How to Invest in Gaming (Updated 2023)
New gaming devices coupled with the advancement of existing gadgets have paved the way for the gaming industry to reach new heights in terms of market value.
Gamers are spoiled for choice today as game publishers continue to release titles across multiple platforms, including mobile, PC, tablets and consoles.
So how can investors get involved and potentially make a profit in this exciting space? Read on for a look at the digital gaming industry, including what makes it lucrative and what stocks and exchange-traded funds (ETFs) investors may want to consider.
How fast is the gaming industry growing?
In a December 2022 report, Newzoo, a provider of gaming and esports analytics, estimates that the global gaming economy came in at an impressive US$184.4 billion in 2022. This figure is down 6.4 percent year-on-year, which the firm attributes to ‘the recession’s impact on people’s disposable income.’
Looking forward, the firm forecasts that growth in the worldwide gaming market will lead to annual revenues of US$211.2 billion in 2025. Mobile gaming is the largest segment of the overall gaming market, with expected revenues of US$103.1 billion in 2024.
Another global gaming market segment seeing unprecedented growth is cloud gaming, which allows users to play video games using remote servers in data centers, eliminating the need to download and install games. Newzoo reports that cloud gaming revenues for 2022 more than doubled from the previous year to reach US$2.4 billion. The firm is forecasting cloud gaming revenues of US$8.2 billion in 2025.
Why is esports so popular?
While the digital gaming industry has numerous subdivisions, it’s the popular esports area — the competitive video gaming industry — that is projected to witness the fastest growth.
Cognitive Market Research expects this sector to experience a compound annual growth rate of 17.8 percent beginning in 2023 to reach a total value of more than US$4.47 billion in 2030. The firm attributes this impressive growth to “the growing adoption of smart devices coupled with rising internet connectivity.’
The market segment with the highest revenues in the esports industry is the sponsorship segment, accounting for 37.5 percent of total global esports market revenues. ‘Sponsorships allow various brands to reach directly to a large target audience,’ according to Cognitive Market Research. ‘For instance, Coca-Cola has used Fortnite Island to launch the limited-edition gaming-inspired flavor Zero Sugar Byte in April 2022.’
North America, the Asia-Pacific region and Europe are responsible for the lion’s share of the sector’s revenues due to their residents’ higher disposable income and faster adoption rates for smartphones.
The most popular genre in the esports market is the multiplayer online battle arena segment, which is slated to reach US$490 million in global annual sales by 2025, and includes popular esports titles such as League of Legends and Dota 2.
How to invest in gaming stocks?
Stocks are often the popular choice for investors looking to make a gaming investment.
Given that the industry involves multiple sectors, investors have plenty of options. For example, investors could consider the biggest esports stocks; they could also look more broadly at the top mobile gaming companies.
Of course, it’s important to be aware that both esports and gaming involve components apart from software. That means investors can look at related stocks, including NVIDIA (NASDAQ:NVDA), which makes computer chips, and Corsair (NASDAQ:CRSR) and Logitech International (NASDAQ:LOGI), which both make gaming peripherals such as mice, keyboards and headsets.
How to invest in gaming ETFs?
Investors who want to enter the gaming space as a whole and not focus on specific companies may want to put their money into an ETF. ETFs offer broad industry coverage and are known for being less risky — potentially an ideal option for investors with less experience in the space.
The following three ETFs are the top gaming options by total assets, according to ETFdb.com:
Securities Disclosure: I, Melissa Pistilli hold no direct investment interest in any company mentioned in this article.