Confidence in growth prospects has investment dollars flowing
Companies from within and outside the video gaming sector are pouring money into investment, confident in the prospects for continued strong growth.
The total funding in gaming firms over the last 18 months has exceeded the amount invested over the previous five years. Investment in video game companies was US$5.8b in 2018 and already crossed US$3.8b in the first half of 2019.4
Major technology companies are among the most significant investors in the video gaming industry. Seeking to leverage powerful franchises and brands, huge customer bases and deep technical know-how, these global players are building out new, potentially highly disruptive gaming platforms. This includes a variety of subscription-based streaming services, and, in some cases, talent and studio infrastructure to support the development of proprietary video game content.
Meanwhile, incumbent pure-play gaming companies are investing in the next wave of game franchises along with a variety of new technologies. Among them, cloud-based gaming systems, enhanced mobile offerings and robust social media features that serve to strengthen the bonds with and among their player communities.
In addition, capital continues to flow into the build-out of ancillary capabilities, such as systems to support the sale of advertising embedded into games and add-on content monetized through in-game microtransactions, which help diversify revenues and lift profit margins.
eSports is an intriguing area for a cross-section of strategic and financial investors, including media and entertainment companies aiming to access a younger, rapidly growing audience that is exiting the legacy media ecosystem at an accelerating pace. Companies looking to play in the eSports arena are investing in everything from venues, events and teams, to merchandise, sponsorship and media rights.
However, the more immediate opportunity in eSports for video gaming companies may be to market their titles and products to be more distinctive in an increasingly crowded market.