Luxor esports arena operator moves toward an asset-light strategy

It’s not just casino operators like MGM Resorts International announcing plans for an “asset-light” strategy.

Frank Ng, CEO of Allied Esports Entertainment, a California-based company that operates the HyperX Esports Arena at MGM’s Luxor, told investors Tuesday that the company has been looking to figure out a way “to achieve a more asset-light approach to tackle this market.”

The company announced a partnership with a subsidiary of Simon Property Group — a commercial real estate company that operates shopping malls — back in June, with Simon purchasing $5 million of stock and agreeing to collaborate with Allied to build esports venues at its properties.

Ng said the company has been approached by “a lot of major real estate companies like Simon Properties” over the past few months. These sorts of partnerships would allow Allied to run an esports venue without having to purchase the real estate itself.

“A very consistent conclusion is that shopping malls around the world, they’re looking into converting from a shopping center into an experience center,” he said. “They all realize that esports is a very big part of it.”

Brick-and-mortar malls have been struggling to keep people coming in recent years. Research firm Reis reported last month that the average mall vacancy rate hit an eight-year high of 9.4 percent during the third quarter.

Meanwhile, esports has been a rapidly growing industry, especially among younger demographics. Research firm Newzoo reported in February that the global esports market is expected to exceed the billion-dollar revenue mark for the first time this year, hitting $1.1 billion on 27 percent growth from last year. Additionally, the global esports audience is expected to reach 453.8 million worldwide, up 15 percent from 2018.

Tuesday’s earnings call was Allied’s first as a public company. The esports entertainment company was formed Aug. 9 as a business combination between Black Ridge Acquisition Corp., Allied Esports International, Inc., WPT Enterprises, Inc. and other affiliates.

Allied’s third-quarter revenue increased $0.9 million from the third quarter of last year. Anthony Hung, the company’s chief financial officer, said this growth was “largely a result of increased revenue at the HyperX Esports Arena in Las Vegas.”

Shares of Allied closed down 2.6 percent to $4.31 on Tuesday.

Contact Bailey Schulz at bschulz@reviewjournal.com or 702-383-0233. Follow @bailey_schulz on Twitter.