An overview of the gaming industry and how to invest in it.

Investing in gaming stocks

The gaming industry is a broad investment category that has become one of the fastest-growing entertainment industries. According to a report published by Accenture in April 2021, the value of the global gaming industry exceeds $300 billion, more than the movie and music industries combined.

Have you ever thought about adding gaming stocks to your portfolio? Keep reading to learn about this industry and some of the big names in it.

The evolving gaming industry

People have been playing video games for decades. One of the first video games to see commercial success was Pong, released by Atari in 1972. The game was a two-dimensional arcade-tennis table game, which later turned into a home console game. Many cite Pong as the game that helped kickstart the industry.

The gaming industry has changed immensely since then. Today, three-dimensional high-definition graphics look nearly real, a once-niche market has turned mainstream with 2.7 billion gamers globally and game development costs have skyrocketed, some games costing tens to hundreds of millions to make. Advancements in technology have changed the way people play games. While arcade games are still around, the main ways to play games are on mobile devices, consoles and PCs.

New trends in the gaming industry are always rising. According to an article published by Yahoo Finance, some of the top gaming trends for 2021 are esports, could-based gaming, social gaming, virtual reality (VR) gaming and ‘roguelike’ gaming, which is a subgenre of role-playing video games.

Segments of the online gaming ecosystem

The gaming industry is massive and diverse, creating different streams of revenue for the industry and investment opportunities. Below are eight segments within the gaming industry and examples of companies that operate in each. Some companies may be involved in multiple segments; for example, a company may both develop and publish games.

  • Hardware developers-Companies that build the infrastructure needed to play games on, such as consoles, mobile devices, PCs, graphic cards, keyboards, headphones and more.

    Examples: Nintendo (JP3756600007), Nvidia (US67066G1040)

  • Software developers-Companies that develop applications to enable the game to work as intended, such as anti-cheat systems and communication software

    Examples: Discord (privately held), OpenAI (privately held)

  • Game developers-Companies that build games from the ground up, including everything from coming up with the story line to writing code and implementing it.

    Examples: Blizzard Entertainment (owned by Activision Blizzard US00507V1098), CD Projekt (PLOPTTC00011)

  • Publishers-Companies that provide financing for games and put a finished game on the market.

    Examples: Ubisoft (FR0000054470), Electronic Arts (US2855121099)

  • Distributors/retailers-Companies and platforms that sell and distribute games.

    Examples: GameStop (US36467W1099), Google Play (owned by Alphabet US02079K3059/US02079K1079)

  • Esports-Companies involved in organised competitive multiplayer video game competitions, usually played by professionals.

    Examples: Guild Esports (GB00BMWVF760), Enthusiast Gaming (CA29385B1094)

  • Gaming arenas-Companies that own indoor arenas and event centres that host gaming events.

    Examples: Allied Esports Entertainment (US0191701095)

  • Streaming services-Companies that provide services that allow users to livestream games.

    Examples: Twitch (owned by Amazon US0231351067), YouTube Gaming (owned by Alphabet US02079K3059/US02079K1079)

Top-10 companies by revenue

Newzoo, a research firm focusing on games and esports analytics, published their 2021 Global Games Market Report in July 2021. In it, Newzoo reported the top 100 public game companies based on revenues in 2020. Out of these, the top-10 were either Asian or American companies:

Tencent is the biggest gaming company based on revenue in 2020.

*In cases where a company does not explicitly report game revenues apart from total revenues, Newzoo included an estimate. Esports were not included as well as revenues from hardware sales and other non-game sales.

Most traded game companies

Out of the above ten companies, the three that were traded the most through the DEGIRO platform from 01.01.21-30.08.21 were:

Apple was the most traded gaming stock through the DEGIRO platform.

Investing with DEGIRO

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The information in this article is not written for advisory purposes, nor does it intend to recommend any investments. Please be aware that facts may have changed since the article was originally written. Investing involves risks. You can lose (a part of) your deposit. We advise you to only invest in financial products that match your knowledge and experience.

Sources: Newzoo, Accenture, Visual Capitalist, Hackernoon, HP, Investopedia, World Economic Forum, Bloomberg, Yahoo! Finance

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Note: Investing involves risks. You can lose (a part of) your deposit. We advise you to only invest in financial products which match your knowledge and experience.

Note:
Investing involves risks. You can lose (a part of) your deposit. We advise you to only invest in financial products which match your knowledge and experience.

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