Roughly 2.5 billion people around the world play video games, which includes two out of every three Americans per research from the newest Exchange Traded Fund manager Roundhill Investments. Deloitte's research showed $4.5 billion was invested in the eSports industry in 2018 alone, which represented an 818% increase from 2017. Currently, 454 million people watch eSports events, and estimates have that number growing to 645 million by 2022. The global gaming market is expected to hit $152 billion by the end of 2019, a 10% year-over-year growth rate.
The rise of multiplayer battle royale games such as ‘Fortnite,’ increased technology, which includes higher internet speeds, virtual reality headsets, increased processing power. It’s also ushered in the ability to allow gamers to use multiple devices to access games that have been key drivers in changing the industry. In the past, the industry relied on single gaming consoles sales or single games to bring in all the revenue. Today we have in-game purchases; massive esports arena’s selling out for tournaments, advertising revenue from watching streaming video of other players competing in games.
While the video gaming industry has been around for decades, the investment opportunities have never been as good as they are today, especially because from most accounts, it would appear the next catalyst for growth is still in its infancy stages today.
Currently, five Exchange Traded Funds focus on the gaming industry and allow you the opportunity to buy into this industry that could see massive growth over the next decade. Let’s take a look at your options.
Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD) began trading on June 4th of this year. NERD has attempted to differentiate itself from the other gaming ETF’s by focusing more on the esports side of the business. The fund owns video game publishers and developers but also invests in owning competitive video game teams and companies that own video game leagues. NERD has an expense ratio of 0.25%, $10.35 million in assets under management, and 27 positions with a weighted average market cap of $23 billion.
The ETFMG Video Game Tech ETF (GAMR) was the first ETF launched in 2016, with the focus solely on the video game industry. GAMR owns stocks globally that support, create, or use video games. This is a loose definition of what the fund holds since the fund holds some stocks that broadly support the video game industry, such as hardware companies and semiconductor firms. The fund has an expense ratio of 0.75%, $81 million in assets, and 86 positions with a weighted average market cap of $71 billion. Year-to-date, the fund is up 11.5% and has an annualized three-year return of 12.62%.
The VanEck Vectors Video Gaming and eSports ETF (ESPO) and the Defiance Next-gen Video Gaming ETF (VIDG) where both introduced in 2018 and have very blended holdings. Both ETFs focus on the traditional gaming industry and the eSports gaming market. The only noticeable difference in their holdings is that VIDG also invests in online casino gaming, and the fund’s prospectus makes a note that the fund will have a little focus on mobile gaming.
ESPO has an expense ratio of 0.55%, $52 million in assets under management, 26 positions with a weighted average market cap of $56 billion. Year-to-date, the fund is up almost 35%. VIDG boasts an expense ratio of 0.30%, but just $3 million in assets under management, with 48 positions and a weighted average market cap of $65 billion. Year-to-date VIDG is up 25.19%.
Finally, we have the VanEck Vectors Gaming ETF (BJK). BJK offers investors more exposure to the global casino and gaming industry than the other ETFs mentioned, but based on its investing guidelines, it can invest in any company that generates at least 50% of its revenues from gaming and related activities. The bulk of BJK’s assets are invested in casino gaming companies, but as we have seen in Las Vegas, the video gaming industry is building a relationship with the traditional casino gaming industry. Gamblers can now place bets on esports events, the big Las Vegas hotels are hosting esports tournaments, and a lot of the same companies who produce certain software products for the casino games are now involved in online casino video game operations.
Year-to-date BJK is up 23%, and the fund has an expense ratio of 0.66%, $26 million in assets, and 43 positions with a weighted average market cap of $15 billion. While BJK is the least connected to the tradition video game industry, it may still be an option if you are looking to diversify into video gaming without taking the full leap into the unknown industry.
Regardless of whether or not you feel playing games are a waste of time or you play them daily, the fact of the matter is a lot of people enjoy them. New technology is changing the gaming industry and creating new opportunities for not only a different type of ‘competitor’ than what we are traditionally accustomed to but also opening new doors for investment opportunities. The video game revolution is happening today; the question is, do you think you can benefit from it?
Matt Thalman
INO.com Contributor - ETFs
Follow me on Twitter @mthalman5513
Disclosure: This contributor held long positions in Apple, Tesla, Intel, Google, Amazon.com, Facebook, Priceline and Microsoft at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
