Alibaba (NYSE:BABA) made a $150m investment in the International e-Sports Federation, in which the IeSF and BABA will use the investments to help eSports to gain global recognition and "sports" status, including securing participation in the Olympic Games. This is the first major investment in eSports by an established Internet company, and I believe that this positions BABA to benefit from eSports' growing engagement and viewership. This investment came after Alibaba and YuuZoo signed a JV, in which YuuZoo will manage and run BABA's eSports events throughout China (see - Alibaba: Dipping Into eSports), and I believe that this is a clear sign that BABA is getting serious on this theme.
The eSports value chain consists of the content developers such as Activision (NASDAQ:ATVI), Nintendo (OTCPK:NTDOY), and Tencent (OTCPK:TCEHY) that develop the games, the media distributors such as YouTube Gaming (NASDAQ:GOOG) (NASDAQ:GOOGL) and Amazon's (NASDAQ:AMZN) Twitch, and mostly private event organizers. Given that Alibaba is already late to the content development side where rival Tencent dominates with its ownership of Riot Games (developer of League of Legends), BABA is looking to cash on this theme from the media side through its Alisports division. I think this a long-term positive in that BABA can generate higher ad revenue from non-ecommerce sites and drive growth in its Youku Tudou and Alisports divisions. I remain bullish on BABA and reiterate that it has the most compelling ecosystem among the Chinese Internet media players.
The partnership with IeSF is designed to host tournaments for both amateur and professional eSports players where the IeSF will fully repeat the WESG Game series. Both parties will also work together on helping eSports gaining global recognition and actual "sports" status that could pave the way for the Olympic Games. The debate of eSports being a sport or a competition is irrelevant here in that I believe eSports is a sport because it has a competitive element where both physical and mental strength are tested similar to the other conventional sports such as soccer or tennis. Having BABA backing the IeSF could accelerate eSports' global recognition and help IeSF's lobbying to the International Olympics Committee.
As I mentioned earlier, Alisports will be the biggest beneficiary of the eSports theme given the growing viewership and engagement on competitive video gaming, which will also benefit Youku Tudou as the site streams eSports competition to fans across China. Although the economic benefit at this point is still difficult to gauge, what is clear is that eSports is big business especially when developers are investing heavily into this space and mainstream media such as Turner Sports and ESPN are ramping up on their respective coverage of this theme. BABA is an early mover in the eSports media scene in China, and this should ultimately benefit the company in the long run.
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