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Allied Esports Goes Mall Shopping

Allied Esports Entertainment Inc. Chief Executive Frank Ng is optimistic about the future of his company that operates venues and live events for video gaming enthusiasts, and the Irvine-based entertainment firm has new real estate-related deals to bolster his point.

“Video gaming is the biggest form of entertainment, it’s bigger than music and movies combined,” Ng told the Business Journal last month, while inside the $20 million HyperX Esports Arena in Las Vegas, the company’s flagship venue.

“Esports is the major driving force to push the growth,” he added.

Esports involves multiplayer video games played competitively for spectators, often by professional gamers.

There’s some 2.2 billion gamers playing esports globally, and it is projected that by 2022, 645 million people will be watching esports, according to the company’s statistics.

Revenue for the global esports market is projected to grow to nearly $1.8 billion by 2022.

Allied Esports is still seeking to break into profitability. The company’s revenue is expected to climb to almost $32 million this year, according to the average of two analysts who follow the company.

Brookfield, Simon

“We have a lot of big partners working with us on some exciting projects,” Ng said, as he spoke on the future of the company last month, from the balcony of the arena inside the pyramid-shaped Luxor Hotel & Casino.

The arena’s naming rights belong to HyperX, a unit of Fountain Valley’s electronics giant Kingston Technology that makes gaming headsets, keyboards and related products.

“This year, we’re still testing new products because we have the mall owners invested in us,” Ng said.

Bermuda-based real estate firm Brookfield Property Partners LP (Nasdaq: BPY) is the latest mall owner looking to take part of the esports growth push.

The $8.4 billion-valued firm, whose holdings include a portfolio of retail centers such as Las Vegas’ Grand Canal Shoppes and Hawaii’s Ala Moana Center, last month said it would invest $5 million in Allied (Nasdaq: AESE).

Brookfield said it will help Allied Esports build esports venues in its retail destinations. The two parties will jointly develop venues that will house amateur and professional play, with broadcast and streaming production facilities on-site.

It’s the 21st century version of a mall’s video game arcade, with an emphasis on audience participation.

Locations such as shopping malls “are the perfect foundation” for growing the esports ecosystem, Ng said.

Specific locations for the venues in the new partnership weren’t cited; Brookfield has retail locations in Los Angeles and the San Diego area, but none in Orange County.

The Brookfield deal is the second such partnership for Allied Esports.

In July, the company inked a $5 million deal with Indianapolis-based Simon Property Group Inc. (NYSE: SPG), and last month the $43 billion-valued mall owners said that Mall of Georgia in the suburbs of Atlanta will have its first esports venue.

2019 Listing

Allied Esports has ways to go to reach the valuation of Simon and Brookfield.

It went public and raised $21 million via a reverse merger in August, and currently counts a market capitalization of about $65 million.

Along with the esports business, the company’s operations include the World Poker Tour.

“The World Poker Tour is making money,” Ng said. “It’s profitable. The other (esports) side, it’s still early stage. We just started it last year, basically.”

Third-quarter revenue rose 10% year-over-year to $6 million. Of that amount, $4.1 million—or about 70%—was attributable to the World Poker Tour, while the remainder—$1.9 million—came from esports.

Allied Esports has about 100 employees, including WPT and its Las Vegas operations. About half of them are in Irvine.

$15M Being Raised

In December, the company said it plans to sell an additional $15 million in common stock, and Ng talked to potential investors during last month’s CES technology show in Las Vegas.

Shares in the company have lost about 23% of their value since mid-August, and were trading at about $3 apiece as of last month.

Ng said he has “total confidence” that the share price will go back up, adding: “Right now, we’re just going through some process of adjustment,” as the prior China-based owners of Allied, as well as some investors of the blank check firm that took the company public via reverse merger—Minneapolis-based Black Ridge Acquisition Corp.—offload shares.

Massive Investment

“It’s a massive investment,” he said of the Las Vegas arena. “We run a lot of tournaments for big publishers, like Riot, Blizzard, everybody.”

For the weekly events, typically there is a nominal entry fee that goes toward the prize pool. Depending on the event and the number of players participating, nightly prize pools can range from $500 to $2,000.

For special events, the prize money can be higher, especially when sponsors are involved.

In addition to the flagship, 30,000-square-foot arena in Las Vegas and a smaller locale in downtown Santa Ana that it runs, Allied Esports owns two HyperX Esports trucks, one in North America and the other in Europe, to provide “mobile arenas.”

It also owns the HyperX Esports Studio in the northern Germany city of Hamburg, and works with partners in Australia, China and California who currently own or are building esports facilities.

Last year, the company launched the Allied Esports Property Network, an esports venue affiliate program, designed to offer infrastructure services and programming to like-minded partners looking to build sites.

Real Connections

For those who haven’t tried esports, Ng has this advice:

“I can tell you as a gamer for 30 years, if you start player vs. player on a competitive basis, you can’t go back to playing easy against the computer,” Ng said.

“The level of excitement is so much higher when you play with real people.”

Connections made via video games are real, and can be lifelong, Ng said, while watching activity from the Luxor hub.

“This year we’re going to a have a wedding here—two gamers getting married,” Ng said inside the cavernous arena.

“I think they’re inviting me.”

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Kevin Costelloe
Kevin Costelloe
Tech reporter at Orange County Business Journal
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