Investing in the Business of Video Games
Don’t just play the game.
Learn more about investing in ETFs and stocks in the companies that are leading the video game industry.
Stash is giving new users a $5 sign-up credit to start investing today.
Here’s what you’ll learn in this guide:
- Why video games are a huge global business
- How the industry is innovating in virtual reality and eSports
- How the industry appeals to an increasingly diverse population and demographic of consumers
Learn more about investing in the video game industry.
Video games have gone way beyond sticks and consoles, they’re a huge global business worth hundreds of billions of dollars. Learn how video game companies can fit into a diversified portfolio.
What is the video game industry?
Video games have gone way beyond the console. We play on our phones, create virtual lives, and get to live and play in fantasy worlds. Once upon a time, you had to stand on line at an arcade to play your favorite video game. Now you can choose your fighter—and play with people around the world.
Video games are a big, global business, potentially worth as much as $230 billion in the next five years. Two-thirds of American households contain people who regularly play video games, according to industry data.
As for the size of the industry and its overall economic impact, the sector comprises nearly 2,500 companies around the world, employing more than 220,000 people. The employment outlook in the industry is good, too—the number of jobs has been growing at a rate of about 3%, according to industry data.
As the gaming industry has expanded over the years, so has the number of companies working in and around it. While some companies focus solely on software—games themselves, in other words—others build both hardware and software. Yet others build hardware only, including processors and chips to improve consoles, phones, and computers.
Some of the bigger names in game development are Activision Blizzard, Capcom, Square Enix, and Electronic Arts. Alongside these companies are ones that act as both developers or publishers, and that build hardware, such as Microsoft, Sony, and Nintendo.
America’s gamers are also increasingly diverse, as the results of a recent Pew Research survey show. Young men make up the industry’s largest base of consumers, but gaming is popular across racial, age, and educational levels.
Along racial lines, Hispanics are America’s largest group of gamers with 48% playing at least some of the time. Black (44%) and white (41%) Americans were somewhat less likely to play, overall, according to Pew’s data.
Gaming’s most populous demographic are young American men—specifically, men between the ages of 18 and 29. Roughly 70% of men younger than 30 play games, compared with only about 50% of women in the same age range.
In terms of education, individuals that have some college experience are more likely to be active gamers (50%) than those who never attended college or graduated. College graduates (36%) are the least-likely to actively play.
What’s new in the video gaming industry?
Film and TV
Today, the gaming industry makes more money than other stalwarts of the entertainment sector, including music and movies.
Studios are spending hundreds of millions to produce games such as “Grand Theft Auto V” and “Destiny” (and their sequels), and the profits for successful games tally in the billions.
And there’s still a lot of room for the sector to grow.
Virtual reality, or VR gaming, is still in its early stages but is advancing at a rapid pace. There are many VR systems already available to consumers, from the low-tech Google Cardboard to the PlayStation VR.
Gaming is also breaking new cultural barriers. eSports, for example, which started in the early 1990s, has exploded in popularity. In eSports, professional players compete against each other in popular games like “DOTA 2,” “League of Legends,” and “Counter-Strike: Global Offensive.”
Like other sports leagues, eSport athletes can earn big salaries from sponsors and spectators who pay to watch. It’s a growing element of the industry that’s expected to earn as much as $1.5 billion by 2020, according to industry reports.
Investing in the video gaming industry
For investors interested in the business of gaming and who want to add some of these companies to their portfolios, there are a few simple ways to do it.
Investors in the U.S. can buy shares of stock in video games and related companies on a publicly-traded exchange, or buy shares of a fund—like an exchange-traded fund, or ETF—that offers exposure to those companies.
Investing in video game stocks
A single stock is just that, a share of ownership of a company. For example, investors can purchase shares of stock in companies like Activision Blizzard, Microsoft, Take-Two Interactive, or Electronic Arts. You can also buy shares in companies that support the industry, such as gaming microchip maker NVIDIA*.
Investing in gaming ETFs (exchange-traded funds)
Exchange-traded funds (ETFs) are a basket of investments bundled into a fund that’s traded on an exchange like the Nasdaq or NYSE.
When you invest in an ETF, you are effectively buying small fractions of the companies within that ETF. The fraction depends on the weights stocks held in that fund. That fund owns the stocks within it and generally tracks an index–or group of investments that represent part of an industry or investment theme.
ETFs vs stocks
ETFs have become popular in recent years as they give investors the opportunity to invest in the performance of a group of stocks without having to buy every single stock in the fund or handpicking single stocks.
Not only can this save time and research, ETFs can offer diversification, which many consider to be an essential investing strategy.
Investing in the video gaming industry on Stash
*Listed investments currently available on Stash but not necessarily representative of all investments.
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