Jack Anderson
Sep 06, 2024 05:40
VanEck’s ESPO ETF Q&A highlights the growth, challenges and key trends in the gaming and esports sector, predicting significant market expansion.
VanEck’s recent Q&A blog provides valuable insight into the ESPO ETF, focusing on the growth prospects, potential challenges, and key industry trends in the gaming and esports sector. The blog highlights the criteria for ETF inclusion and provides a comprehensive view of the future trajectory of the market.
Industry Challenges and Threats
The gaming and esports industry faces several challenges as it moves toward future growth, including short-term volatility and continued layoffs beyond 2021. The tech sector’s over-hiring during the pandemic has had a lingering effect that is expected to continue through 2025. Additionally, while artificial intelligence (AI) improves developer productivity, it also poses a threat to real actors and game performers, as generative AI (GenAI) can now capture characters’ real emotions and vivid details.
Major players like Microsoft, Netflix, and Disney are making significant investments in gaming. Microsoft’s $68 billion acquisition of Blizzard Studios in 2022, Netflix’s beta testing of a cloud gaming service, and Disney’s $1.5 billion investment in Epic Games are testaments to the industry’s growing appeal. In addition, Saudi Arabia’s Public Investment Fund is actively expanding its presence in the esports market through its subsidiary Savvy Games Group, which has managed $37.9 billion in assets since its inception.
Expected Market Growth
The global video game market is expected to grow from $187 billion in 2024 to $213 billion in 2027. In 2022, the gaming industry will generate approximately $184 billion, surpassing the combined revenue of the music ($26.4 billion) and film ($26.2 billion) industries. The number of gamers worldwide is expected to reach 3.32 billion, with Asia leading the way with 1.48 billion, followed by Europe with 715 million.
Emerging economies are playing a significant role in the growth of the gaming industry due to increasing internet penetration and smartphone adoption. The rollout of affordable 5G networks will further support this expansion, providing high-quality gaming experiences without expensive hardware. According to a 2023 study by Niko Partners, Asia and the MENA region are expected to host approximately 2 billion gamers by 2028, up from 1.6 billion in 2022. Saudi Arabia’s Vision 2030 plan aims to establish 250 gaming companies and produce more than 30 top 300 titles by 2031, and the International Olympic Committee is partnering with the country to host Olympic esports events over the next 12 years.
Key Industry Trends
Mobile gaming is a major trend, expected to account for nearly half of global gaming revenue. This growth is driven by the expansion of the mobile app ecosystem and global antitrust laws such as the EU’s Digital Markets Act. Companies such as Epic Games and Microsoft are expanding into mobile platforms, and consumer brands are leveraging mobile gaming through strategic partnerships and in-game experiences.
Advances in AI and virtual reality (VR) are revolutionizing the gaming experience. AI tools are streamlining the development process, from automating bug fixes to enabling dynamic in-game interactions. VR innovations like the Virtuix Omni treadmill and Apple’s Vision Pro are enhancing player immersion and expanding the capabilities of game developers and hardware manufacturers. These trends point to significant growth and innovation in the gaming and esports industries in the coming years.
Leading industry players
The gaming industry is dominated by global giants like Sony, Microsoft, Nintendo, Tencent, and Electronic Arts, all of which are planning steady product launches through 2026. In the console gaming market, Sony’s PlayStation, Microsoft’s Xbox, and Nintendo’s Switch are the main competitors. As of September 2023, Sony’s PS5 is leading with 39.9 million units sold. Nintendo plans to release a new Switch model in 2025, while improved versions of the PS5 and Xbox are expected to be released in late 2024, highlighting continued competition and innovation in the console sector.
For more details, please visit the original (VanEck) blog (https://www.vaneck.com/us/en/blogs/thematic-investing/espo-etf-question-and-answer/).
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