In today’s Exponential Investor…

  • The unshakeable stigma
  • The REAL console wars
  • You a believer or a denier?

I’m in my late 30s – technically I’d classify myself as an 80s kid. That’s the decade I was born in, and that’s the decade I spent a number of formative years in.

That did of course blend into the 90s and it wasn’t till the 2000s that I properly hit adulthood.

One of the defining technologies, however, of my “youth” was the rise in video games.

Now if you were a parent in the 80s and 90s – as my folks were – then your recollection of the video game boom and console wars may be a little different than mine.

I recall the 80s and 90s fondly for the breadth of new games, consoles, incredible games and the ability to nip round to any one of my mates’ places to play a Nintendo, Sega, Atari, 3DO, PlayStation… it’s a big old list.

But a parent in the 80s and 90s might recall the rise of home video gaming as a time when siblings would fight and bicker, “computer rage” would become a thing (thanks to stupidly hard games like Battletoads) and far, far too much time spent indoors when, “it’s such a lovely day outside”.

I dare to suggest that the “console wars” of the 80s and 90s if you asked my dad was simply my brother and I kicking the crap out of each other as to who got to play Cobra Triangle next…

Hence I think there’s somewhat of a stigma attached to the video game industry for anyone who popular culture would infamously refer to as a “boomer” or above.

I hope I’m wrong, but I truly want to find out just where people’s thoughts lie when it comes to “video games”.

Hence it’s time for me to ask another favour of you…

What do you really think?

I’d like you to write in to me if you can spare a moment, and let me know what your view on video games and the video game industry is.

Is the video game industry just for kids to spend way too much time indoors playing in online worlds that are rife with groomers and paedophiles?

Is it a waste of time, energy and money?

Or perhaps you can see the size and scale of the video game industry and the growth that exists within.

Maybe you love gaming yourself, maybe you hate it. I don’t know but I’d love to know what you think.

So write in to me here to let me know…

I ask because I firmly sit in the camp of the “video game” industry being ripe with opportunity. However, I don’t think the term “video games” does it or the ancillary industries any justice.

We’re actually talking more about digital and online gaming technologies.

That encompasses everything from game (mobile and console) developers, console manufacturers, hardware manufacturers (that makes the goodies inside the consoles), esports, advertising and marketing, and even alternative economies (such as in-game currencies and spending).

There’s a lot that makes up the sum of the parts of the “video game” industry. So much so that when you hear that term, “video games”, I believe it delivers connotations that aren’t reflective of just how big an industry and how big the opportunities within actually are.

I’ve had this conversation with a number of people in the Southbank Investment Research office – and it’s hard to really pencil in what people’s view on this all is.

Some seem to have an aversion to investing in companies related to the digital online gaming industries, some seem to love it. It’s a very black and white view for most.

For some reason, it seems to evoke great emotion. Video games are bad, they’ll turn your eyes square, they’re the future of social interaction, “bigger than Hollywood”. There’s common arguments on both sides.

But when you look at the money, you can’t deny the size of the players in this space.

Today gaming companies have become enormous, giants of industry. Activision Blizzard (NASDAQ:ATVI) ($64 billion) and Electronic Arts (NASDAQ:EA) ($41 billion) are just two titans of gaming.

King Digital Entertainment was another, but Activision snaffled them up a few years ago for about $5.9 billion.

Zynga (NASDAQ:ZNGA) is another with a current market cap over $10 billion.

Another and arguably one of the most powerful game companies today is Epic Games. It’s the creator of the juggernaut game Fortnite. It’s estimated to be worth about $17.3 billion.

Then you’ve got companies like Nintendo, Microsoft and of course Sony, which are the major console manufacturers. Of course there’s also the PC companies and the hardware that goes into those – companies like AMD and Nvidia and their importance to the gaming industry.

There’s so much to squirrel down into , so many layers, players, and I believe exciting small-cap opportunities that I think it’s an area of focus right now in our Covid-19 world that is cherry ripe for the picking.

Tomorrow’s Activision?

I wonder though, does the appetite for these plays exist with investors? Or are we truly scratching at a corner of the market that’s still underappreciated, still quite unknown and still perhaps even in what you might call its infancy?

When you look at developments in AR, VR, next gen consoles, the technology behind them (such as ray tracing) and the rise of mobile gaming, I wonder if today we’re actually at a similar point that I was in back in the 80s.

I wish I’d had the foresight as a kid to say to my dad, “This Nintendo is AMAZING. It will change the world. Go buy me some stock.”

Of course, it wasn’t that easy back then.

But today I wonder, what is the Nintendo of today? What is tomorrow’s Activision Blizzard? Where will the next multi-billion dollar gaming giant come from? And where can I invest to get my slice of the action today?

That’s what I’m looking for, and I’m curious to find out if you think I’m on the right track.


Sam Volkering
Editor, Exponential Investor