Profit From the Gaming Revolution’s Explosive Growth
When I was in college, everyone was obsessed with Angry Birds.
Yes, I’m referring to the game where you use a slingshot to launch birds at pigs, and you get points based on the amount of damage you do.
At the time, I felt like I was the only person who didn’t download that game. I figured that playing games on your smartphone was just a fad.
But it didn’t stop. It actually did the exact opposite.
From 2011 through 2013, Angry Birds brought in $500 million in sales. Not bad for a free download!
If people enjoyed playing it so much that they’d make in-game purchases to that degree, it definitely wasn’t just a fad. After all, what’s a couple of dollars here and there compared to spending upward of $70 for an Xbox or PlayStation game?
This business model, which is called “freemium,” has turned out to be a huge revolution in the way we play games.
Gaming’s Rapidly Expanding User Base
I’ll get back to the mobile game revolution shortly. But first, I want to highlight just how prominent the gaming industry in general has become.
Last year, the amount of revenue that gaming brought in around the world was $116 billion. That’s more than any other type of media.
For the first time, gaming revenue was higher than that of the TV industry, which fell 8% from 2017.
To put it plainly, the growth in the gaming industry is enormous. By 2025, it’s expected to be a $300 billion industry, 159% growth from 2018.
One main factor contributing to that growth is a rapidly expanding user base.
Over the past four years, over 500 million people have joined the gaming community, whether that be through consoles, smartphones, virtual reality (VR) or any other method of playing. That brings the total number to over 2.3 billion.
The Mobile Gaming Craze
The other factor is the rapidly growing field of mobile gaming.
Last year was a particularly huge year for mobile gaming, as it cleared the 50% mark for total gaming revenue. Overall, people spent about $70.3 billion on mobile games.
And like I said, these aren’t big purchases. It turns out that spending a dollar here and there for extra things in your favorite game can really add up.
For example, a Chinese mobile game called Honor of Kings brought in about $1.93 billion last year. It actually got so popular that it has since been released on the Nintendo Switch. That’s the first time a game has ever made the transition from mobile to console.
And who can forget the Pokémon Go craze of 2016? Within nine days of its release, it had brought in over $1.6 billion in sales.
Keep in mind that this game is also completely free to download, showing the power of the freemium business model. And although the massive amount of hype surrounding it has died out, people continue to play. The game has brought in over $270 million so far in 2019.
But Pokémon Go is actually a lot more than just a mobile game. It brought a whole new gaming style called augmented reality to the mainstream.
Augmented and Virtual Reality
With augmented reality, computer-generated images are put against a real background. So in Pokémon Go, the game puts images of Pokémon in the real world for people to catch.
A big advantage of this, other than the fact that the game is free, is that you don’t need any extra accessories to play it. With augmented reality’s closest relative, VR, you need to buy and set up a headset, which isn’t cheap.
However, VR gaming has exploded over the past several years.
Due to strong holiday sales, there were over 1.5 million headsets sold by Sony, HTC and Oculus, which are emerging as the VR market leaders. And that was just in one quarter.
This is strong evidence that VR is finally emerging as a viable type of gaming.
For years, VR sales fell way below expectations. However, sales grew last year by 64%. And they’re expected to continue to grow by another 353%, to $16.3 billion, through 2022.
The biggest argument against VR is that the mainstream public doesn’t want to play VR games. However, with over 22 million VR users in the U.S. alone, that notion seems to be fading away.
There’s also a record number of VR users on the gaming platform Steam, which is encouraging for future adoption as well as game sales. And we’ve already seen some games take off in huge ways.
One example is Beat Saber, a game for the PlayStation VR, which sold over 1 million copies in just its first 10 months on the market.
Another is Skyrim VR, also available for the PlayStation VR, which also sold over 1 million copies in its first 10 months.
More importantly, it’s twice the price of Beat Saber. And it’s bringing in about as much money as the regular console version of Skyrim, which is one of the most popular video games of all time.
How to Invest in Gaming
So, in short, gaming is undergoing an explosion of popularity driven by huge growth in mobile, augmented reality and VR games.
Mobile is by far the most dominant growth driver, and by 2021 it’s expected to generate $106.4 billion on its own, nearly doubling what it made in 2017.
Meanwhile, the augmented reality and VR markets are expected to hit $55 billion by then, which is about double their overall sales from 2018. So, in just two years, these two types of gaming alone will exceed what the entire gaming industry brought in last year by $45 billion.
To invest in this huge growth, I recommend buying shares of the ETFMG Video Game Tech ETF (NYSE: GAMR).
This exchange-traded fund (ETF) is filled with 79 different stocks from all over the world that are each contributing to the gaming industry.
Editor, Rapid Profit Trader