Like the broader technology space, the global video games and e-sports industry has become a huge beneficiary of the stay at home economy caused by the Covid-19 pandemic, according to Jay Jacobs, New York-based head of research and strategy at ETF provider Global X.
As of the end of 2019, revenues in the global video gaming and e-sports industry already reached $150bn, and Jacobs expects this to grow in the next couple of years.
“Within the US alone, we saw the gaming industry had around 9% revenue growth in Q1, and we saw even the larger companies in the space showing 20% year-on-year growth in revenues as people were starting to buy more games or in-game purchases during the pandemic,” he said during a media briefing.
Before the pandemic, revenues are also already supported by gamers, who have remained loyal to the industry and consistently buy games. However, non-gamers have also started to play video games this year, which further propelled the growth of the industry.
“During Covid-19, we saw a lot of people starting to be brought into the gaming ecosystem. For example, parents of children who saw their kids playing games wanted to interact with the kids while at home.
“There are also no professional sports to watch and they couldn’t go out for entertainment. So more and more people shifted into gaming, which made gaming revenues accelerate at a faster pace,” he said.
Strong performance
The firm manages the US-listed Global X Video Games and Esports ETF, which was launched in October last year and has $153.5m in assets as of 23 July, according to information from the firm’s website. The fund has performed 40.98% on a year-to-date basis and 53.8% since the fund’s inception.
For its thematic ETFs, Global X only invests in companies that have at least 50% of their revenues exposed to a theme, Jacobs noted.
Other gaming ETFs have also performed strongly during the year. For example, the VanEck Vectors Video Gaming and eSports ETF returned 42.5% on a year-to-date basis, while the ETFMG Video Game Tech ETF performed 33.7%, according to data from FE Fundinfo.
There is only one ETF listed in Hong Kong that provides exposure to the gaming theme, which is the Nikko AM E-Games Active ETF. The product is new and was only listed on the exchange last month.
Jacobs declined to comment whether the firm has plans to list a gaming ETF in Hong Kong. Global X has 14 ETFs listed on the Hong Kong Exchange, which include five leveraged and inverse products, according to the firm’s website.
Globally, Global X manages around $12bn in thematic and income-focused ETFs, according to Jacobs. The firm was acquired by Mirae Asset Global Investments in 2018 and has started to promote Global X products to Asia-based institutions and private banks last year.
An expected dip
While Global X’s Jacobs acknowledged that the acceleration of revenues in the gaming industry will slow down post Covid-19, he expects the industry to continue to grow long-term.
“I wouldn’t think it would be unusual to see a little bit of dip in some of that engagement in gaming because people will start to go out as lockdown rules start to relax.
“However, many of the non-gamers who were newly introduced to gaming are expected to continue, as they realised video games are fun and it is a way to connect with their friends and families. While Covid-19 is a massive accelerant to this theme, demand will continue to be sticky in the long-term [as you still have that growing base of loyal gamers].”
Wealth managers have also promoted the video gaming theme to investors. For example, UBS Wealth Management has included the theme in its longer-term Covid-19 investment idea report, which included the VanEck Vectors Video Gaming and eSports ETF as one of the firm’s ETF ideas. That ETF was also recently included in robo-advisory firm’s Kristal AI investment platform, which is available in Hong Kong and Singapore.
In a separate report, UBS Wealth said that revenues in the global video game market are forecasted to grow 8.4% annually from 2019 to 2021. PC and console games remain a large revenue generator, but new platforms and mobile gaming are growing at a much faster rate, it noted.
Like UBS Wealth, Citi Private Bank also promoted the gaming industry’s long-term growth prospects.
