Video Games & Esports: Building on 2020's Rapid Growth
Video games, and competitive video gaming (called Esports), are skyrocketing in popularity and profitability. In response, investors may want to consider adding these industries to their portfolios in order to take advantage of this meteoric growth.
Video games and esports are enjoying notable profitability.
In 2020, video games were supposed to reach $159 billion in revenue, eclipsing both cyber-security and robotics. This profitability is coming on the heels of a growing user base--By 2023, more than 3 billion people are expected to be participating in video games.
Three trends drive the popularity growth of video games and esports.
Three trends are driving the growth of video games and esports, besides the push that Covid-19 provided.
Interactive Online Experiences
Over the past two decades, interactive online experiences through channels such as social media have become the norm. Video games provide this type of connection for players.
Video games are one of the many recent options (including streaming services such as Netflix) that allow people to customize their online experiences.
Shift Toward Online Play
Young adults today have spent their lives playing online. Now 65 percent of Americans play video games.
Mobile gaming is gaining market share.
Among the three gaming platforms of PC, console, and mobile, mobile gaming brings in the most revenue and is growing the fastest. Mobile gaming presents game publishers with a way to more broadly distribute their games.
Games as a service generate ongoing revenue.
Gaming trends include gaming as a service-Providing free access to games and then creating opportunities for players to spend money within the game. This model provides ongoing revenue for game publishers, instead of a one-and-done payment that comes from selling the game outright to players.
Fortnite is an example of the success of this gaming model-earning 1.6 billion hours of streaming, becoming a direct competitor with Netflix, and earning $2.4 billion of in-game revenue in 2018.
Esports are a subset of video gaming.
Esports are earning attention, but still constitute a very small percentage of the revenue from video gaming as a whole. As a result, they can safely be considered a younger and still developing subset of video gaming.
Esports are becoming a publisher-driven industry.
Currently, video game publishers are positioned to benefit the most from Esports. They own the rights to the games, the rights to the broadcasting, and the majority of revenue streams from Esports. Esports appeal to publishers because they serve as an effective way to build and engage a large fanbase of individuals who play, and watch, the publisher's game.
The gaming industry is not without risks.
Gaming is gaining in popularity, but still carries risks, including the following:
- Dependence on a single game for business success
- Regulatory risk from changing laws
- Stock valuations that exceed the company's actual market position
- Introduction of competitors
- Drop in interest as pandemic resolves and people return to normal
If you are interested in gaming and Esports industry, there are several funds available that invest in that area.