Bet on 3 ETFs to Play "New Super Cycle" for Video Games
The video game industry is stealing the thunder of traditional media and entertainment. The segment is gradually transforming to offline from online. The stay-at-home-trend caused by the coronavirus pandemic made the segment more lucrative. eSports, mobile gaming, subscription models and streaming services are some of the emerging trends in this arena, .
New Super Cycle Hits
To add to the grandeur of the segment, Microsoft and Sony have officially launched their latest next-generation consoles. The new systems, named the Xbox Series X and PlayStation 5 (PS5), showcase a number of comparable improvements over their forerunners including ray tracing technology for the more-impressive graphics and solid-state storage drives to lower load times, per .
The Xbox Series X and Series S were up for sale on Nov 10 internationally and the . Globally, the PS5 will go on sale on Nov 19. Microsoft has dubbed the release of Xbox Series X and S as its .
With this, the video gaming industry is now on the verge of entering a “.” Some analysts are betting big on this new cycle, which has the potential to dole out profits , as it was indicated by Olivier Garret, CEO of RiskHedge, in January.
Last time that the duo surprised the video game market with such big announcements was in 2013. In 2013, PlayStation 4 and Microsoft’s Xbox One were launched in November. The launches acted as a cornerstone for the entire industry. That year, shares of Activision Blizzard and Electronic Arts rose 69% and 58%, respectively.
In January, Olivier Garret explained that when gamers buy video game consoles of Sony or Microsoft, they also buy some video games alongside. As a result, the entire industry benefits. had also noted that the last super cycle helped video game title sellers like EA throw off 1261% gains from 2012 to 2018, Take-Two Interactive (TTWO) shares skyrocket 1665% and ATVI add 690%.
The article also highlighted investment bank Cowen’s view which says, “Activision, Take-Two, and Electronic Arts beat the stock market by an average of 26% in the year leading up to the last three major console launches, which occurred in .”
Moreover, the holiday season is going to be a special tailwind for the segment. projects that consumer spending on video games in the United States may touch $13.4 billion this holiday season (November and December 2020), increasing 24% year over year (read: ).
Against this backdrop, one must take a look at the below-mentioned video gaming ETFs.
ETF Picks
ETFMG Video Game Tech ETF
GAMR tracks the EEFund Video Game Tech Index, which follows companies actively involved in the electronic gaming industry, including the entertainment, education and simulation segments. It charges 75 bps in fees.
VanEck Vectors Video Gaming And ESports ETF
The fund ESPO follows the MVIS Global Video Gaming and eSports Index, which intends to track the overall performance of companies involved in video game development, eSports, and related hardware and software. The fund charges 55 bps in fees.
Global X Video Games & Esports ETF
The underlying Solactive Video Games & Esports Index seeks to provide exposure to companies positioned to benefit from increased consumption related to video games & esports, including companies whose principal business is in video game development/publishing, video game & esports content distribution & streaming, operating/owning esports leagues/teams & producing video game/esports hardware. The fund charges 50 bps in fees.
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