How to Invest in the Gaming Industry: A Beginner's Guide

Do you know that gaming is bigger than Hollywood? Now you do!

The gaming industry is no longer a thing associated with an isolated hobby of outcasts, but rather it’s now glittering with gold, fanfare, booze, and sports cars! It doesn’t come as a surprise, and what’s more surprising is that despite its success, the industry isn’t living as lavishly (yet) as those in Hollywood, or more accurately — they surprisingly aren’t living more lavishly than those in Hollywood.

As technology marches forward, the gaming industry came up with more and more bangers. Take Grand Theft Auto V, which made more than $6 billion, as compared to Hollywood’s Avatar which raked in only $2.9 billion — which is still remarkably huge, for Hollywood, but that $6 billion wasn’t even close to the eight top-grossing video games of all times — Player Unknown’s Battleground (PUBG), an online multiplatform shooting game published in 2017 which raked more than $11 billion.

Love comes from knowing

Before you invest in the gaming industry, it is important to understand what the industry is all about. The gaming industry encompasses a wide range of activities, including mobile games, PC games, console games, virtual reality games, and more. This industry is driven by innovation and is constantly evolving as new technologies are developed, and as the industry gets bigger, so are the stakeholders.

It started with those who are keen to recreate real-life games using computer programs, with Bertie the Brain, a tic-tac-toe video game that unknowingly opened the door to a galaxy of wondrous possibilities back in 1950.

From a tic-tac-toe game on a set of monitors big enough to engulf a child, the industry evolved, and mankind began transcending space and time. Then came the internet, which provides gamers a gateway to play with each other — or against each other in a competitive arena, a life or death to some.

With gaming tournaments garnering millions in views, ads companies are starting to notice, and the industry expands further, from developers, casual users, live streamers, professional players, tournament organizers, and advertises — whereby according to Grand View Research, the market size value as of 2022 was around $220.79 billion.

Now, the key here is to know that investment in the gaming industry doesn’t always have to be in gaming companies. You can look for anyone involved in any stage of the scene, those that provide the equipment, those that get to be the tournament organizer, media companies involved, merchandise vendors, and more — as long as it’s gaming-related then why not?

The people involved in the Gaming Industry

Here are a few stakeholders in the gaming industry that you might want to eyeball for (these are not comprehensive and are not a suggestion of stocks to buy. We just pick stakeholders we think are relevant, and company names are only for example purposes):

Game Developers: The people who design and create the game, including programmers, artists, game designers, writers, and audio specialists. Examples include Activision Blizzard, Electronic Arts, and Take-Two Interactive.
Game Publishers: The companies that fund and market the game, handle distribution, and coordinate with retailers. Companies like Ubisoft or Tencent Holdings invest in game development and publishing companies around the world.
Game Distributors: The companies that handle physical and digital distribution of the game to retailers or online stores. GameStop or Amazon sells digital games through its online platform.
Retailers: The stores or online platforms that sell the game or game-related merchandise to consumers. Among the companies that are involved in this line of business are Electronic Arts, Walmart, Best Buy, and Target.
Platform Owners: The companies that create and maintain the hardware and software platforms that games are played on, such as console manufacturers or operating system providers. Among the well-known companies that do these activities are Microsoft and Sony.
Service Providers: Companies that provide services to game developers, such as game engine developers, localization companies, or quality assurance (QA) testers. Unity Technologies and Keywords Studios are among the well-known companies of this kind.
Media-related stakeholders: Journalists, bloggers, advertisers, and influencers who cover and promote the game, generating buzz and interest. Among the companies that are known for this are IGN (owned by J2 Global), Twitch (owned by Amazon) and Facebook (owned by Meta).
Tournament organizers: these are the organizations that would set up a tournament for a particular game. The success of said tournament in garnering hype will heavily depend on the organizers, apart from the user base of the game itself. Valve (not publicly traded) is known for organizing the world’s biggest Dota2 tournament with an average prize pool of $29.7 million from the year 2018 to 2022, with 2021 marking the highest prize pool at $40.02 million.

How to Invest in the Gaming Industry

Different ways to invest in the gaming industry include investing in gaming stocks, gaming-related stocks, gaming funds, and gaming ETFs. Each investment option has its advantages and disadvantages, and it is important to consider each option before making an investment decision.

Investing in Gaming Stocks:

The main way to invest in the gaming industry is by investing in gaming stocks. This involves buying shares of gaming companies that are publicly traded on stock exchanges. This investment option allows you to benefit from the growth of the gaming industry without having to invest directly in a gaming company.

Some of the top gaming stocks include Activision Blizzard, Electronic Arts, Take-Two Interactive, and Ubisoft. When investing in gaming stocks, it is important to consider the company’s financial performance, growth prospects, and competition.

Investing in Stocks involved in gaming companies:

We do understand that some companies are not publicly listed. Grand Theft Auto and Red Dead Redemption are two of the most renowned game franchises globally, which are developed by Rockstar Games, a private company. There is technically no way for you to have a share in Rockstar unless you have enough cash to become a private investor — but what you can do is you can invest in Take-Two Interactive, which owns Rockstar.

Do note, however, that if you choose to go through the ‘backdoors’ like this, your exposure is not just towards Rockstar, but all other companies and projects that Take-Two Interactive is involved with. You’ll have to make sure that the impact that Rockstar will bring is big enough to carry Take-Two Interactive for you to feel like you have invested in Rockstar.

In the same way, you can also invest in companies that garner revenues from the gaming industries, despite not being directly involved in the industry, such as those that provide software or hardware required to complete a game, conduct tournaments, or even manufacture merchandise.

Investing in Venture Capital & Private Investment Firms

If you have a little bit more money in your pocket, you can try investing via venture capital firms and private investment firms — but mind you, many of these options are super expensive, at least for plebians such as myself.

Many such firms would require a minimum investment of around $500,000. So yeah, we just put it here for you to know, but if I’m being honest, I myself can’t afford it. Don’t be discouraged, there are plenty of options below!

Investing in Gaming Funds or ETFs:

Gaming funds are mutual funds or exchange-traded funds (ETFs) that invest in gaming companies. These funds provide investors with a diversified portfolio of gaming companies, reducing the risk associated with investing in a single gaming company.

There are also private equity funds, which provide you access to gaming companies that are not publicly traded.

Gaming ETFs are similar to gaming funds, but they are traded on stock exchanges like individual stocks. These ETFs invest in gaming companies and provide investors with a diversified portfolio of gaming companies.

Some of the top gaming ETFs include the VanEck Vectors Video Gaming and eSports ETF, the Global X Video Games & Esports ETF, and the Wedbush ETFMG Video Game Tech ETF.

Factors to Consider When Investing in the Gaming Industry

It is important to keep up with the latest trends in the gaming industry when investing in the industry. This includes staying up to date with new technologies, game releases, and industry news.

For example, many are speculating that Grand Theft Auto 6, a predecessor to a global hit, Grand Theft Auto 5, will be released in 2025. Thus, all the related companies, including those that provide support works in keeping this game up may see a boost in their revenue as the game is launched.

Competition:

The gaming industry is highly competitive, and it is important to consider the competition when investing in the industry. Look for companies that have a competitive advantage over their competitors, such as a strong brand or a loyal fan base.

For each hallmark franchise, there will always be heated-up rivalries between companies. Take shooting games — you have Battlefield, Call of Duty, Counter-Strike, and Player Unknown’s Battleground. Each with its own variations, but fanbases can easily swing from one game to another — especially when developers fail to meet user demands.

Financial Performance:

When investing in the gaming industry, it is important to consider the financial performance of the companies you are interested in investing in. Look for companies with strong financials, such as a healthy balance sheet and positive cash flow.

As much as the gaming industry is said to be bigger than Hollywood itself, one must also note the time, labor, and money needed for them to develop a particular game. The better a game is, the more sophisticated the system would be — which also means the more costly the game will be.

Gaming Company Management:

The management of a gaming company can have a significant impact on its success. Look for companies with strong leadership and management teams that have a track record of success in the industry.

Apart from looking at its business model, some investors also took the initiative to look into the ethical nature of a company in doing its business. As with many emerging industries, the gaming industry is not exempted from mischief and scandals as many sexual misconduct allegations and contract manipulation schemes unfolded.

Regulatory and Legal Risks:

The gaming industry is subject to regulatory and legal risks, such as changes in gaming laws or regulations. It is important to consider these risks when investing in industry and to invest in companies that have a good understanding of the regulatory environment.

Laws such as laws concerning privacy and data protection will heavily impact how much revenue the industry can make.

Bottom line

Investing in the video game industry can be an attractive option for investors, as the industry has experienced significant growth in recent years and shows no signs of slowing down. The market for video games and gaming-related products and services is large, diverse and includes a range of stakeholders such as game developers, publishers, distributors, retailers, gamers, platform owners, service providers, and media outlets.

There are several ways to invest in the video game industry, including buying shares in publicly traded companies involved in game development, publishing, distribution, or retail; investing in venture capital firms or private equity funds that specialize in game development, and supporting crowdfunding campaigns for game development projects. It is also possible to invest in companies that provide services to the video game industry, such as game engine developers, localization companies, or quality assurance testers.

As with any investment, it is important to conduct research and due diligence before investing in the video game industry. Factors to consider may include market trends, competition, consumer preferences, regulatory changes, and financial performance. Additionally, it is important to diversify one’s portfolio and not invest too heavily in any one company or sector.

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None of the material above or on our website is to be construed as a solicitation, recommendation or offer to buy or sell any security, financial product or instrument. Investors should carefully consider if the security and/or product is suitable for them in view of their entire investment portfolio. All investing involves risks, including the possible loss of money invested, and past performance does not guarantee future performance.

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