The “marathon of growth” global video game industry has briefly slowed down to grab a drink of water. According to EE Fund Management’s mosaic of data sources and independent research, a chief component of this is the natural cycle of consumer demand. Another element is the gradually improving—but still cantankerous—supply chain issues and game release delays. Meanwhile, a less significant aspect is economic uncertainty based on multiple factors.
Even while slowing down for water, this long-distance industry is still positive, and its future prospects remain bright. “Common wisdom” frequently attempts to define the video game tech industry, and yet the industry defies its definitions and spawns new revenue channels.
“Play to Learn” Trend
A promising revenue channel is illustrated by Electronic Arts (“EA”) launching the “Play to Learn” line of education gaming products. This gamified curriculum has expanded in the past quarter and maintains the potential to capture a piece of the global education market.
According to EA, “Play to Learn offers online gaming and engaging simulations for middle and high school students to engage them on a number of topics including binary numbers, scientific notation, the Pythagorean Theorem, probability and basic coding language. The course modules are designed to reinforce real-world application of these skills while getting students interested and excited in new career fields. Through Play to Learn, these programs will be used in the classroom to supplement the curriculum.”[1]
After forecasting the global education, training, and simulation markets, we found that even if the Total Addressable Market (TAM) is lower than predicted, the Potential Addressable Market (PAM) is still in the multi-trillion-dollar range. This type of potential dwarfs most of the hot topic video game trends such as blockchain gaming, NFT enhanced games, eSports, and pretty much everything else.
Training and educational game market 2021–2027. (Source: Ted Pollak)
Although the educational gaming market gained traction due to COVID19 stay-at-home protocols, it does not need a forced remote learning atmosphere to flourish. Interactive education has timeless value and application, not only because of superior curriculum retention but because advanced gamified training can analyze a student’s weaknesses and tailor lessons based on individual performance. Furthermore, and perhaps most importantly, is that interactive gamified education can allow the student to customize the conceptual application of the lessons. This means a student could choose the real-world application of course work, say for example applied mathematics, based on their personal hobbies and interests. The possibility that a lesson or even midterm/final exam could be different across individual students while applying the same concepts across the entire class is unprecedented.
EE Fund Video Game Tech Index
This quarter the index came under pressure from the general stock market and tech stock selloffs partially due to global uncertainty in the face of war, lingering pandemic issues, inflationary pressure, and the commencement and anticipation of monetary tightening.
Source: Prime/Level ETF. *Holdings are subject to change without notice. Past Performance Does Not Guarantee Future Results.[2]
Source: Prime/Level ETF. *Holdings are subject to change without notice. Past Performance Does Not Guarantee Future Results.[3]
All that considered, if discretionary spending continues to be under threat due to inflation in consumer staples, transportation and energy, people will seek value in their entertainment. Gaming has typically offered incredible cost-per-hour value and is usually done at home without the need for transportation. So even in the stormy seas of the current economic environment, we are very optimistic about the industry’s fundamentals and growth ability.
The EEFund Video Game Tech™ Index provides a benchmark for investors interested in tracking companies actively involved in the electronic gaming industry including the entertainment, education and simulation segments. The Index uses a market capitalization-weighted allocation across the pure-play and non-pure-play sectors and a set weight for the conglomerate sector as well as an equal-weighted allocation methodology for all components within each sector allocation. The index was created and is maintained by EEFund Management.
The Wedbush ETFMG Video Game Tech ETF
The video game industry is enjoyed by over 1 billion loyal users. It is estimated that the global gaming market will amount to 268.8 billion U.S. dollars annually in 2025, up from 178 billion U.S. dollars in 2021. Gaming additionally influences many other tech industries, such as virtual reality software and cloud-based services.[4] Access the sub-sectors within the video game industry in 1 trade with the Wedbush ETFMG Video Game Tech ETF (Ticker: GAMR). GAMR is the first ETF to provide pure-play and diversified exposure to a dynamic intersection of technology and entertainment. Learn more: etfmg.com/GAMR.
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. Securities mentioned may or may not be held in the Fund and are subject to change without notice.
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.
The Fund is distributed by ETFMG Financial LLC. ETF Managers Group LLC and ETFMG Financial LLC are wholly owned subsidiaries of Exchange Traded Managers Group LLC (collectively, “ETFMG”). ETFMG is not affiliated with EEFund Management or Wedbush Securities LLC.
The Fund is intended to be made available only to U.S. residents. Under no circumstances is any information provided on this website intended for distribution to or use by, or to be an offer to sell to or solicitation of an offer to buy the Fund or any investment product or service of, any person or entity in any jurisdiction or country, other than the United States, where such distribution, use, offer or solicitation would subject the Fund or its affiliates to any registration requirement or be unlawful under the securities laws of that jurisdiction or country.
[1] https://www.ea.com/news/play-to-learn
[2] Securities % held in the GAMR fund as of 3/31/22.
[3] Securities % held in the GAMR fund as of 3/31/22.
[4] https://www.statista.com/statistics/292056/video-game-market-value-worldwide/
