OK, lets try something new today! When I first started to dabble in the art of investing, one of the core idea I had for the stocks I wanted to invest was in the video games industry. As a gamer, I felt compelled to buy some video games stocks, seeing as it was a field I was already invested and naturally knowledgeable in. However, despite there being a lot of blogs and article telling you how much these stocks have gone up, they don’t really explain why you should or what you keep an eye out on when it comes to investing in this growing market. I wanted to share my experience with that.
Now before we go on, I gotta emphasize this very important point:
“This is not a financial advise and your capital is at risk. This blog is for entertainment purposes only.”
Can’t have you all come at my neck if things go south, as it does tend to happen with any investment. Anyways, with that being said, let me tell you the following reasons as to why I’ve chosen to invest in some key video game stocks.
This is an obvious one but with a caveat to it. The video game industry has grown to an exponential size of the past few years. More and more people are playing video games everyday, and not just that, people also enjoy watching others play games as well. The reason for this is because it create a sense of community. Despite you yourself not playing, watching others play creates this sense of connection. Games were designed to be played with others after all so when YouTube picked up, it was a natural fit. This has translated well in terms of revenue. According to Fortunly,
For the past 10 years, the video game industry has earned more money than Hollywood and the music industry combined.
Neither music nor the movie industry is the biggest when it comes to entertainment. It’s video games.
So it’s safe to say that there’s a massive potential with video games, especially when you consider both the ever so dominate and expanding China and the emerging countries of the continent of Africa. Both yielding massive growth potential respectively.
Another facet that’s often overlooked is the esports scene. The Esports scene has grown extremely rapidly over the past few years, with more and more people participating in tournaments or watching it on livestreams services such as Twitch and YouTube. It is a medium that many still aren’t able to grasps its relevance and have instead shunned the idea of it ever being a legitimate career path or even a “real” sport. But when the Esports scene is racking up major stacks, with the European market alone estimated to be worth $209 Million, it’s an area worth investigating.
According to Newzoo, the market is estimated to reach $1.2 billion by 2020:
The coming year will see the Esports Economy grow to $696 million, a year-on-year growth of 41.3%. Brands are expected to spend $517 million, broken down into $155 million on advertising, $266 million on sponsorship, and a further $95 million on media rights. Brand investment will double by 2020, pushing the total market to $1.5 billion.
In my opinion esport is a sleeping giant waiting to awoken.
Game Development Cost
One of the guarantees you’ll have for game revenue continuing to grow is the development cost of gaming. As games continue to innovate and push the envelope of what’s possible (R&D, advancement of graphical fidelity, game mechanics, A.I. etc , the cost of making these games will naturally go up, essentially ensuring that game companies and developers are constantly seeking way to improve their revenue to cover these cost. Often times though, this has been met with a negative pushback from gamers over the years if the method is anti-consumer, so that is something to take note.
I can’t talk about all that positivity without highlighting one of the core risk when it comes to investing in gaming. One of the biggest risks that I’ve been able to identify is the industry’ slack of a “moat”! For example, if you were to invest in a particular game company that has recently released a brand new IP, there’s no protection if another game company comes around the following week and release a game similar to that one. There’s a risk of that game underperforming in such an event. Spreading you asset around is a good tactic to employ.
So these are some of the reasons why I invest in gaming stocks. If this field is something that interests you, I highly recommend you doing so extensive research on the matter. This blog was merely writing to give you an idea of the potential.