A sector shooting up its profits
The video gaming industry has grown in leaps and bounds, especially in the last two years with the pandemic, but what does the market actually look like for potential investors?
There are 2.7bn video game players around the world, one third of the population of the planet, creating global revenues of over USD $180bn, and the sector is perennially growing, as gamers just can’t get enough of new titles and developments in the tech and innovation around them.
A compound annual growth rate of 12% is forecast between 2020 and 2025 – according to various industry analysts’ data – an indication that there is a lot of room for the sector to continue to expand.
Significantly, gaming is now more valuable than film, music and TV combined. So, what next for an industry experiencing such good times, and where will this expansion be seen?
Who are the gamers?
Demographics generally illustrate that the majority of them are 18-35 years old, surprisingly perhaps with an almost 50-50 gender split. Although it’s also worth noting that 20% of gamers are over 50 – often ones who can afford the best kit.
Asia clearly has the largest pool of gamers, 1.5 billion identifying as gamers, with mobile as the platform of choice, and this will only continue to grow.
What is energising such growth?
Single game titles are still the main draw but the rise of wideranging, sophisticated, multiplayer online games has driven revenues to soaring new peaks.
Record numbers are being achieved by Fortnite (released in 2017 and updated regularly) – 250 million players around the world have generated £3 billion in revenue a year for its maker, Epic. The broadcasting of games has become just as prevalent, on average 42 million hours of Fortnite are broadcast on YouTube a month.
eSports has added yet another high value column to the video gaming world. Professional teams and players now compete for vast sums and draw audiences that film and TV can only dream of.
Getting into the game of gaming
Video games development is high risk-high reward. A good video game can cost $100m to develop, with a huge marketing spend to boot, with no safeguard of commercial success. It’s a crowded market too, but if one becomes a hit, the stratosphere is the limit.
In any investment bonanza, the smart money is in the bricks and mortar – in this case the infrastructure for the capacity to deliver games. Successful brands in the sector become trusted and attractive prospects.
The industry has a boom-bust cycle to it, often centred around the launch of new hardware or devices. So one needs to seek out Wiley management teams that, like avatars in their games, can adapt to new, perilous scenarios.
Gaming is also a sharp-end technology sector, so what will the players, tournament organisers and broadcast companies be requiring over the next 3-5 years, is something to ask yourself.
Gaming on demand (essentially Netflix for gaming) is going to be the next big thing, so what software and infrastructure is going to be needed by the market to fuel the growth?
Our take
There are huge opportunities for investment within gaming, as the sector is far from peaking and the potential for revenue growth is clear.
While the hype belongs to the big titles of the gaming world, the astute investments could be in infrastructure development and workflow management tools.
As the sector grows, it will drive to become more efficient and seek a longer-term view over market retention and future-proofing itself as best it can.