By Avner Meyrav
The Covid-19 pandemic continues to impact billions of people around the world. Many aspects of the entertainment industry have suffered tremendously, as live music shows have been cancelled around the world and cinemas and theatres have shut their doors. However, one aspect of entertainment has not only held its own, but actually thrived during the pandemic: video games.
In recent years, gaming stocks have become a hot ticket and the industry has many alluring investment opportunities. To give investors exposure to the gaming industry, eToro is offering the InTheGame CopyPortfolio, which has a thematic investment strategy in gaming stocks.
Becoming the king of Entertainment
From a niche market in its earlier days of the 1970s and 1980s, to a $150+ billion market today, video games have become the largest sector in the entertainment market, surpassing the film and music industries combined. Moreover, the market has a CAGR (compound annual growth rate) of 9.17 % and is expected to reach more than $250 billion by 2025¹.
What Drives the Growth of the Video game Market?
Many factors have contributed to the growth of the video game industry over the past few decades. Here are a few worth noting:
- Entering people’s homes: While gaming consoles have been around since the invention of the video game, it has taken about 20 years for them to completely replace their arcade counterparts. A significant milestone was reached when Sony launched the first PlayStation in 1994. With its launch, it became evident that the home versions of video games have caught up with the commercial machines and that the latter’s days are numbered.
- Becoming mainstream: Initially, video gaming was considered an exclusively “geeky” practice, reserved for hardcore fans. However, over time, gaming became more mainstream through blockbuster brands such as Nintendo’s Super Mario Brothers, and sporting games created by EA, Take-Two and other developers.
- Coming online: What started as a secluded, solitary practice, became a social event with online gaming. Millions of people around the world log on every day and play their favourite first-person shooter, fantasy RPG or modern-day heist game with their friends online.
- Better tech: Technology progresses and becomes better over time. Affordable GPUs and other processors have improved and become more affordable, while peripheral equipment such as 4K displays is now much more common.
- Going mobile: The fact that everyone now has a portable gaming console in their pocket also greatly helped games become more widely accepted. No longer were video games just for kids. Grandmas and grandpas around the world started playing mobile games, such as those developed by Zynga.
- The commercialisation of the industry: The rise of online and mobile gaming has given way to relatively new phenomena, such as eSports leagues, leading to tournaments that bring in millions of viewers as well as millions of dollars in sponsorships. Furthermore, gaming livestreams have created celebrities, who have become brand ambassadors and are as influential as entertainment celebrities or professional athletes.
The Coronavirus Effect
As massive as the gaming industry has become, it was boosted further by the coronavirus pandemic of 2020. With billions around the world confined to their homes, many turned to video games to entertain themselves while under lockdown. In fact, one of the World Health Organization’s recommendations for handling lockdown and quarantine situations was to play video games².
The recommendation was part of the #PlayApartTogether initiative, created by video game makers such as Activision-Blizzard and Zynga. The aim of the initiative is to promote social interaction through online gaming, and, thus, promote social distancing and help to slow down the spread of the virus.
Looking to the Future
As popular as video games are today, this may just be the beginning. Several current and future developments could further boost the gaming industry, and contribute to its ongoing growth:
- Virtual Reality: Long considered the “Holy Grail” of gaming, this innovative form of gaming is gradually seeping into the mainstream, and as the equipment needed to fully enjoy a VR experience becomes more affordable, it may eventually become as common as the gaming console.
- Augmented Reality: Not to be confused with the above, AR is about adding digital elements to a real environment with a digital device, such as a smartphone. Some games have already broken the barrier, including the global hit Pokemon Go, which reached a billion downloads and more than $3 billion in revenue³.
- 5G: The high-speed, high-capacity mobile network, which is currently being deployed around the world, could connect more people to the online gaming space and enable those who already play to enjoy a smoother experience, regardless of where they are. You can learn more about 5G here.
Investing in Gaming
The video game industry is no doubt one of the most intriguing entertainment sectors and, as mentioned above, has plenty of room to grow. Therefore, it is no wonder that so many investors are looking to invest in gaming company stocks. To give investors exposure to this growing market, eToro has created the InTheGame CopyPortfolio.
This thematic investment strategy comprises some of the best gaming stocks on eToro, including video game studios, chipmakers, media giants, mobile game developers and many others. The portfolio presents a balanced investment strategy, which offers diversified exposure to this growing sector.
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