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Over the past two decades, the video game market has experienced an unprecedented boom. One of the key drivers has been the revolution in mobile gaming. The time of “Snake” or other games that barely lasted two hours have passed. Imagine this: since the introduction of in-app purchases on the App Store in 2009, the widespread adoption of smartphones and the rise of advanced free-to-play models, the mobile gaming market has grown 9.3 times! Based on open-source data and Statista estimates the entire history of mobile games, from 2003, people spent an astronomical budget on mobile games – $793B! To put it in perspective, in the early 2000s, the entire mobile gaming market generated just $500M annually. Twenty years later, after consistent yearly growth, the mobile game development market alone has brought in nearly $800 billion! Today, mobile gaming accounts for 47% of the global gaming market (as of December 2024) and continues to grow.

During tough economic times, people may cut back on going to concerts or movies but continue to play video games. Throughout the economic downturn of 2008, Nintendo thrived on the success of the Wii console. Similarly, gaming was flourishing during the COVID-19 pandemic when people stayed at home.

Popular games are highly profitable: they bring in billions every year. Released in June 2023, Diablo 4 generated over $1B in revenue by September 2024, with $150M coming from in-game microtransactions. 

Many game franchises remain popular for decades and generate revenue through sequels and spin-offs. The Grand Theft Auto franchise alone has sold over 395 million copies since the first installment in 1997. 

The video game industry is among the first to adopt new technologies like generative AI and virtual reality that improve player experience and engagement. This helps in retaining players and attracting new audiences, so companies increase their revenues and capture an ever larger market share.

Also, game publishers actively collaborate with cinema or music production: HBO’s adaptation of The Last of Us increased sales of a video game.

Are Gaming Companies Growing? Global Video Game Market

The video game industry has grown consistently over the past few decades and shows no signs of stopping. Newzoo forecasts that by 2027, global gaming revenue will reach $213.3B (up from $187.7B in 2024, a 5% annual growth rate). Mobile games alone are expected to account for 49% of the market this year, growing 3% from the previous year to reach $92.6B!

So, why you should pay attention to this market from the investment point of view:

• Consistent Consumer Spending: Players have always spent money on mobile games and will continue to do so. They want to improve their gaming experience: speed up progress, acquire unique items or characters, and express themselves through customization. In addition, in-game purchases allow you to maintain your favourite projects and get access to additional content. 
• Global Audience Accessibility: With smartphones in nearly everyone’s hands, mobile games have access to a massive potential user base.
• Free-to-Play Monetization: Free-to-play games generate stable, high revenues through in-game purchases and ads.
• Dominance of Mobile Gaming: Since the launch of the App Store, the mobile segment has become the largest in the industry and continues to dominate.
• Massive Audience Potential: Mobile games are accessible to billions of people worldwide.
• Major Deals and Successful IPOs: Zynga, GDEV, Playtika confirm that the mobile market is stable even in crisis years.

Source: Statista

Over the past two decades, the industry has developed and grown—many gaming companies became publicly traded: in 2021 alone 10 new gaming IPOs appeared. Their market capitalization reached its peak in 2020 at $535 billion, according to research. 

PwC predicts that video games will account for 10.9% of all entertainment and media spending by 2026. Challenges and Opportunities of Investments in the Gaming Industry

Although gaming is a fast-growing industry, it has inherent risks that investors need to be aware of to assess the long-term viability of an investment.

• High Competition. The market is unpredictable and changes quickly. The entry barriers in the industry are quite low, so new studios and games are constantly appearing. Gaming giants compete with indie developers and new platforms; still, in most cases, only large companies manage to achieve new levels of success because they have the experience and financial resources to back them up. 
• AI in Game Development. Generative AI tools are significantly driving down development costs and reducing routine tasks in product, marketing, and creative production. This tendency will help gaming companies become more profitable in the future. 

Investment Opportunities in Gaming

Investing in gaming can involve buying shares in gaming companies for direct profits or choosing ETFs that pool different assets to reduce risk and potential losses.

Individual Gaming Stocks. One of the easiest investment options is to buy shares in gaming companies. If the company grows, so will your stock returns. Many game developers and publishers are publicly listed: Nintendo, Microsoft, Take-Two Interactive, EA, Roblox, GDEV, NetEase, KRAFTON etc. Before investing, monitor new game launches and analyse trends in stock prices and revenue growth, while comparing these metrics with relevant company news over the years.

Gaming Exchange-Traded Funds. Exchange-traded funds (ETFs) pool money from individual investors to buy shares of various assets. Here are three of the most popular ETFs:

1. Vaneck Video Gaming and Esports ETF (ESPO) tracks the performance of the MVIS® Global Video Gaming and eSports Index by investing in a range of gaming-related stocks such as Nintendo, EA, and Roblox. Over the past year, it has grown by 29,52%.
2. GX Video Games & Esports ETF (HERO) covers companies that develop and publish games, stream, and distribute game content, as well as producers of supporting hardware. This ETF has grown by 18.74% last year.

Source: analytic platform – vaneck.com

Investing in gaming company stocks through ETFs is convenient: with one purchase, you acquire a collection of gaming companies and own multiple gaming companies in one investment. In addition, ETFs tend to be more tax-friendly than actively managed mutual funds. However, there are a few things to consider. Some ETFs aren’t always as easy to buy or sell as individual stocks during volatile market conditions. And while they are designed to track the performance of certain indices or assets, their actual returns may not always match their returns.

How to Explore Investing Opportunities in Gaming 

Video gaming is a broad industry and has many nuances that need to be researched beforehand.

1. Understand the market trends: Focus on major players like Microsoft or Nintendo. If you prefer alternatives to corporations, consider smaller companies, such as Playtika, Huuuge, GDEV and so on. Analyse their areas of development (mobile gaming, VR, AI). Use reports from industry sources (PwC, Newzoo) to analyse growth rates and consumer preferences. 
2. Review financial performance: Check the stability of revenue and earnings, especially in live-service models. Look for companies with diverse revenue channels. Evaluate whether the company’s profits are growing steadily. Does the company reinvest revenues in innovation, or do expenses reduce profits? 
3. Evaluate risks: Assess franchise dependency and economic factors affecting consumer spending. Companies with diverse game portfolios or a pipeline of new releases are generally less vulnerable.
4. Select investment options: Weigh the pros and cons of each choice. Individual stocks have high growth potential but require active monitoring. Gaming ETFs provide a diversified investment portfolio across the industry.