Is gaming a safe bet for investors?
Is gaming a safe bet for investors?
The world is full of gamers. Once seen as the province of gaunt teenagers hunched over a console in their darkened bedroom, the rise of the Internet, and even more, the mobile revolution, have combined to make gaming a pastime for the masses.
From Farmville to Angry Birds and Tetris to Texas Hold 'Em, there is a game to suit everyone. Anybody under the age of 50 has grown up around games, and the global industry is worth more than $100 billion per year. So it should come as no surprise that venture capitalists are queuing up with their investment dollars to get a piece of the action.
According to Digi-Capital's annual games review, 2016 saw more than $30 billion in investments and M&A over the course of the year. That was an increase of an impressive 77 percent over the previous highest year.
The growth has come from two key areas. On the one hand, the rise of mobile gaming mentioned earlier has taken place with a speed that has even caught the industry by surprise. The second aspect is the growth in popularity of sports related gaming and the associated sites.
The estimated market size of the esports sector for 2016 was just shy of $900 million.
That has not escaped the notice of serial investors Ken Howery and Brian Singerman of venture capital firm Founders Fund. They, alongside NFL legends Joe Montana, Hunter Pence and several others, plowed an undisclosed sum into eSports franchise Cloud 9.
If esports and mobile tech were the watchwords of 2016, this year is very likely to be centered on the rise of virtual reality. After numerous false starts, VR headsets are now starting to enter the world of mainstream affordability, thanks to smartphone compatibility and the rise of the Oculus Rift.
Already, alternative wearables are flooding onto the market, and VR technology is likely to be this year's Amazon Echo, in respect of being 2017's "must have" for Christmas.
Again, the venture capitalists are not slow to recognize a good opportunity. Andreessen Horowitz is a VC firm that has a history of success within the gaming industry and is, therefore, a good barometer to watch. The company has invested in two virtual reality companies over recent months, namely Leap Motion and Magic Leap. It was also a prior investor in Oculus before Facebook acquired the company for $2 billion in 2014.
Money making opportunities for all
The gaming industry can provide a great income for casual investors as well as the venture capitalists. One example of the growing number of companies in the gaming industry that provide a great opportunity for amateur investors as well as the professionals is 888casino. 888casino is a subsidiary of 888 Holdings, one of the success stories of the London Stock Exchange over recent years. Originally listed in 2005 with a valuation of £590 million ($770 million), it entered the FTSE 250 three years later and has a current market capitalization of around £925 million ($1.2 billion).
The Motley Fool is a website that provides advice to everyday investors and it ran this story at the end of last year, exploring some of the best up and coming investment opportunities for those who like to dabble in the stock market.
Particularly noteworthy was the fact that the stocks it selected were from a wide range of sectors within the industry, from traditional game designers to new technology developers.
Leveraging the industry
As an industry, the gaming sector provides unparalleled money generating opportunities. Testers, developers, and designers are working harder than ever before, and from traditional sports and adventure games to the huge growth of online casinos and gambling sites, the games are getting smarter and more interactive every year.
Each area prompts still more business and marketing opportunities in the form of blogs, fansites, and other support services and add ons.
Looking to the future
The gaming industry continues to grow every year, and while new sectors continue to emerge the older ones still thrive. For years, commentators have been predicting the end of the console era, but even with mobile and VR taking off, the sector continues to perform steadily.
There can be few industries that are as buoyant with such robust prospects for the years ahead, so it is perhaps obvious why it is so attractive to investors.