BIG GAME AWARENESS
Added: (Wed Mar 27 2019)
Pressbox (Press Release) -
For many of us (let’s be honest) who do not play video games, we harbor a slightly smug dismissive attitude, leading us to ignore the absolutely monstrous size of this industry. It is not a niche market anymore. Over 80 U. S. Universities now offer scholarships to E-sport “athletes”! It is a $ 140 Billion annual behemoth growing at double digit rates. Over 30 percent of the world’s population over the age of 8 are considered “Gamers”. So it sure is time to hit the restart button and give ourselves an up to date introduction.
The Gaming marketplace can be divided into the three segments on which they are played; Console (on TV), PC or Laptop, and Mobile Devices. From an insignificant percentage 15 years ago, Mobile Device Gaming now accounts for over 50 percent of total revenue, at roughly $ 71 Billion and is projected to account for 60 percent of total revenue and reach $100 Billion in just three years time.
For investors seeking direct exposure there are a few “Pure Plays” but it should be understood that some of the biggest players are Tech giants like Sony, Microsoft, Apple and Google where the Gaming portion of their total revenue is not hugely significant. Tencent Holdings, the Chinese Internet Conglomerate is an exception with over 35 percent of total revenue coming from Gaming. It is also a major global investor in other gaming companies. Because of their strategic/political position in the fastest growing gaming market, any portfolio seeking entry into this sector should start with Tencent (ADR symbol TCEHY). They are also the biggest player in Mobile Device Gaming.
For those seeking complete exposure a good place to start your research and get a sense of where the industry has come from is Nintendo (ADR symbol NTDOY). This Japanese pioneer has been in the Video Game business for 45 years. (A big player in the Console sector) Activision Blizzard (ATVI), Take Two Interactive (TTWO) and Electronic Arts (EA) are three major U.S. based players. All have bought out a diverse range of international rivals in recent years. A very successful French game designer with an International presence is Ubisoft Entertainment (ADR symbol UBSFF). Tencent purchased a five percent interest in this company last year.
The biggest player in the hardware sector is Nvidia Corporation (NVDA). Although their products are used in other sectors like Graphic Design and A.I. applications they obtain over 50 percent of their revenue from Gaming applications. One of their main competitors, Advanced Micro Devices, (AMD) is often mentioned for their Gaming chips but they derive too small an overall percentage of revenue from Gaming to be considered a true gaming stock. The same would apply to Intel (INTC).
There are two ETF Mutual Funds devoted to Gaming, ETFMG Video Tech (GAMR) and Van Eck Vectors Video Gaming and eSports ETF (ESPO). The former is a widely diversified 78 stock fund that includes most of the Tech Giants while ESPO is more focused on e Sports and entertainment with less weighting on the Tech Giants.
Albert P. Johnston, Director of Research, Walter International