The growing popularity of video games has forced investors, brands, and media outlets to pay attention. According to estimates by Insider Intelligence, in 2022, there will be 29.6 million monthly esports viewers in the United States. This would be an increase of 11.5% from 2021.

More eyeballs mean significantly more business. Newzoo forecasts that esports ecosystem revenue could hit $1.8 billion by 2022. Media rights, live event ticket sales, merchandise sales, in-game purchases, sponsorship, and advertising will all play roles in this revenue growth.1

Source: Forbes, “How Esports Are Fueling The Data Economy”; Image Source: IBM

Online Gaming and the Metaverse

There’s another theme that’s been getting a great deal of attention these days: the metaverse, a 3D virtual world focused on social connection.

Real estate in the metaverse is getting expensive. In a blockchain-based virtual world called Sandbox, someone recently paid $450,000 for virtual land in order to be neighbors with Snoop Dogg. In Decentraland, an open-source 3D virtual world platform, digital real estate prices have surged 400% to 500% in the past few months.2

Two Gaming Companies and Their Video Games

Electronic Arts Inc.

Electronic Arts reported that second quarter of fiscal year 2022, ended September 30, 2021, was the strongest second quarter in the company’s history.

The maker of well-known games like The Sims, Need for Speed, and Plants vs. Zombies registered revenue of $1.8 billion for the second quarter of fiscal year 2022. In the same period a year ago, it reported revenue of $1.2 billion. This represents an increase of over 58% year over year. For the entire year of fiscal 2022, Electronic Arts forecasts revenue to be about $6.9 billion and net income to hit approximately $583.0 million, or $2.02 per diluted share.3

Source: Businesswire.com, Plants vs. Zombies: Battle For Neighborville™ Complete Edition (Graphic: Business Wire)

Activision Blizzard, Inc.

Activision Blizzard focuses on developing and publishing interactive egames, content, and services. The company reported revenue of almost $2.1 billion for the third quarter of 2021. This was a decent improvement over the $1.9 billion the company reported in the same period of 2020. Its games were in high demand; Activision Blizzard monthly active users hit 390 million for the quarter. Activision Blizzard’s flagship brands continue to do well. Call of Duty Mobile’s net bookings jumped over 40% year over year in the third quarter. World of Warcraft continued to receive strong engagement and net bookings. Candy Crush, which grew over 20% year over year, remains one of the top games on app stores.4 For the entire year of 2021, Activision Blizzard expects revenue to be $8.7 billion and earnings per share of $3.27 and $3.70 on a non-generally accepted accounting principles (GAAP) basis. Wall Street analysts expect revenue to be $8.7 billion and non-GAAP earnings per share to be $3.78.5

Investing in Video Games with HERO ETF

Interested in a diversified approach to investing in video games? Evolve E-Gaming Index ETF (TSX Ticker: HERO) may be the right investment for you. HERO ETF gives investors access to equity securities of companies, listed domestically and globally, with business activities in the gaming industry. This ETF invests in companies involved in hardware, software and services relating to the electronic gaming industry. Learn more about this fund by clicking here.

For the latest information on investing in video games and industry updates on related investment products, sign up for our weekly newsletter here.

Sources:

  1. “Esports Ecosystem in 2022: Key industry companies, viewership growth trends, and market revenue stats,” Insider Intelligence, January 3, 2021; https://www.insiderintelligence.com/insights/esports-ecosystem-market-report/.
  2. DiLella, C., and Day, A., “Investors are paying millions for virtual land in the metaverse,” CNBC, January 12, 2021; https://www.cnbc.com/2022/01/12/investors-are-paying-millions-for-virtual-land-in-the-metaverse.html.
  3. “Electronic Arts Reports Q2 FY22 Financial Results,” Electronic Arts Inc., November 3, 2021; https://s22.q4cdn.com/894350492/files/doc_financials/2022/q2/Q2-FY22-Earnings-Release-vFinal.pdf.
  4. “Activision Blizzard Announces Third-Quarter 2021 Financial Results,” Activision Blizzard Inc., November 2, 2021; https://investor.activision.com/node/34856/pdf.
  5. “Activision Blizzard, Inc. (ATVI); Analysis,” Yahoo! Finance, https://finance.yahoo.com/quote/ATVI/analysis?p=ATVI, last accessed January 12, 2022.

 

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