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Gaming ETFs to Buy on Solid Cash Reserves & Merger Potential?
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A new report from venture capital firm Konvoy, as quoted on CNBC, reveals that publicly listed gaming companies are holding a substantial $45 billion in cash and cash equivalents. This significant cash reserve could potentially trigger increased consolidation within the $188 billion video games market.
Focus on Engaging Gamers with Live-Service Games and Subscriptions
In the quest to maintain player engagement over extended periods, gaming firms are emphasizing live-service games that continuously deliver new content and paid subscription packages that provide access to both free games and cloud gaming services. Cloud gaming enables players to enjoy games via streaming instead of traditional downloads.
Microsoft's acquisition of Activision Blizzard strengthens its portfolio of game publishers and places a significant focus on cloud gaming. This initiative eliminates the need for traditional consoles. Josh Chapman, a partner at Konvoy, predicts that Microsoft's move into cloud gaming will create new opportunities for emerging game developers, infrastructure companies, and gaming platforms.
Positive Performance of Publicly Listed Gaming Companies in 2023
Overall, publicly listed gaming companies had a successful year in 2023. The VanEck Video Gaming and eSports ETF (ESPO - Free Report) , which tracks the MVIS Global Video Gaming & eSports Index, witnessed a 20% increase year-to-date, while the S&P 500 index saw a comparatively lower 12% gain during the same period.
The Global X Video Games & Esports ETF (HERO - Free Report) , which tracks a modified market-cap-weighted global index of gaming and esports companies, experienced a slight decline of 0.4% since the start of 2023.
Big Tech Companies Entering the Gaming Arena
Konvoy also highlights the substantial cash reserves held by major tech giants, including Amazon, Microsoft, Google, Apple, Meta, Netflix, Tencent from China, and Sony from Japan, totaling $229.4 billion. This suggests that these tech giants are well-positioned to explore potential gaming-related acquisitions.
Expectations of Further Mergers and Acquisitions
Konvoy anticipates that the Microsoft-Activision deal, in which Microsoft paid $69 billion for U.S. game publisher Activision Blizzard, will likely stimulate additional merger and acquisition activity within the gaming industry. This could lead to the emergence of a new generation of gaming companies.
VC Investment Slump in Video Game Firms
According to Konvoy's report, venture capital investment in video game companies declined by 64% year-over-year in the third quarter of 2023. Gaming startups globally raised a combined total of $454 million in the three months leading up to September, representing a 9% decrease compared to the previous quarter and a substantial 64% drop from the same period the previous year. This is another reason for which gaming companies may look for acquirers.
Upbeat Potential in the Cards?
Konvoy expects long-term growth for the games industry in the coming years despite funding crisis and margin issues. The firm expects a compound annual growth rate of 9% in the next five years, with the industry touching a staggering $288 billion in overall sales by 2028.
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)
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Gaming ETFs to Buy on Solid Cash Reserves & Merger Potential?
A new report from venture capital firm Konvoy, as quoted on CNBC, reveals that publicly listed gaming companies are holding a substantial $45 billion in cash and cash equivalents. This significant cash reserve could potentially trigger increased consolidation within the $188 billion video games market.
Focus on Engaging Gamers with Live-Service Games and Subscriptions
In the quest to maintain player engagement over extended periods, gaming firms are emphasizing live-service games that continuously deliver new content and paid subscription packages that provide access to both free games and cloud gaming services. Cloud gaming enables players to enjoy games via streaming instead of traditional downloads.
Microsoft's acquisition of Activision Blizzard strengthens its portfolio of game publishers and places a significant focus on cloud gaming. This initiative eliminates the need for traditional consoles. Josh Chapman, a partner at Konvoy, predicts that Microsoft's move into cloud gaming will create new opportunities for emerging game developers, infrastructure companies, and gaming platforms.
Positive Performance of Publicly Listed Gaming Companies in 2023
Overall, publicly listed gaming companies had a successful year in 2023. The VanEck Video Gaming and eSports ETF (ESPO - Free Report) , which tracks the MVIS Global Video Gaming & eSports Index, witnessed a 20% increase year-to-date, while the S&P 500 index saw a comparatively lower 12% gain during the same period.
The Global X Video Games & Esports ETF (HERO - Free Report) , which tracks a modified market-cap-weighted global index of gaming and esports companies, experienced a slight decline of 0.4% since the start of 2023.
Big Tech Companies Entering the Gaming Arena
Konvoy also highlights the substantial cash reserves held by major tech giants, including Amazon, Microsoft, Google, Apple, Meta, Netflix, Tencent from China, and Sony from Japan, totaling $229.4 billion. This suggests that these tech giants are well-positioned to explore potential gaming-related acquisitions.
Expectations of Further Mergers and Acquisitions
Konvoy anticipates that the Microsoft-Activision deal, in which Microsoft paid $69 billion for U.S. game publisher Activision Blizzard, will likely stimulate additional merger and acquisition activity within the gaming industry. This could lead to the emergence of a new generation of gaming companies.
VC Investment Slump in Video Game Firms
According to Konvoy's report, venture capital investment in video game companies declined by 64% year-over-year in the third quarter of 2023. Gaming startups globally raised a combined total of $454 million in the three months leading up to September, representing a 9% decrease compared to the previous quarter and a substantial 64% drop from the same period the previous year. This is another reason for which gaming companies may look for acquirers.
Upbeat Potential in the Cards?
Konvoy expects long-term growth for the games industry in the coming years despite funding crisis and margin issues. The firm expects a compound annual growth rate of 9% in the next five years, with the industry touching a staggering $288 billion in overall sales by 2028.
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)