“You can discover more about a person in an hour of play than in a year of conversation” — Plato
The gaming industry is taking the world by storm, surpassing even traditional entertainment sectors such as movies and music. With billions of people engaging in video games daily, it has become a global phenomenon that transcends age, gender, culture, and society. As more individuals join the gaming ecosystem for entertainment and connection, the multibillion-dollar video game industry, including esports, has become one of the fastest-growing forms of entertainment.
Video Game Industry Overview
The year 2022 is projected to see the number of gamers rise to a staggering 3.2 billion, according to a report by Newzoo. In recent years, the number of gamers and the time spent playing and watching video games has multiplied significantly. The average gamer now spends 13 hours per week playing video games, as stated in a report by the Entertainment Software Association (ESA). Additionally, 65% of adults in the United States play video games. Video games have become more than just a mode of entertainment; they are now a preferred choice for social interaction. In fact, 83% of people play video games with others online or in-person, showcasing a tremendous surge from 77% in 2021 and 65% in 2020.
The gaming industry, currently valued at around $200 billion, is expected to experience robust growth in the coming years. Accenture’s estimate for 2021 placed the direct and indirect value of the gaming industry at $300 billion. Projections from Newzoo suggest that the global games market will reach $225.7 billion in 2025, with a compound annual growth rate (CAGR) of 4.7% between 2020 and 2025. Another report indicates that the gaming market will reach $339.95 billion by 2027, registering a CAGR of 8.94% over the period of 2022-2027.
Mobile gaming was the primary driver of growth in 2022, contributing to 53% of the global market revenue, up from 48% in 2020.
Top Investment Options (ETFs)
If you’re looking to invest in the booming gaming industry, here are some top exchange-traded funds (ETFs) that provide convenient avenues for participation in its 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. This ETF tracks the MVIS Global Video Gaming and eSports Index, which includes companies involved in video game development, eSports, and related hardware and software. The index represents the largest and most liquid companies in the global video gaming and eSports industries. ESPO has an eligibility criterion that requires companies to generate at least 50% of their revenues from the target sector. The fund provides exposure to nine geographies, with the majority allocated to the U.S., Japan, and Cayman Islands. Other geographies covered include Australia, South Korea, France, Sweden, Taiwan, and Poland. ESPO currently manages $328.5 million in assets with an expense ratio of 0.55%.
The top ten holdings of ESPO include:
- 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 positioned to benefit from the increasing popularity of video games and esports. HERO offers a compact portfolio of 50 companies involved in video game development, publishing, streaming, competitive esports leagues, and hardware used in video games and esports, including augmented and virtual reality. The ETF tracks the Solactive Video Games & Esports Index and provides exposure to various geographies, including Japan, South Korea, China, Sweden, France, and others. As of now, HERO manages $199.95 million in assets with an expense ratio of 0.50%.
HERO’s top ten holdings include:
- 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. However, the fund has announced changes that will take effect at the end of September. The NERD ETF’s new name will become the Roundhill Video Games ETF, with the Nasdaq CTA Global Video Games Software Index as its underlying index. This index tracks companies engaged in video game publishing and/or video game development, excluding companies domiciled in China or Russia.
Gambling Investment Options
In addition to the ETFs mentioned above, there are two ETFs that provide exposure to the betting segment alongside video games and esports.
VanEck Gaming ETF (BJK)
Launched in 2008, BJK is the first ETF in the gaming space. This ETF tracks the MVIS Global Gaming Index (MVBJKTR), which includes companies involved in casinos and casino hotels, sports betting, lottery services, gaming services, gaming technology, and gaming equipment.
Roundhill Sports Betting & iGaming ETF (BETZ)
The Roundhill Sports Betting & iGaming ETF offers investors exposure to the sports betting and iGaming industries by tracking the Roundhill Sports Betting & iGaming Index. BETZ was launched in 2020 and currently manages $135 million in assets.
Final Word
The gaming community continues to grow, with many seeing it as a means to foster connections and develop skills. Demographic shifts, changing consumer demands, cord-cutting, internet penetration, and technological advancements will collectively fuel the growth of the video game ecosystem.
Disclaimer: The author of this article does not hold any positions in the mentioned stocks. The above information should be considered as an idea for further consideration rather than a de facto recommendation. The report has been thoroughly prepared, and any exclusions or errors are unintentional. The fast-growing field of esports is a part of the video game ecosystem. ETF data is based on factsheets as of August 9, 2022.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
