An Overview of the Gaming Industry and Ways to Invest in It

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Credit: Photo by ELLA DON on Unsplash

“You can discover more about a person in an hour of play than in a year of conversation” — Plato

The gaming community and market are gaining traction, surpassing traditional industries such as movie and music—combined. Across the globe, billions of people indulge in video games every day, breaking the barriers of age, gender, culture and society. With more and more people joining the ecosystem of video games for entertainment and connection, the multibillion-dollar video industry (including esports) is among the fastest-growing forms of entertainment.

Video Game Industry Overview

Here’s an overview of the gaming industry and ways to invest in it.

The year 2022 is expected to see the number of gamers rise to 3.2 billion, according to a report by newzoo. In the last few years, the number of gamers and the amount of time spent playing and watching video games have increased multifold. According to an Entertainment Software Association (ESA) report, the average gamer spends 13 hours a week playing video games. In the U.S., 65% adults play video games. Video games are just not a mode of entertainment but are a preferred choice of interaction. The interaction via video games has seen a rise with 83% of people playing with others online or in-person (up from 77% in 2021 and 65% in 2020).

The gaming industry, which is currently around $200 billion, is expected to see robust growth in the years ahead. Accenture’s 2021 estimate of the direct and indirect value of the gaming industry stood at $300 billion. The market forecast by newzoo suggests that the global games market will reach $225.7 billion in 2025, a 4.7% CAGR between 2020 and 2025. As per another report, the gaming market will be $339.95 billion by 2027, registering a CAGR of 8.94% over 2022-2027.

During 2022, mobile was the primary driver of growth accounting for 53% of the global market revenue, up from 48% in 2020.

Top Investment Options (ETFs)

Here’s an overview of the top exchange-traded funds that offer a convenient way to participate in the industry’s growth.

VanEck Vectors Video Gaming and eSports (ESPO)

Launched in October 2018, ESPO is currently the largest gaming ETF in terms of assets under management. The VanEck Vectors Video Gaming and eSports ETF tracks the MVIS Global Video Gaming and eSports Index, which constitutes companies involved in video game development, eSports, and related hardware and software. The index represents the largest and more liquid companies in the global video gaming and eSports industries. With an eligibility criterion that companies must generate at least 50% of their revenues in the target sector, the 25-stock index covers 90% of the investable universe. The fund, which replicates the index, provides exposure to nine geographies, with the U.S., Japan and Cayman Islands taking away 84% of the allocation and the rest spread between Australia, South Korea, France, Sweden, Taiwan and Poland. The fund has $328.5 million as assets under management and an expense ratio of 0.55%.

  • NVIDIA Corporation (NVDA)
  • Advanced Micro Devices, Inc. (AMD)
  • Activision Blizzard, Inc. (ATVI)
  • Roblox Corporation (RBLX)
  • Tencent Holdings Ltd. (TCEHY)
  • Nintendo Co. Ltd. (NTDOY)
  • NetEase, Inc. (NTES)
  • Electronic Arts, Inc. (EA)
  • Bandai Namco Holdings, Inc. (NCBDY)
  • Unity Software, Inc. (U)

Global X Video Games & Esports ETF (HERO)

Launched in October 2019, the Global X Video Games & Esports ETF provides an opportunity to invest in companies that are positioned to benefit from the increasing popularity of video games and eSports. HERO offers a compact portfolio of 50 companies that develop or publish video games, facilitate the streaming and distribution of video gaming or esports content, own and operate within competitive eSport leagues, or produce hardware used in video games and eSports, including augmented and virtual reality. The ETF tracks the Solactive Video Games & Esports Index, and takes exposure to geographies beyond the U.S. (33.8%), such as Japan (23.7%), South Korea (14.7%), China (12.3%), Sweden (6.2%) and France (3.6%), among a few others. The ETF has $199.95 million as assets under management and an expense ratio of 0.50%. The top ten stocks holdings of the fund are:

  • Roblox Corporation (RBLX)
  • Unity Software, Inc. (U)
  • Electronic Arts, Inc. (EA)
  • Activision Blizzard, Inc. (ATVI)
  • NetEase, Inc. (NTES)
  • Take-Two Interactive Software, Inc. (TTWO)
  • Nintendo Co. Ltd. (NTDOY)
  • Nexon Co. Ltd. (NEXOY)
  • Embracer Group AB (THQQF)
  • Bilibili, Inc. (BILI)

Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD)

Launched in June 2019, the Roundhill BITKRAFT Esports & Digital Entertainment ETF currently tracks the Roundhill BITKRAFT Esports Index. The fund has announced some changes that will be effective around end of September. The NERD ETF's new name will become the Roundhill Video Games ETF with Nasdaq CTA Global Video Games Software Index as its underlying Index. The Nasdaq CTA Global Video Games Software Index tracks companies engaged in video game publishing and/or video game development. It excludes companies domiciled in China or Russia.

Gambling Investment Options

In addition to the above ETFs, there are two ETFs that provide exposure to the betting segment in addition to video games and eSports.

1. VanEck Gaming ETF (BJK)

Launched in 2008, BJK is the first ETF in the gaming space. The ETF tracks the MVIS Global Gaming Index (MVBJKTR), which constitutes companies involved in casinos and casino hotels, sports betting, lottery services, gaming services, gaming technology and gaming equipment.

2. Roundhill Sports Betting & iGaming ETF (BETZ)

The Roundhill Sports Betting & iGaming ETF offer investors exposure to sports betting and iGaming industries by tracking the Roundhill Sports Betting & iGaming Index. BETZ was launched in 2020 and currently has $135 million as asset under management.

Final Word

The community of gamers is increasing, and many see it as a way to foster connections and build skills. The demographic shifts, changing consumer demands, cord-cutting, Internet penetration and technological advancements will together fuel the growth of the video game ecosystem.

Disclaimer: The author has no position in any stocks mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration. The report has been carefully prepared, and any exclusions or errors in it are totally unintentional. The fast growing ‘esports’ is a part of video game ecosystem. ETF data based on factsheets as on August 9, 2022.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Prableen Bajpai

Prableen Bajpai is the founder of FinFix Research and Analytics which is an all women financial research and wealth management firm. She holds a bachelor (honours) and master’s degree in economics with a major in econometrics and macroeconomics. Prableen is a Chartered Financial Analyst (CFA, ICFAI) and a CFP®.

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