Gaming and streaming are two subsectors that already have a significant head start in this regard. During this period, millions of new users dove into these fascinating worlds, which – without any exaggeration – can devour huge amounts of time and money.
The digital transition in the world of media
But even independently of the pandemic, traditional entertainment industries such as film, television, radio, and print media are increasingly being displaced by digital media such as streaming, social media, and gaming. The video game industry is now in first place among the entertainment subsectors with annual revenue of USD 145 billion, far ahead of cinema (USD 42 billion) and music (USD 20 billion). Almost half of the annual revenue of the gaming industry falls into the category of mobile gaming, i.e. games played on tablets or smartphones.
The subscription video on demand (SVOD) industry is also gaining ground on the traditional sectors. The bank UBS estimates that the global market for these services will grow by an average of 11% per year between now and 2025. In the USA alone, the number of SVOD subscriptions doubled in 2020 and the streaming time increased by 75%.
Promising industries
Without a doubt, the younger generations represent the most important foundation for the success of gaming and streaming. While television and radio are still the most popular forms of entertainment among older generations, they are being overtaken by gaming, streaming, notebook computers, and smartphones among Generation Z. Thus, these modern media are enjoying strong tailwinds in the form of demographic change. New technologies such as 5G, artificial intelligence, virtual reality, and advances in computer chips and semiconductors will also open up new possibilities for these industries in the future thanks to more powerful smartphones and faster Internet.
Megatrends cause long-term, fundamental changes in the world. These trends affect more than just a few specific areas: they have an impact at all levels of society and on individuals as well. If companies want to keep up with the future, they have to address these developments, or – ideally – anticipate them. Companies which are able to do this are highly interesting for investors, as they offer the ability to move with future changes and grow.
Gaming and streaming on the financial market
Many of the major companies in the gaming and streaming industries have been established players on the financial markets for years. The gaming trend primarily includes names in the segments of semiconductor and chip production, software, game publishers, graphics card manufacturers, and console and game developers. In the streaming segment, all of the dominant companies on the market such as Netflix, Amazon, Disney, and Apple are listed on the exchanges, but newer companies like FuboTV and Roku have also turned heads with phenomenal gains.
Big opportunities, particularly in Asia
The biggest markets for gaming are located in China, the USA, Japan, and South Korea. Mobile gaming is a particularly significant topic in China, where Tencent and NetEase are providers that dominate the market. The Chinese mobile gaming market is expected to expand to USD 48 billion by 2027 – with an annual growth rate of 11.9%. One reason for this growth is the tremendous progress being made in smartphone development. More powerful devices and higher mobile data speeds are increasingly erasing the gap between console gaming and mobile gaming.
Investments in these sectors also pose risks
The entertainment sector is in the midst of a significant transition: Every year, new providers come onto the scene and fight with the established players to gain a foothold in a rapidly growing market. And consumers are primarily interested in an extensive and attractive range of offerings. Therefore, companies looking to be successful in streaming and gaming have to provide a wide selection of popular movies, series, and games and also offer attractive content that keeps customers coming back again and again. Among other things, this requires significant ongoing investments in order to be able to constantly offer new shows, films, and games.
In addition, Chinese game developers and publishers in particular have come under pressure recently, as the Chinese government has imposed stricter limits on playing time for minors. Although similarly drastic measures are much less likely in other countries, there are certainly risks due to regulatory measures in other parts of the world, as well. While such regulations would hardly pose a serious threat to the industry, they could impact individual companies in different ways, thus resulting in new winners and losers.
The market must be closely monitored at all times
Therefore, this equity market segment also requires constant monitoring and a good selection of investments. Naturally, the risks that are generally associated with equity investments – such as increased price volatility and the potential for capital losses and declining values – also apply to firms active in the fields of gaming and streaming.