Finding a promising area for investment in the stock market is becoming increasingly difficult: over the past three months, the mining industry has fallen by 4%, the IT industry by 7%, and the highly liquid stock market by 2.5%. One of the few growing areas is the video game industry. According to PwC forecast, by 2025 it will grow by at least 17% due to the development of the mobile segment, cloud gaming, and VR technologies. But thoughtless investments will not bring results, because not all companies show stable profitability. For example, when Activision Blizzard’s shares rose 26% on the back of the Microsoft deal, Sony’s shares immediately fell 13%. To make money on investments in video games, it is important to understand the structure and trends of the market. We will explain how this industry works, how it will develop, and which companies investors need to pay attention to.
Why the video game industry is growing
Games are more interesting than movies. In cyberspace, you can virtually spend time with loved ones – this is one of the main factors that attract new players. According to the HP Global Gaming Survey, 47% of users play with friends and 63% with relatives. More and more people began to play games where there is a lot of content, for example, World of Warcraft, because there the player is immersed in the whole universe, which is cooler than a regular movie or series. Someone plays for hours every day to pump their character to the maximum, while others order boosting. Thanks to boosting, you can save time on leveling, passing dungeons and raids, and extracting wow gold which can be easily bought through boosting companies. This is another reason why games have become more popular – now there are more opportunities to develop your character and at the same time not sacrifice time in real life.
In 2020, total game revenue increased by 12%, and the developers of the most popular series began to earn 63% more. People spend a lot of time at home. Due to remote work and the pandemic, there is more free time for games: no need to waste time commuting to and from work, going to a cafe for lunch, or shopping for clothes. Even those who had not played before became interested – the number of gamers in the world increased by almost 1.5 times during the pandemic.
Technology improves the gaming experience. In addition to the fact that graphics and stories are constantly improving, radically new technologies appear in the industry. For example, in virtual reality, the user is immersed in the process with the help of special equipment and interacts with the game world, as with the real one – visually, acoustically, and tactilely.
Games are available to everyone. Thanks to the mobile segment and cloud services, it is not necessary to have a powerful computer or console to be a gamer. And due to the free-to-play format (free games with in-game purchases) and the subscription system, the market is not limited by the ability of users to pay.
Which segments and companies to pay attention to
The main segment of the industry is game development. It is made up of studios and publishers: the former creates the story and graphics, while the latter releases the finished product. For example, among publishers, there are many world-famous companies:
- Sony (games The Last of Us, Uncharted, Horizon Zero Down, and others);
- Microsoft (Halo, Forza, Gears of War);
- Electronic Arts (The Sims, FIFA, Battlefield);
- Ubisoft (Assassins Creed, Far Cry, Watch Dogs).
There are also major developers in mobile gaming: miHoYo (Genshin Impact – a game that makes a billion dollars every 6 months), Tencent (PUBG Mobile), and Roblox (the game of the same name). But the scope is not limited to the release of video games. Without technology manufacturers, it would not exist, and without cloud services, it would not be so popular. Therefore, it is profitable to invest in related industry segments.
Production of game consoles. In 2021, the console segment accounted for 28% of the total market for the video game industry. The key role is played by the companies that produce the three most popular consoles in the world – Sony (Playstation), Nintendo (Switch), Microsoft (Xbox)
Production of video cards and processors. NVIDIA, AMD, Intel, and Qualcomm produce components for computers, consoles, and smartphones. It is these manufacturers who expand the technical potential of games: the stronger the video card and processor, the more opportunities for developers to improve the graphics.
Why the industry is attractive to investors
The segment of mobile games will increase. By 2024, its volume will increase by another 10-20%. According to NewZoo forecasts, Electronic Arts, Nintendo, and Activision Blizzard will be the leaders in mobile development.
Subscriptions will start generating more revenue. Subscribing to games instead of buying makes gaming cheaper, helps small studios grow, and boosts big publishers’ revenue through upselling. According to Statista analysts, revenue in the Video Games market is projected to reach US$384.90bn in 2023.
Cloud gaming will become more popular. NewZoo predicts the segment will grow by 257% by the end of 2023. This is due to the spread of 5G networks: the faster and more stable the Internet is, the lower the delay and the more comfortable it is to play.
Metaverses will begin to develop. This will accelerate the development of virtual and augmented reality: by 2027, the segment will grow by 50.6%. Moreover, VR and AR technologies will be used not only in games. For example, they plan to use them in the field of education, as well as in medicine and industry to work out complex operations and emergencies.
In conclusion, the video game industry stands out as a rare beacon of growth and opportunity amidst challenging market conditions. With its potential for sustained expansion, it presents an attractive investment prospect for those who delve into it wisely.
