loyal brand relationships
— Esports consumer base skews much younger compared to traditional sports fans
— More years of purchasing video game products and esports related entertainment
Average Age of U.S. Sports Fan versus Esports Enthusiast
70
60
50
40
Age
30
20
10
0
PGA MLB NFL NHL NBA Esports
Source: Street & Smith’s SportsBusiness Journal, Interpret, LLC. As of 2017.
9Attracting large investors
Esports-related mergers and acquisitions demonstrate the worldwide
business potential of the industry
Majority of deals are primarily from established tech companies, but there has been interest from non-tech
related industries (such as, United Talent Agency)
Year Acquiring Company Acquired Company Details
Tencent invested $632 million into Douyu, a gaming and
2018 Tencent Douyu
entertainment live streaming platform in China
United Talent Agency acquired esports talent agency Press
2018 United Talent Agency Press X and Everyday Influencers X and esports management company Everyday Influencers
for an undisclosed amount
Alibaba invested $150 million into the International e-Sports
2016 Alibaba International e-Sports Federation Federation, whose mission is to promote esports as a
traditional sport
Activision Blizzard paid $46 million for Major League
2016 Activision Blizzard Major League Gaming
Gaming, a specialist in esports events
Amazon paid $970 million for Twitch.tv, a live streaming
2014 Amazon Twitch video platform that initially focused on video game
streaming
Source: Business Insider, Mashable, Variety, Major League Gaming, China Money Network.
10Pure and targeted index
Companies must derive at least 50% of total revenues from video gaming and/or esports to be initially
eligible for the index
— Revenue requirements ensure targeted exposure to video gaming and esports companies
— Focus on the largest pure-play video gaming companies
— Modified market cap weighting ensures that no single company dominates the index
What companies don’t meet inclusion requirements?
— Companies like Microsoft (Xbox), Sony (PlayStation), and Amazon (Twitch.tv) generate substantial revenue
dollars from other sources besides video gaming and esports related business lines
— Due to index revenue percentage rules, these companies are excluded to maintain the index’s focus on video
gaming and esports
Included in index Reason for inclusion Excluded from index Reason for exclusion
Activision Blizzard Video game developer Alphabet Tech conglomerate (based on revenue test)
Nintendo Video game developer Amazon.com Tech retail (based on revenue test)
Tencent Holdings Video game developer Microsoft Tech conglomerate (based on revenue test)
NVIDIA Hardware company Sony Tech conglomerate (based on revenue test)
Advanced Micro Devices Hardware company Intel Hardware (based on revenue test)
Source: MVIS.
11Index methodology
MVIS Global Video Gaming and eSports Index
Selection universe: Global universe of equity securities
— Freely investable for foreign investors
— Market capitalization and liquidity screens
Revenue analysis
— Company must generate at least 50% of revenues from video gaming and/or esports to be initially eligible
— Software and hardware companies may also be included if their end product is used in video gaming
systems
Index portfolio size
— At least 25 securities
Buffer rule
— At each review, companies which generate less than 25% of revenues from video gaming and/or esports
are removed from the index
Modified market cap
— Individual company weights are capped at 8%
Source: MVIS. See disclosures at the end of the presentation.
12VanEck Vectors Video Gaming and eSports ETF (ESPO)
VanEck Vectors Video Gaming and eSports ETF (ESPO) seeks to replicate as closely as possible, before
fees and expenses, the price and yield performance of the MVIS® Global Video Gaming and eSports Index
(MVESPO). The Index is a global index that tracks the performance of the global video gaming and esports
(also known as electronic sports) segment.
Fund Details
• Competitive video gaming audience
Fund Ticker ESPO expected to reach 454 million people
Intraday NAV Ticker ESPO.IV globally in 20191
Index Ticker MVESPOTR
• Esports revenue growth has averaged
Inception Date 10/16/2018 almost 40% yearly since 2015, supported by
a young, affluent audience2
Gross Expense Ratio (%) 0.60
Net Expense Ratio3 (%) 0.55 • Companies must derive at least 50% of total
revenues from video gaming and/or esports
Listing Exchange NYSE Arca
to be initially eligible for the Index
Dividend Frequency Annually
1 Newzoo Global Esports Market Report, 2019.
2 Newzoo Global Esports Market Report, 2017, 2018, 2019.
All information as of 12/31/2018 and subject to change.
The Index is unmanaged and not a security in which investments can be made. You cannot invest in an Index.
3 Expenses are capped contractually until 2/1/2020. Cap excludes acquired fund fees and expenses, interest, trading, taxes, and extraordinary expenses. Returns are average annualized total returns, except those
for periods of less than one year, which are cumulative.
13Fund performance
LIFE
ESPO Performance History (%) as of 3/31/2019 YTD 1YR 3YR 5YR 10/16/2018
NAV 17.51 -- -- -- 2.40
Share Price 18.30 -- -- -- 2.82
MVESPO Index 17.48 -- -- -- 3.27
Fees and Expenses1
Management Fee (%) 0.50
Other Expenses (%) 0.10
Gross Expense Ratio (%) 0.60
Fee Waivers and Expense Reimbursement (%) 0.05
Net Expense Ratio (%) 0.55
Source: VanEck, and FactSet.
1Expenses are capped contractually until 2/1/2020. Cap excludes acquired fund fees and expenses, interest, trading, taxes, and extraordinary expenses. Returns are average annualized total returns, except those
for periods of less than one year, which are cumulative.
The table presents past performance which is no guarantee of future results and which may be lower or higher than current performance. Returns reflect applicable fee
waivers and/or expense reimbursements. Had the Fund incurred all expenses and fees, investment returns would have been reduced. Investment returns and Fund share
values will fluctuate so that investor’s shares, when redeemed, may be worth more or less than their original cost. Fund returns assume that dividends and capital gains
distributions have been reinvested in the Fund at NAV. Index returns assume that dividends of the Index constituents in the Index have been reinvested. Investing
involves risk, including loss of principal. Please call 800.826.2333 or visit vaneck.com for performance current to the most recent month ended.
All indices are unmanaged and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the fund. An index’s
performance is not illustrative of the fund’s performance. Certain indices may take into account withholding taxes. Indices are not securities in which investments can be made. See disclosures at the end of this
presentation.
14ETF disclosure This material does not constitute an offer to sell or solicitation to buy any security, including shares of any fund. An offer or solicitation will be made only through a fund’s prospectus or summary prospectus and will be subject to the terms and conditions contained therein. This material and the information provided herein are not directed at or intended for distribution to any person (or entity) who is a citizen or resident of (or located or established in) any jurisdiction where the distribution of these materials and/or the purchase or sale of interests of a Fund would be contrary to applicable law or regulation or would subject a Fund to any registration or licensing requirement in such jurisdiction. Persons who wish to review this material are required to inform themselves about and to observe any legal or regulatory restrictions which may affect their eligibility to make an investment in a fund. Professional advice should be sought in cases of doubt. THIS MATERIAL MAY ONLY BE PROVIDED TO YOU BY VANECK AND IS FOR YOUR PERSONAL USE ONLY AND MUST NOT BE PASSED ON TO THIRD PARTIES WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF VANECK. IF YOU HAVE NOT RECEIVED THIS MATERIAL FROM VANECK, YOU ARE HEREBY NOTIFIED THAT YOU HAVE RECEIVED IT FROM A NON-AUTHORIZED SOURCE THAT DID NOT ACT ON BEHALF OF VANECK AND THAT ANY REVIEW, USE, DISSEMINATION, DISCLOSURE OR COPYING OF THIS MATERIAL IS STRICTLY PROHIBITED. BEFORE MAKING AN INVESTMENT DECISION, PLEASE CONSULT A QUALIFIED INVESTMENT AND TAX ADVISOR. Any projections, market outlooks or estimates in this material are forward-looking statements and are based upon certain assumptions that are solely the opinion of VanEck. Any projections, outlooks or assumptions should not be construed to be indicative of the actual events which will occur. Further, any information regarding portfolio composition, portfolio composition methodology, investment process or limits, or valuation methods of evaluating companies and markets are intended as guidelines which may be modified or changed by VanEck at any time in its sole discretion without notice. The performance data quoted represents past performance. Past performance is not a guarantee of future results. Forecasts, estimates, and certain information contained herein are based upon proprietary research and the information contained in this material is not intended to be, nor should it be construed or used as investment, tax or legal advice, any recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security. References to specific securities and their issuers or sectors are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities or gain exposure to such sectors. The fund(s) may or may not own the securities or be exposed to the sectors referenced and, if such securities are owned or exposure maintained, no representation is being made that such securities will continue to be held or exposure maintained. VanEck Securities Corporation, Distributor 666 Third Avenue, New York, NY 10017 800.826.2333 15
ETF disclosure Indices are unmanaged and are not securities in which an investment can be made. Index returns do not reflect a deduction for fees & expenses. MVIS® Global Video Gaming and eSports Index is the exclusive property of MVIS (a wholly owned subsidiary of Van Eck Associates Corporation), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MV Index Solutions GmbH, Solactive AG has no obligation to point out errors in the Index to third parties. The VanEck Vectors Video Gaming and eSports ETF is not sponsored, endorsed, sold or promoted by MV Index Solutions GmbH and MV Index Solutions GmbH makes no representation regarding the advisability of investing in the Fund. Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called “creation units” and otherwise can be bought and sold only through exchange trading. Shares may trade at a premium or discount to their NAV in the secondary market. You will incur brokerage expenses when trading Fund shares in the secondary market. Past performance is no guarantee of future results. Returns for actual Fund investments may differ from what is shown because of differences in timing, the amount invested and fees and expenses. Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing. Non-VanEck proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck. Principal VanEck Vectors Video Gaming and eSports ETF (the “Fund”) Risk Factors: An investment in the Fund may be subject to risks which include, among others, investing in the video gaming and esports companies, equity securities, communication services and information technology sectors, medium-capitalization companies, issuer-specific changes, special risk considerations of investing in Asian, Japanese and emerging markets issuers, foreign securities, foreign currency, depositary receipts, market, operational, cash transactions, index tracking, authorized participant concentration, absence of prior active market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversified, and concentration risks, all of which may adversely affect the Fund. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund's returns. Medium-capitalization companies may be subject to elevated risks. For a more complete description of these and other risks, please refer to the Fund’s prospectus. © 2019 VanEck. 16
Definitions Esports : Competitive gaming at a professional level and in an organized format (a tournament or league) with a specific goal (i.e., winning a championship title or prize money) and a clear distinction between players and teams that are competing against each other. Esports Enthusiasts: People who watch esports more than once a month. Esports Event: A competitive gaming tournament or league organized by a third party, where players and/or teams compete against each other with the goal to win. Media Rights Revenue: Revenues generated through media property, including all revenues paid to industry stakeholders to secure the rights to show esports content on a channel. Merchandise and Tickets Revenue: Revenues generated by the sales of tickets for live esports events and merchandise. Advertising Revenue: Revenues generated by advertisements seen by viewers via esports content, which are paid for per impression. Sponsorship Revenues: Revenues generated by teams and organizers through sponsorship deals. Game Publisher Fees: Revenues paid by game publishers to independent esports organizers for hosting events. This excludes investments or spending by game publishers on their own events, as we consider that to be part of their regular marketing efforts. 17
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