There was a time when the gaming industry seemed like the most sensible investment in the world. But those days have rapidly gone away.
During the pandemic, it seemed everybody was investing in their gaming devices. Record player engagement and spending was announced with every new title.
But things rapidly changed. 2023 was not a good year, and 2024 is looking to go exactly the same way. Investments made when things were good have fallen apart, and now the cost of just about everything has skyrocketed. Publishers, developers and even console manufacturers are having to cut costs to ensure their profitability.
But more than that, they’re cutting deep. Employees are being let go. Games are being cancelled by the armful. And companies are going independent or, worse, being shut. You’d be forgiven for looking at the daily news and wondering how you’re ever going to make your money back – let alone make a profit – if you invest in a video game company.
And yet it’s not all doom and gloom.
What Exactly happened?
The pandemic gave many people a little refresher from the daily grind. For the first time in their adult lives, they were able to sit in front of a screen again for as long as they wanted. Which meant more money was coming into the industry. That caught some attention.
What games were they playing? Well, there was a good variety, but some of the most successful games during this time were the likes of Call of Duty and Fifa. Service games, or at least games where the platform was the point. It’s easy to see the possibilities today by looking at Fortnite. It’s not just a game, it’s multiple games under one roof, playable in absolutely any place you play your games.
And so investors chased certain buzzwords. GAAS, Metaverse, blockchain. They chased acquisitions. Mountains of money went into projects that had no future. And it seems the money disappeared.
Actually, that’s not entirely true. It only seems that way because companies are having to make efficiencies. There is still plenty of investment happening in the video game industry. Not as much as two or three years ago, but it’s still a great time to be a start-up company. It’s just not the golden ticket some might have thought it was in 2021.
Improvements Are Coming
It’s the nature of things that things are actually getting worse for people working in the industry, but that there are still investment opportunities for those that want them.
The games industry is expected to grow this year 2.8 percent, and analysts are expecting there to be more consolidation over the coming year.
Because valuations are down, it could be a good time to invest. Especially since you never know what the next big thing is going to be, or who might end up buying up the company you’re investing in.
For instance, Helldivers 2 is set to be one of the biggest games of the year, and nobody could have seen that coming. As of writing, it was tracking just behind Spider-Man 2 in sales. Granted, it was released on PC as well as PS5 (and sold better on PC too), but it’s that kind of shift to a multiplatform model that we’re going to be seeing more of.
Palworld has been hugely successful too. Two games, two surprise hits, and we’re barely three months into 2024. There is almost definitely going to be more to come. And there’s no way of knowing what will hit the public zeitgeist.
Where to Invest
The nature of video game investment is that you don’t always know where the next bolt of lighting is going to strike. So if you’re looking for something safe for long-term investment, you have to start looking at the pillars of the industry.
The likes of Capcom and EA are always going to be safe bets. They are consistently successful, and make games that gamers love. Take Two has Grand Theft Auto 6 next year, and it’s probably going to be one of the biggest games of all time. It’ll be hard to argue with the impact that’s going to have.
Console holders are a little less certain. Microsoft is always a safe bet, and they’re making moves to ensure their profitability going forward. Nintendo is also a safe pair of hands, and is going to be releasing a new console next year. Historically, Nintendo isn’t always the success you’d hope it would be with fresh devices, but there’s a lot of excitement for the Switch 2.
Finally Sony’s PlayStation is in a period of flux, but is always the biggest in terms of high-end console sales. It would take an awful lot to change that.
Investing in Video Games – Conclusion
Although things aren’t quite as big as they were a couple of years ago, it’s still a fantastic time to invest in video games. The industry is becoming more and more popular – and with it, the profits are growing.
