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Overwatch League 2020 season-opening weekend in Dallas, Texas featured the Los Angeles Gladiators vs Vancouver Titans, on Feb 8, 2020.

Courtesy Enthusiast Gaming/Courtesy of manufacturer

Adrian Montgomery didn’t know what to make of the young guys in hoodies touring the Rogers Arena in Vancouver. They were renting it for a six-day video-game tournament and strutting through it like they owned the place. In fact, Aquilini Investment Group, where Mr. Montgomery led the sports and entertainment division, owned it. He’d never heard of the game they were talking about, Dota 2. Sensing an opportunity to knock them down a peg, he asked how big the prize pool was. The answer – more than US$25-million – left him stunned.

So did the marketing plan for the event: a single tweet. That was it. Mr. Montgomery couldn’t sleep the night before the tweet was supposed to go out. But when it did, the entire tournament sold out in one day.

The actual competition, held in August, 2018, was another awakening. The young crowd roared and swooned along with the game play just as fans watching hockey would. “We all looked at each other and said, ‘Oh my God, this is very, very, very real,’” Mr. Montgomery says.

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Francesco Aquilini (L) and CEO of Enthusiast Adrian Montgomery (R) visit Riot Games office in China in November 2018 shortly after forming Aquilini GameCo, which later merged with Enthusiast Gaming in 2019.

Courtesy of manufacturer

More than two years later, he’s the chief executive officer of Enthusiast Gaming Holdings Inc. , a burgeoning publicly traded company comprised of about 100 websites, a multichannel network spanning 1,000 YouTube channels, and minority stakes in two major e-sports franchises, the Vancouver Titans and Seattle Surge. Enthusiast also has the backing of Vancouver Canucks owner Francesco Aquilini, who serves as chair. He, too, had an awakening after the gaming tournament at Rogers Arena.

This past August, Enthusiast purchased Omnia Media Inc. in a deal valued at $44.1-million, boosting its video library of gaming content and giving it access to some of the most popular gamers. These are stars that anyone over 35 probably hasn’t heard of, but command massive followings of Gen Z and young millennial gamers. Enthusiast’s properties reach about 300 million fans, Mr. Montgomery boasts. “Young people are the most lucrative demographic, and they’re the hardest to find,” he says.

The plan is to build a gaming media empire. Whenever gamers switch off their consoles, Enthusiast wants them to visit one of its sites, watch one of its YouTube videos, tweet at one of its influencers, buy merchandise or attend one of its live events. “We see a lot of potential,” Mr. Aquilini said via e-mail. “We’re just getting started.”

Gaming and e-sports have become more popular than ever during the COVID-19 pandemic, with much of the world under stay-at-home orders. The time people spent glued to Amazon -owned Twitch, the most popular video-game streaming platform, hit a record in November with 1.7 billion hours watched. Enthusiast’s revenue is small, but growing rapidly, and its share price has tripled to about $4.40 recently in just over two months.

That surge has given Enthusiast a mid-sized market cap of $472-million. But it is still a money-losing company that’s burning through cash. Its impressive stock run has been fuelled in part by bullishness on the sector amid the pandemic, and investors have piled in because Enthusiast, which is listed on the TSX, is one of the few publicly traded e-sports issues.

MAY

JUNE

JULY

APRIL

AUGUST

SEPTEMBER

OCTOBER

MARCH

FEBRUARY

2020

NOVEMBER

TWITCH

JANUARY

VIEWERSHIP

Billions of

hours watched

1.5

1.0

0.5

0

SOURCE: STREAM ELEMENTS

MAY

JUNE

JULY

APRIL

AUGUST

SEPTEMBER

OCTOBER

MARCH

FEBRUARY

2020

NOVEMBER

TWITCH

JANUARY

VIEWERSHIP

Billions of

hours watched

1.5

1.0

0.5

0

SOURCE: STREAM ELEMENTS

MAY

JUNE

JULY

APRIL

AUGUST

SEPTEMBER

OCTOBER

MARCH

FEBRUARY

2020

NOVEMBER

TWITCH

JANUARY

VIEWERSHIP

Billions of

hours watched

1.5

1.0

0.5

0

SOURCE: STREAM ELEMENTS

In short, Enthusiast carries all of the risks and rewards of an early-stage company in a growing industry: lots of potential, but much to prove. To succeed, the company will have to show it can make money, build a lasting brand with fickle youth and shell out cash to partner with the right star gamers.

Oh, and tap the expertise of a former rabbi.

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CEO Adrian Montgomery and President Menashe Kestenbaum congratulate the 'Rising Stars' Fortnite tournament runner-up at EGLX 2019, at the Metro Convention Centre in Toronto in October, 2019.

Courtesy Enthusiast Gaming/Courtesy of manufacturer

When Menashe Kestenbaum was growing up in Toronto in the 1990s, gaming carried a nerdy stigma and fan culture was relegated to magazines with names such as Nintendo Power. His closet was stuffed with them. As gaming culture moved online, Mr. Kestenbaum moved with it, devouring websites and posting on forums. He came from a family of rabbis, and at 28, he was teaching at a religious school in Israel. Still, he gamed at night. “That was my secret passion,” he says.

Looking to make extra cash, he launched a blog called Nintendo Enthusiast that quickly found an audience, and he later expanded into more blogs. “I decided that’s what I was going to do full-time,” he says. In 2013, he quit teaching the Talmud, and moved home to Toronto with his wife and children to blog about gaming. His parents, he says, were supportive.

Mr. Kestenbaum found fans clustered around particular games and platforms, and audiences didn’t always overlap. By ferreting out niches, he figured he could build a media company, and he started acquiring other properties. He founded Enthusiast in 2015, and within a few years owned a large network of gaming sites and ran an annual expo in Toronto that attracted some 30,000 attendees in 2019.

By then, Mr. Aquilini, the Vancouver property magnate and Canucks owner, had taken notice of the booming sector. Through an Aquilini investment company, he purchased a Canadian e-sports outfit called Luminosity Gaming and merged it with Enthusiast in September, 2019, to create the company as it exists today.

Mr. Montgomery joined as CEO, and Mr. Kestenbaum became president. Mr. Aquilini owns a 3.24-per-cent stake. Joining the entities, according to Mr. Aquilini, creates a “powerful combination for both video-game and e-sports fans, but also for advertisers and sponsors.”

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At Enthusiast, Mr. Montgomery is the oldest guy in the room at age 46. He’s got a picture of Bruce Springsteen’s Born in the U.S.A. album cover in his office, and he uses an iPad, the device of choice for the 40-plus exec. He completed a stint at Rogers Communications Inc. before joining Aquilini Sports and Entertainment as CEO.

He’s full of analogies to help the uninitiated understand the company: It’s kind of like a record label, or professional sports or Live Nation. Sometimes his analogies are a stretch. “We can be the Netflix of gaming,” he says.

The basic premise is to create as much gaming content as possible, whether it be on the company’s own websites, YouTube videos or live events, and sell ads. On the first point, Enthusiast is well on its way. It owns websites such as Destructoid, which covers industry news, game releases and reviews, and Daily Esports, which follows competitive play.

On YouTube, Enthusiast owns channels that include BCC Gaming, where fans submit videos of their game play. A typical video title: “Fortnite Funny Fails and WTF Moments!” The channel has more than 10 million subscribers.

The company tells advertisers it can deliver an elusive young demographic disenchanted with traditional media and Facebook. About 64 per cent of Americans aged 12 to 34 reported using the social networking site in 2020, according to a report from Edison Research and Triton Digital, down from 79 per cent three years before. Gaming, meanwhile, is on the rise. In Canada, 83 per cent of Gen Z and 74 per cent of millennials are gamers, according to research firm Kantar.

After Mr. Montgomery came aboard, the company built a direct sales team to wring more money from Enthusiast’s websites, and the effort is paying off. During last year’s U.S. presidential election, the Joe Biden and Kamala Harris campaign purchased banner and video ads on Enthusiast’s properties to reach a young audience, validating the company’s approach, Mr. Montgomery says. Gillette, GoDaddy and the U.S. Air Force have all advertised, too.

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The company also owns an e-sports organization named Luminosity Gaming, and its players compete in a handful of leagues. Over the past few years, though, gamers who stream online but don’t necessarily compete have become a huge part of the ecosystem. They’re entertainers who pump out hours of content, day and night, and successful ones amass dedicated fan communities and lucrative sponsorship deals.

Luminosity has signed dozens of streamers – or, in company parlance, content creators – and pays them on a monthly basis. Typically, an organization could pay anywhere from US$1,000 a month to up to US$30,000 for top streamers. In return, creators do many things for Luminosity: make videos that appear on Enthusiast’s YouTube channels, appear at events, partner on apparel and other merchandise and collaborate with other Luminosity creators.

The most popular e-sports orgs have transcended gaming to become lifestyle brands. One called FaZe Clan, which is privately owned, is valued at US$305-million, according to Forbes. The group consists of pro gamers and influencers, many of whom share a house in Los Angeles. When members visited Manhattan in 2019, teens flooded the streets and several blocks were shut down.

Luminosity is not quite there yet. Canaccord Genuity pegged its valuation at $91.9-million upon initiating coverage in 2019, while B. Riley Financial put at it $65-million.

For smaller streamers, signing a deal with an organization increases exposure, while it helps the org nurture talent. “Over the next five to 10 years, you’re going to see e-sports organizations become powerhouses in helping broaden the strength and impact of each creator,” Mr. Kestenbaum says.

That’s the case with Tori Pareno, a 20-year-old in the U.S. who joined Luminosity in 2019 and has more than 44,000 Twitch followers. She started streaming in high school, and her parents asked whether she’d like to do it professionally instead of attend college. “I’m not going to say no to that,” she says.

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It wasn’t long before e-sports orgs approached her about signing. “There are a few orgs here and there that will drain creators,” she says. “Luminosity was the only team that really showed they cared.” She sounds somewhat incredulous at the arrangement. “The majority of the time, they’re not asking for too much,” Ms. Pareno says. Luminosity might reach out to retweet announcements or make the occasional TikTok post.

Over the past few years, though, power has shifted from organizations to individual streamers. The biggest names don’t need the backing of a larger entity, so e-sports orgs have to shell out top dollar.

In October, Luminosity signed Felix Lengyel, a 25-year-old from Quebec known as xQc, who has 7.2 million Twitch followers. He was the most popular streamer on the platform last year, and his fans spent 147.8 million hours watching him. Last year, he streamed alongside U.S. Representative Alexandria Ocasio-Cortez and federal NDP Leader Jagmeet Singh, playing a game called Among Us.

The world’s most-watched gamer, Felix Lengyel is know as xQc to his millions of followers who watch him play a variety of competitive video games like Mario Kart from Nintendo.

Courtesy Enthusiast Gaming/Handout

Mr. Lengyel’s popularity stoked a bidding war among organizations wanting to sign him. Such deals can be akin to a sponsorship, where Luminosity piggybacks off Mr. Lengyel’s popularity. “It was important that Luminosity was not a brand that would overshadow xQc,” says Ryan Morrison, founder of Evolved Talent Agency, which represents Mr. Lengyel.

Even so, fans pay close attention to such deals. Before signing, popular streamers hype an announcement for days in advance, drawing tens of thousands of likes and retweets.

Mr. Montgomery rejects the sponsorship comparison, though. “It’s more than wearing the Luminosity jersey,” he says. Luminosity can tap Mr. Lengyel to bring his audience to its live events, such as one in November in which he was a judge in an online competition to award a contract to an up-and-coming streamer.

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But streamers can leave and take their fans with them. “It definitely is a challenge,” Mr. Montgomery says of retaining talent. “It can be very frustrating at times.”

Luminosity signed a burgeoning gamer called Tyler Blevins a few years ago, and he became one of the most popular in the world, once setting a Twitch viewing record playing Fortnite with Drake. But Mr. Blevins left Luminosity in 2018, before it was acquired by Enthusiast, providing a lesson in the importance of scale.

Mr. Kestenbaum is confident something like that won’t happen again. “At this point, we could offer anything to somebody to keep them,” he says. It’s worth noting Mr. Blevins signed an exclusive multiyear deal in 2019 to leave Twitch and stream on Microsoft’s gaming platform for a reported US$20-million to US$30-million. Microsoft shut down its platform last year, and Mr. Blevins is back on Twitch.

Some streamers come to relish their popularity. In 2019, Luminosity signed four gamers and installed them in a house in Florida to churn out gaming videos, but they split last July. The crew then released a video announcing their own organization, posing next to a fleet of luxury cars and drifting through a mansion they just bought. One of them brags his walk-in closet is bigger than his entire bedroom at the Luminosity house.

A lanky 20-something in gym shorts and a T-shirt, known as Formula, shows off a wall-sized wine rack encased in glass. “None of us drink wine,” he shrugs.


After months of planning, Nick Amyoony enjoys his new stream room, complete with a custom, wall-mounted, liquid-cooled gaming PC and broadcast centre, in November, 2020

Courtesy Enthusiast Gaming/Courtesy of manufacturer

When the pandemic arrived in March, not much changed for Nick Amyoony. The 25-year-old continued streaming to his 2.3 million followers on Twitch from his parents’ home in Halifax. Mr. Amyoony, a top-tier streamer whose handle is Nick Eh 30, could theoretically move out, but says he’s close to his parents.

His content occupies a family-friendly niche, too. He doesn’t swear and he’s unrelentingly positive in conversation. “I’ve noticed a lot more amazing people joining the community,” he says of the past few months. “Everything has just been flourishing because of all that’s going on in the world.” Mr. Amyoony, who joined Luminosity in November, has seen his audience grow by some 30 per cent this year.

Indeed, people played and watched more video games while stuck at home under lockdown orders. In the second quarter of 2020, sales of Nintendo’s Switch gaming consoles surged 171 per cent from a year earlier, while sales of the Xbox One are estimated to have nearly tripled from the previous quarter, according to S&P Global Market Intelligence.

Even the dearth of in-person e-sports competitions hasn’t been a disaster. Live events moved online, and with traditional pro sports largely stymied, some broadcasters filled airtime with e-sports. Research firm Newzoo expects global e-sports revenue to total US$950.3-million for 2020, roughly the same as in 2019.

Mr. Montgomery sees parallels with 2004, when the National Hockey League lockout forced broadcasters to air professional poker. “The assumption would have been when hockey is back, poker goes bye-bye,” he says. “But that’s not what happened.”

Gamblers have turned to e-sports, too. Nevada state regulators approved wagering on 13 different leagues and tournaments in the span of a few months.

Enthusiast’s revenue is growing rapidly – $30.3-million in the first nine months of 2020 compared with $12.2-million for all of 2019. But like many expanding companies in hot sectors, Enthusiast is losing money – $8-million in the third quarter – and it’s cash-flow negative, spending money on acquisitions, player and streamer contracts, and in-house talent to achieve scale.

Moez Mahrez, an analyst at 5i Research Inc., says Enthusiast can only sustain negative cash flows for another year, and will have to take on more debt or issue equity. “That’s typically seen as a bad sign,” he says. “The big ‘if’ is whether management can execute.”

Despite the sharp share-price climb in the past couple of months – shares of smaller firms are often volatile – Enthusiast is not overvalued, Mr. Mahrez contends. “The company does not look outrageously expensive, especially if it can maintain its level of growth,” he says.

There is stiff competition in all of Enthusiast’s business lines, though. There are formidable e-sports organizations, such as FaZe, and many engaged fan communities on Discord, a wildly popular messaging platform with gamers. A lot of top streamers already have set up their own Discord pages – known as servers – to interact directly with followers, separate from an org.

Much depends on the headway Enthusiast can make with advertisers. In the wake of the pandemic, Mr. Montgomery is encountering less skepticism with marketing executives who used to question why anyone would watch someone else play video games. “That doesn’t happen any more,” he says. “If you need to get a hold of young people, you have to have a video-game strategy.”

Mr. Morrison at Evolved Talent Agency suspects the about-face with some advertisers is because old marketing execs spent more time with their gaming-obsessed kids under stay-at-home orders.

In a growing field, Enthusiast also has a head start, given the breadth of its operations. The company’s sites cracked Comscore’s list of the top 100 properties in the U.S. recently, the only gaming outfit aside from Twitch to do so.

That’s partly why analysts are optimistic about Enthusiast’s prospects for making money from its content. The company’s direct sales approach has helped boost annualized per-user revenue from 10 cents to nearly 40 cents, and analysts are bullish on the opportunity to introduce subscription tiers to some of the company’s properties.

Enthusiast already has 115,000 members paying $5 a month to access a fan site dedicated to The Sims, a popular life simulation game. The company could introduce a single subscription option across multiple Enthusiast and Luminosity properties, analysts say. E-sports organization Cloud9, for example, created a US$500 annual subscription for superfans recently, giving them access to a private Discord server, merchandise and other perks.

Management has also removed at least some investment risk, Canaccord Genuity analyst Robert Young says, by strengthening Enthusiast’s balance sheet. A planned Nasdaq listing this year could broaden the investor base, too. Mr. Young recently upped his rating from “speculative buy” to a “buy.”

Mr. Montgomery, meanwhile, is very focused on growth. He talks about plans for a social network and a marketplace for gaming merch. As a Gen Xer, he’s absorbing all he can about Gen Z gaming culture. Recently, Mr. Montgomery talked excitedly about a merchandise deal Luminosity Gaming struck for Fresh, an Australian teenager with more than 11 million subscribers combined on Twitch and YouTube, and one of Luminosity’s most popular creators, and a rapper named Lil Tecca.

Fresh, Mr. Montgomery explained, is a huge fan of Lil Tecca. “That’s why Fresh hangs with LG!!!” he wrote, from his iPad.

Vancouver Titans competing in The Overwatch League Grand Finals at Wells Fargo Center in Philadelphia, PA, on Sept. 29, 2019

Courtesy Enthusiast Gaming/Courtesy of manufacturer

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