Video games have become mainstream and their popularity can be found everywhere. Jimmy Kimmel showcased parents recording their child's hilarious reaction when they turned off the TV in the middle of a game and CNBC interviewed Tyler "Ninja" Blevins, one of the most popular players who makes over USD 500,000 a month. Have you ever wanted to learn more about the industry itself? In our recent report, Everything you wanted to know about video games but were afraid to ask, we dive into some of the most frequently asked questions around gaming, including how companies are making money, what makes a great video game and whether or not it's a good idea for your child to become a professional game player.
From your parents' basement to the main stage
Gaming used to be more of a niche industry catering to those engrossed by virtual exploration and competition. It has grown to an astounding USD 135 billion in 2018 revenues, with additional growth on the horizon. Some may wonder how the industry has grown so large as the thought of video games may bring up memories of purchasing an Atari or Nintendo along with a collection of games around the holiday season. Context matters, and the video game industry today is dominated by mobile gaming as there are billions of smartphones being used on a daily basis. The dramatic rise in mobile revenues stems from wide-spread popularity due to dependable Internet speeds and the enhanced social aspect gaming now represents. Instead of playing Mario Kart against your siblings on the weekend, gamers compete with their friends across the globe at any time and can watch and follow other popular gamers online, becoming more engaged with the experience. Another driver of game popularity and attachment is the fastest growing spectator sport in the world: eSports. Professional gaming teams compete against one another on the big stage (literally – the Overwatch tournament sold out The Barclays Center) for big prize money, sponsorships, and more.
Reading the crystal ball
The gaming industry is attracting a number of innovative and exciting investments that hope to push the form of entertainment to the next level. We expect subscription services, which gives users access to a collection of potential games instead of just one, and a cloud streaming model, versus the current downloading of games to a local device, will revolutionize the industry. Think of how Netflix turned traditional media on its head! In the near term, strong intellectual property remains essential to draw a large enough fan-base to drive revenues, which bodes well for major game developers. The total addressable market may increase as well with decreasing consumer barriers to entry such as expensive consoles and PCs.
Robert Samuels, Consumer Discretionary and Media Analyst Americas, UBS Financial Services Inc. (UBS FS) Reid Gilligan, Equity Associate Analyst Americas, UBS Financial Services Inc. (UBS FS)