In today’s Exponential Investor:

  • Nostalgic evolution of a half-trillion-dollar industry
  • What is the future of gaming?
  • What kind of companies can you invest in for gaming?

A friend of ours recently popped into our new office to have a bit of a look around. He made a comment that he was in somewhat admiration of my display cabinet in the office.

We can’t imagine why…

Source: editor’s own photo

We’ve got a few little bits and bobs from the gaming world over the decades. That’s an original Gameboy, and a few original Gameboy games (Tetris, Double Dragon, Jurassic Park, to name a few). There’s an original Battletoads Nintendo Entertainment System (NES) game, a NES and SNES (Super Nintendo Mini) and something I’m keeping for the long haul: an original NBA 2K21 “Mamba Forever” edition PS5 game that I got for its tribute to the late Kobe Bryant.

But of all the game paraphernalia it’s the one up the top that I love the most. It’s a (working) Galaxy Invader 10000 from the early 80s. The number of times my brother and I would fight over Galaxy Invader at my nan and pop’s house when we were kids were countless…  but there were great memories.

Clearly I have a thing for gaming. And always have had.

That’s because as a child of the 1980s and 1990s, I grew up in the halcyon days of video gaming. I’ve been lucky enough to see a massive global technology trend arrive and evolve over the years. To see an industry go from effectively zero to where it is now, heading towards more than a half-trillion dollars, is quite something to behold.

However, a lot of people still don’t really know what “gaming” is. What do we talk about when we talking of the “gaming industry”? And importantly, are there ways to invest in a profit from gaming?

What is “gaming”?

The gaming industry refers to electronic gaming that can be accessed through several different means, such as computers and consoles. But more recently, tablets, smartphones, and even more recently, crypto networks.

According to Fortune Business Insights, the gaming market is projected to soar past $545 billion by 2028.

Gaming has become a staple of many people’s lives. It provides an entertaining and enthralling way to pass the time, escape the realities of life and even socialise with friends.

The gaming industry has experienced a boom in the last two years as well. With lockdown restrictions confining people to their homes, gaming provided an excellent outlet for people.

What’s more, the value of the gaming industry is being boosted by the emergence of new types of gaming. This includes cloud-based gaming, eSports (or professional competitive) gaming, virtual reality (VR) gaming and play-to-earn gaming, which is a feature of several crypto networks, as explained below.

Let’s have a look at some of these…

What is cloud gaming?

Cloud gaming is a method of playing video games remotely, anywhere anytime. The reality is that you’re downloading the game data from “the cloud”, which really just comprises of servers in data centres.

With cloud gaming, there’s no need to download or install games on a PC or console. Typically, cloud games are accessible through an app or internet link. Think of it as like a Netflix service for gaming.

You only need a reliable internet connection which is hooked up to a platform to watch the film, and not a video or DVD player. On some occasions, a subscription fee is required to access cloud gaming. However, this of course saves forking out on an expensive gaming console. For instance, the latest Xbox console retails for around £450.

Cloud gaming is here to stay. One of the main advantages of cloud gaming is the convenience it provides to gamers. It works across all devices, no matter what screen or hardware you have, whether that be Android, iOS, PC or laptop. As such, the barriers to entry a low and cloud gaming can be enjoyed by almost everyone.

Another positive of cloud gaming is that users don’t need to worry about storage space. You never need to download anything outside of the game’s application, meaning you can avoid hefty gigabyte (GB) downloads that can cause your device to lag.

What about virtual reality gaming? Is VR gaming the future?

There is definitely a future for VR gaming in the wider gaming industry. Its ability to create an immersive, engaging gaming environment and increase connectivity amongst gaming communities is opening up the industry to a new world of opportunities. And with the VR gaming market projected to grow from $7.9 billion in 2021 to $53.4 billion in 2028, it seems it is here to stay. However, at this stage, it’s likely that it’ll coexist with more traditional versions of gaming, rather than replace them.

It’s still early stages for VR gaming, with many technology companies only taking the plunge into VR gaming over the past few years. For example, Meta Platforms (formerly Facebook) introduced its Oculus Quest VR headset in 2019. The headset provides access to a plethora of exciting VR games, such as Star Wars and Jurassic World.

Another example is Microsoft. The company has a range of VR devices that you can use to access this digital world. In particular, its NextVR headset allows users to immerse themselves in gaming, sport and music VR experiences.

The fact giant, well-renowned tech conglomerates are diving into the VR space shows the credibility behind this trend.

Should you invest in gaming?

The hard numbers above show the gaming industry is still growing, and hence, we believe it provides opportunities for investors. Gaming is part of the fabric in many western societies, and something that isn’t going to fade away overnight. By and large, video game audiences are very loyal. That is most gamers have been part of the industry for years and form the base of the gaming industry. With this in mind, gaming communities are likely to remain resilient during any market downturn, and keep demand for gaming services steady, which is a positive for the valuations of gaming providers.

What’s more, the addition of crypto and VR gaming is shaping up to make the industry more exciting and valuable than ever before, so now could be a good time to invest in the gaming industry before it really takes off.

How to invest in gaming?

Direct gaming companies

To invest in publicly listed gaming companies, you simply need to go on to your broker platform and purchase the shares of the company you want. It’s also important to consider what type of gaming company you want to invest in. It might be a traditional gaming operator or you might want to go down the VR gaming route.. Finally, if game developers (the companies that make the games) might be your thing. Or for something that’s still a little more fringe, a company that owns and runs an eSports team. A few key players in the market are Microsoft (MASDAQ:MSFT), Meta Platforms (NASDAQ: META) and Electronic Arts (NASDAQ:EA).

Indirect gaming companies

Finally, to gain exposure to the gaming industry, you can also invest in companies that are indirectly involved with gaming. That is, for example, companies that create the technology to be used in games. For example, Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA) create graphics cards (GPUs) used for gaming globally. Intel (NASDAQ:INTC) is the world’s largest semiconductor chip processor, whose technology is used in everything from PCs to smartphones and gaming consoles.

The thing about gaming is it’s a diverse exciting area of technology and investment. There are a number of ways to play (excuse the pun) the market and to ride an industry that continues to grow and get more important to generations as our world becomes more and more online and digital.

Until next time…

Sam Volkering
Editor, Exponential Investor