Video Games
If the image that comes to mind when someone mentions video games is a teenage boy sitting in their parent’s darkened basement playing Mario Kart, surrounded by discarded Mountain Dew cans and Doritos bags, then it is time to discard this outdated stereotype.
Whether or not you yourself enjoy playing video games in your leisure time, gaming has evolved considerably and expanded well beyond its niche origins to sit squarely in the entertainment and cultural mainstream. Fortnite, you may recall, became a global cultural phenomenon following its 2017 release, with everyone from World Cup soccer players to Michelle Obama getting in on the dances popularized by the game.
The demographics of gaming are rapidly evolving with this expansion into the cultural mainstream. In a recent study by AARP, the percentage of adults age 50-59 who play video games at least once a month increased from 38% in 2016 to 44% in 2019, with women more likely than men to regularly play.
Gaming’s explosion in popularity is due, at least in part, to transformative changes in the video game industry over the past decade.
Ten years ago, if you wanted to play the latest game, you would go to a local store (GameStop, for instance), buy the game for around $60, and take the discs home to install/play. These days, mobile gaming (primarily on smartphones) accounts for the largest share of total gaming revenue worldwide, and popular games are often free to download and play. Developers monetize these free games by offering players in-game purchases.
Another relatively recent development is the rise of subscription gaming, which offers players access to a multitude of games for a monthly subscription fee. Similar to the “streaming wars” between Netflix, Amazon, Hulu, etc., developers are scrambling to build competitive subscription services as they work to attract larger shares of the growing market.
For those interested in the investment potential of this dynamic market, there are a few important points to understand.
What Are Video Games Circa 2020?
The Cambridge Dictionary defines a video game as “a game in which the player controls moving pictures on a television screen by pressing buttons or moving a short handle.”
Video games have been around in one form or another for decades, beginning with arcade gaming in the 1970s and transitioning to home gaming in the late 70s and early 80s with popular titles such as Space Invaders, Frogger, and PacMan.
Gaming today largely falls into three distinct categories: console gaming, personal computer (PC) gaming, and mobile gaming. Console gaming happens on devices that are built exclusively to play video games (think PlayStation, Xbox, etc.), while PC gaming happens on high-performance personal computers, and mobile gaming, as the name implies, happens on your mobile device (such as your smartphone or tablet).
Until relatively recently, console and PC gaming were the dominant forces in the video game industry, but the recent explosion of smartphone use and internet connectivity globally has dramatically reshaped the industry.
According to market research firm Newzoo, mobile gaming is currently the fastest-growing segment in the video game industry, and revenues from mobile gaming account for 46% of the total gaming market in 2019. This isn’t to say that dedicated gamers are ditching their consoles and PCs in favor of games on their smartphones; rather, the market is expanding as more people gain access to free or inexpensive games through their mobile devices.
This expansion and diversification of the gaming ecosystem have given rise to novel revenue streams; most notably, live streaming and esports.
Live streaming involves gamers broadcasting themselves playing video games live on the internet. The practice has become wildly popular, as evidenced by Amazon’s 2014 acquisition of the streaming startup Twitch for $1 billion.
Esports, meanwhile, refers to competitive, organized video gaming. You may recall the story about the 16-year-old who went home with $3 million after winning the 2019 Fortnite World Cup.
Global revenues from the burgeoning esports market exceeded $1 billion in 2019, an increase of 26.7% over 2018 revenues. The emergence of live streaming and esports has fueled greater interest in gaming while offering outside investors a new way to reach this diverse group of consumers.
Why Invest in Video Games?
According to Newzoo’s 2019 Global Games Market Report, there are more than 2.5 billion people globally who play video games, and global revenue from gaming reached $148.8 billion in 2019. The U.S. market alone generated about $35.5 billion in 2019.
As a point of comparison, the 2019 global box office for films reached a record $42.5 billion, and the U.S. box office finished with $11.4 billion. This means that in 2019, people spent more than three times as much on video games as they did on seeing movies.
This remarkable performance comes amid a changing revenue landscape in which console and PC gaming account for less and less consumer spending.
Mobile gaming comprised about 46% ($68.2 billion) of overall market revenue in 2019 – an increase of 9.7% over 2018 revenues. Though smaller than mobile, console gaming continues to see healthy growth, occupying 30% of the market ($45.3 billion) with an increase of 7.3% from 2018.
Newzoo forecasts that video game revenues will grow to $196 billion by 2022 at an annual growth rate of 9%. Mobile gaming will continue to grow over the next several years, increasing from 46% of the total market in 2019 to a forecasted 49% by 2020 ($68.2 billion to $95.4 billion).
Mobile gaming’s expansion in the market may even be accelerated by outside factors, including the rollout of 5G networks (faster connectivity means better gameplay in more places) and further advancement of augmented/virtual reality (think Pokémon GO).
The video game market offers a unique investment opportunity because the industry is projected to continue its extraordinary performance in the coming years, and the various segments offer a wide variety of options when it comes to risk vs. return.
How to Invest in Video Games
However, despite their popularity and long-standing growth, investing directly in the video gaming sector can be challenging. There are hundreds of different companies working on individual gaming properties, and the rise of mobile gaming has introduced new players to the sector, such as mobile providers and hardware manufacturers. However, a search on Magnifi suggests that there are a number of other ways to profit from the growth of video games as a whole.
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This blog is sponsored by Magnifi. The information and data are as of the Mar 17, 2020 (publish date) unless otherwise noted and subject to change. This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. [As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide broker-dealer, custodian, investment advice or related investment services.]
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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the January 22, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Climate Change
Once a year, the CEO and Chairman of BlockRock, Larry Fink, sends a letter to the CEOs of the world’s largest and most influential companies. BlackRock is the world’s largest asset manager with over $7 trillion in assets, so the annual letter always attracts a great deal of attention.
In the letter, sent on January 14, 2020, Mr. Fink argued that climate change is driving a “fundamental reshaping of finance,” and that “In the discussions BlackRock has with clients around the world, more and more of them are looking to reallocate their capital into sustainable strategies. If ten percent of global investors do so – or even five percent – we will witness massive capital shifts. And this dynamic will accelerate as the next generation takes the helm of government and business.”
For BlackRock to announce that it is placing sustainability at the center of its investment approach, and to argue that investors and businesses would be wise to follow suit, it is nothing less than a seismic shift with enormous potential implications. This isn’t some small company announcing that it’s placing a renewed focus on sustainability; BlackRock is a financial colossus, and when they say that they are rethinking their investment strategies because of climate change, investors around the world should sit up and pay attention.
It should go without saying at this point that climate change poses a singular threat to mankind and the Earth’s biodiversity. The World Economic Forum’s 2020 Global Risks Report, which annually identifies the most pressing global challenges, ranked “climate action failure” as the top global risk in terms of overall impact, and, for the first time in the report’s existence, the top five risks in terms of likelihood are all climate-related.
There is growing public pressure on governments and businesses to do more to address the threats, and an increasing number of Americans rank it as a top policy priority for the Federal Government.
Climate change is a problem that is so large and complex that it simply cannot be tackled by one group acting alone; as such, governments and businesses need to work together on the transition to renewable energy. As the BlackRock letter makes perfectly clear, the private sector can no longer afford to ignore climate change.
There are promising signs that this message is finally sinking in, as evidenced by recent announcements from several powerful companies detailing bold new climate action plans. Amazon, for instance, recently launched a new initiative called The Climate Pledge, which promises that the company will transition completely to renewable energy by 2030, order 100,000 electric delivery trucks, and invest $100 million in reforestation projects around the world.
In addition to this initiative, Amazon’s CEO, Jeff Bezos, recently announced that he was committing $10 billion of his own money combat climate change.
Not to be outdone, Microsoft made headlines recently with its own bold pledge, announcing that it would work to become carbon negative by 2050, in that it would “remove from the environment all the carbon the company has emitted either directly or by electrical consumption since it was founded in 1975.” Microsoft simultaneously announced that it was investing $1 billion in a “Climate Innovation Fund.”
These recent announcements, coupled with the ground-shaking BlackRock letter, make it clear that the risks posed by climate change are beginning to disrupt traditional investment practices. For the savvy investor who understands the magnitude of the changes that are beginning to occur, there is tremendous opportunity in combating climate change.
For those interested in the investment potential of this critical issue, there are a few important points to understand.
What Is Climate Change?
The United Nations explains the problem of climate change thus: “Greenhouse gases occur naturally and are essential to the survival of humans and millions of other living things, by keeping some of the sun’s warmth from reflecting back into space and making Earth livable. But after more than a century and a half of industrialization, deforestation, and large scale agriculture, quantities of greenhouse gases in the atmosphere have risen to record levels not seen in three million years.”
As greenhouse gasses concentrate in the atmosphere, more of the sun’s heat is prevented from radiating out into space, which slowly drives global temperatures up and creates a whole host of serious problems. According to the NOAA 2019 Global Climate Summary, “the global annual temperature has increased at an average rate of 0.07°C (0.13°F) per decade since 1880 and over twice that rate (+0.18°C / +0.32°F) since 1981.” 2019, the year that saw the devastating Australian wildfires and destructive Atlantic hurricanes, was the second-hottest year on record since record keeping began in 1880.
Efforts to bring together a solid, international coalition committed to tackling climate change have proved difficult thus far, with meetings such as the 2019 UN Climate Action Summit concluding without making much in the way of significant progress.
However, millions of young people in cities around the globe walked out of school on Friday, September 20, 2019, to express their anger at climate inaction and demand substantive, swift change. These young people are energized, politically active, and highly motivated – they represent the groundswell that will richly reward those who turn away from fossil fuels and toward innovative, renewables.
Why Invest in Climate Change?
Technological innovation is key to fighting climate change.
No matter how much we legislate, protest, and conserve, we need technology to help get us out of this mess. Thankfully, humans are nothing if not resourceful, and our desire to keep the planet safe and healthy for future generations means that the market for innovative, clean technology is going to continue to expand.
One challenge currently facing startups focusing on climate change is a lack of venture capital (VC) interest. For VCs, why put your money in a risky startup with moderate short-term returns when a software startup’s short-term return could be enormous? The answer to this question is rather simple: because the world is in trouble and the power of the almighty dollar can help.
Matt Rogers, co-founder of Incite Ventures, a fund that supports mission-driven enterprises, puts it another way: “Sitting on your pile of money while the oceans are rising may not help you stay dry.”
How to Invest in Climate Change
However, supporting a topic as broad and all-encompassing as climate change isn’t as simple as buying a few stocks. The issue crosses industry lines, investment segments and even international borders. That’s why it can be more impactful to invest in fund that are involved in a number of different businesses working on solutions related to climate change.
A search on Magnifi suggests that there are a number of different ETFs and mutual funds available to investors who want to get involved in climate change technology without having to invest in dozens of different companies directly.
Unlock a World of Investing with a Magnifi Account
Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the March 6, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.