VanEck's ESPO ETF: Insights into the Gaming and eSports Industry
Zach Anderson Sep 06, 2024 05:40
VanEck's ESPO ETF Q&A highlights the gaming and eSports sector's growth, challenges, and key trends, projecting significant market expansion.
VanEck's recent Q&A blog provides valuable insights into the ESPO ETF, focusing on the gaming and eSports sector's growth outlook, potential challenges, and key industry trends. The blog underscores the criteria for ETF inclusion and offers a comprehensive view of the market's future trajectory.
Industry Challenges and Threats
The gaming and eSports industry faces several challenges as it moves towards future growth, including short-term volatility and persistent layoffs post-2021. The tech sector's over-hiring during the pandemic has had lingering effects, expected to continue into 2025. Additionally, while Artificial Intelligence (AI) enhances productivity for developers, it also poses a threat to live actors and game performers, as Generative AI (GenAI) can now capture real emotions and lifelike details in characters.
Major players like Microsoft, Netflix, and Disney are making significant investments in gaming. Microsoft's acquisition of Blizzard Studios for $68 billion in 2022, Netflix's beta-testing of a cloud gaming service, and Disney's $1.5 billion investment into Epic Games highlight the industry's growing appeal. Furthermore, Saudi Arabia's Public Investment Fund, through its subsidiary Savvy Games Group, is actively expanding its presence in the eSports market, accumulating $37.9 billion in assets under management since its inception.
Projected Market Growth
The global video games market is set to grow from $187 billion in 2024 to $213 billion by 2027. In 2022, the gaming industry generated an estimated $184 billion, outperforming the combined revenues of the music ($26.4 billion) and movie ($26.2 billion) industries. The number of gamers worldwide is expected to reach 3.32 billion, with Asia leading at 1.48 billion and Europe following with 715 million.
Emerging economies play a crucial role in the gaming industry's growth, driven by increased internet penetration and higher smartphone adoption rates. The rollout of affordable 5G networks further supports this expansion, enabling high-quality gaming experiences without expensive hardware. According to Niko Partners' 2023 study, Asia and MENA regions are expected to host nearly 2 billion gamers by 2028, up from 1.6 billion in 2022. Saudi Arabia's Vision 2030 plan aims to establish 250 gaming firms and produce over 30 top 300 titles by 2031, with the International Olympic Committee partnering with the country to host the Olympic Esports Games for the next 12 years.
Key Industry Trends
Mobile gaming is a significant trend, projected to contribute nearly half of the global gaming revenue. This growth is driven by expanding mobile app ecosystems and global antitrust legislations like the EU’s Digital Markets Act. Companies like Epic Games and Microsoft are expanding into mobile platforms, while consumer brands leverage mobile gaming through strategic partnerships and in-game experiences.
Advancements in AI and Virtual Reality (VR) are revolutionizing the gaming experience. AI tools streamline the development process, from automating bug fixes to enabling dynamic in-game interactions. VR innovations, such as the Virtuix Omni treadmill and Apple’s Vision Pro, enhance player immersion and expand the capabilities of game developers and hardware manufacturers. These trends indicate significant growth and innovation in the gaming and eSports industry in the coming years.
Leading Industry Players
The gaming industry is dominated by global conglomerates like Sony, Microsoft, Nintendo, Tencent, and Electronic Arts, all of which have steady product launches planned through 2026. In the console gaming market, Sony's PlayStation, Microsoft's Xbox, and Nintendo's Switch are the top contenders. As of September 2023, Sony's PS5 leads in sales with 39.9 million units. Nintendo plans to launch a new Switch model in 2025, while improved versions of the PS5 and Xbox are anticipated in late 2024, highlighting the ongoing competition and innovation in the console segment.
For more detailed insights, visit the original [VanEck](https://www.vaneck.com/us/en/blogs/thematic-investing/espo-etf-question-and-answer/) blog.
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