Lockdown measures catapulted the U.S. video games market to record level spending in 20201 and thrust video gaming consoles into the center of hundreds of millions of family rooms across the globe. While this phenomenon was likely a direct beneficiary of the pandemic, a “pandemic-like” event has provided a tailwind to the secular growth trend that is online entertainment and was instrumental in pulling forward the future of video gaming by a factor of years.
Long thought of as mindless screen time, video and mobile gaming continue to integrate into different avenues of our everyday lives. Whether it be attending a highly anticipated virtual event or displaying a new fashion trend with your avatar on the Fortnite platform, learning to code via Roblox as part of your school’s curriculum,2 filling your prescription for the first ever FDA approved video game to increase attentive function,3 interacting with your favorite athlete/celebrity/politician through a live-stream, performing team building exercises and creating inter-departmental synergies with co-workers by participating in the Corporate eSports Association,4 or simply creating and/or strengthening friendships online; It’s apparent that the future of gaming has arrived and is in the early stages of its secular growth story.
It’s these aforementioned shifts in the gaming world that are propelling the industry past 2020’s stay-at-home measures. January 2021 saw record industry sales of $4.7 billion (up 42% year over year)5 while February sales reached $4.6 billion (up 35% year over year).6 Overall video game spending for the two-month period was up 39% comparatively to the same period in 2020,6 which was largely before any stay home restrictions were enacted.
Outside of the U.S., industry growth is being driven by mobile gaming. As smartphone penetration and connectivity continues to rise in developing economies around the world, the TAM for mobile gaming remains a massive growth opportunity for many mobile game developers like Glu Mobile (which was recently acquired by Electronic Arts). “…Mobile gaming is massive. And if you think about over half the world’s population – so half of the world’s population have phones in their hands that we can bring games to. So that is a massive addressable market for us to continue to engage with,” says Electronic Arts Chief Studios Officer, Laura Miele.7
Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the Fund’s prospectus, which may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477), or by visiting www.etfmg.com/GAMR. Read the prospectus carefully before investing.
Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Narrowly focused investments typically exhibit higher volatility. Video Game Tech Companies face intense competition, both domestically and internationally, may have limited product lines, markets, financial resources or personnel, may have products that face rapid obsolescence, and are heavily dependent on the protection of patent and intellectual property rights. Video Game Tech Companies are also subject to increasing regulatory constraints, particularly with respect to cybersecurity and privacy. Such factors may adversely affect the profitability and value of such companies. Investments in foreign securities involve political, economic and currency risks, greater volatility and differences in accounting methods. The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Investments in smaller companies tend to have limited liquidity and greater price volatility than large-capitalization companies. The Fund’s return may not match or achieve a high degree of correlation with the return of the EEFund Video Game Tech Index. To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund had sought to replicate the Index. Diversification does not guarantee a profit, nor does it protect against a loss in a declining market.
ETF Managers Group LLC is the investment adviser to the Fund.
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Sources:
2. Fast Company: ‘Roblox’ isn’t just a gaming company. It’s also the future of education.
3. The Washington Post: FDA-approved gaming is already here, pointing to its therapeutic potential
5. Seeking Alpha: Videogame sales jump again, up 42% to January-record $4.7B
6. The Washington Post/Games Industry: US game spending jumped 35% in February, says NPD Group
7. Yahoo! Finance: The future of gaming: key trends transforming the industry
