Making the decision to invest in gaming can feel like a big risk, as with any investment you decide to make the jump for.
However, if done right, video games are one of the most lucrative investments that you can make and it is important to know how to do it correctly.
This is where we come in! In this article, we will discuss the three key ways you should invest in video games to help you make the most of your investment. So, if this sounds like something you would be interested in, then read on for more!
Why Should You Invest In Video Gaming?
Over the years, video games have grown into one of the most lucrative industries out there. Only 100M people played video games in 1995. However, today the market is worth $152B dollars!
According to a study by Newzoo, the average video game player will play video games for 24 minutes every day.
Thanks to the increase in people playing video games and the rise of social media platforms like Twitch and Youtube, there is a much larger audience of people watching others play video games.
Around 450 million people will watch others play games online, and around 40% of those people do not actually play games themselves!
So, why would someone want to go from watching or playing video games to investing in video games? Well, there are many reasons. For starters, investing in video games has been proven to be a great way to earn passive income.
With the right type of investment, you could potentially get returns of up to 20%. This means that even if you only put a small amount of money into an investment, you could still see some serious gains over time.
However, investing in video games does not come without risk, and we will take a close look at those too so you can make an informed choice!
Investment 1: Video Game Studios
The first way you can invest in video games is by investing in video game studios. As previously mentioned, this is worth around $152B, which is more than the music and film industries. This makes it very attractive to potential investors.
Here, investment is dominated by large developers, but you can get closer to them through the Public Equity Market. The stocks include EA, Activision Blizzard, and Tencent.
By choosing to invest in these companies, then you are exposed to each of their business lines and titles.
You could also try to invest in later-stage game studios, such as Epic Games. However, this is a hugely competitive field where you may not find much success.
Another way you can invest in video games is to invest in smaller studios early on in their lifetime.
This is a risky move because you don’t know how much success that particular video game will have, but it may also be extremely profitable for you eventually.
It is important to note that many early video game projects began on Kickstarter, and the category on Kickstarter that was the first to raise $1B+ was Video Games.
Investment 2: Esports
Another way to invest in video gaming is to invest in professional esports teams.
There are two ways to invest in esports organizations. You can either purchase shares directly from the organization, or you can invest in a fund that invests in esports organizations.
If you choose to invest in the team directly, then you should expect to receive dividends when your share price rises. If you choose to invest in a fund, then you should expect your return to be based on the performance of the fund.
The trading revenue for professional esports teams is ~14x! So, investors are noticing this growth and then invest in the hopes of seeing that projected growth today.
However, most of these organizations and teams are not quite profitable, so they are forced to raise their capital higher to pay for these franchise fees and operating expenses.
So, many investor groups have started to sell their place in esports organizations because they are paying heavy validations but are not noticing any monetization.
Unfortunately, this is a trend that will continue because valuations are being normalized.
So, while we have a strong belief in the investment of esports teams and organizations, we believe their valuations do not reflect their business models as they currently are.
Esports organizations feel the disadvantages of this, as they must keep raising money to stay afloat in the industry.
So, if you want to invest in esports teams, then we think it’s best to wait for the necessary corrections to happen (which thankfully, are happening!). After this, it will be safe to pay a sensible valuation for the teams.
Investment 3: Tech Companies And Infrastructure
It is a great idea to invest in tech companies and infrastructure that support the gaming industry, as this will gain you excellent exposure to the gaming industry.
This will give you incredibly diverse exposure as an investor, and you will not rely upon the failure or successes of any one genre of video game or video game itself.
Investing in a tech company or infrastructure that supports the gaming industry included Twitch, Discord, Unreal Engine, Skillz, etc.
The companies will be around no matter what video game is popular because they are built upon video games being popular as a whole (which as we know, they very much are.) It is also not dependent on an esports team performing well.
Investing in this sector of video gaming will get you the necessary exposure to the market that you need, but with less risk. So, it feels like a great way to start your investment journey.
There are three great ways to get into investing in video games. The first way is by investing in a video games studio.
This will get you excellent exposure to the big companies, but it comes with big risks because of the competitiveness within this sector. You also have the option to invest in smaller studios but there is also risk there with the game not taking off.
The second option is to invest in esports organizations, but their business model is still new and overvalued, so it is wise to wait before investing.
The third option is by investing in tech companies and infrastructure that supports video games, like Twitch, which does not depend on the failure or success of a particular game. This seems like the best option, especially if you’re new to investing.