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Alternate asset classes: gaming

Alternate asset classes: gaming

We’ve come a long way since video games were just for teens in basements! Looks like those guys who were pointed at as ‘nerds’ by other kids are now making heaps of money (who’s laughing now?), and we’re witnessing the rapid evolution of games as both an art form (yes, we have a sensitive side too), as well as an alternate investment class worldwide.

The gaming industry is a popular, multifaceted, and attractive market to invest in. In the last ten years, video games saw an 11% compounded annual growth rate (shockingly, that’s 4x higher than the whole US economy!), with forecasts that it would generate $180b in revenues in 2021. Feels like it’s time to really start living by the “work hard, play hard” motto!

In addition to partaking in gameplay, crowds of gaming enthusiasts are constantly on the lookout to purchase things to show their commitment as well. So, hold on to your joysticks, as this week we deep dive into the past and present of gaming to investigate how it can serve to diversify your investment portfolio — yes, it can do more than just entertain you and your buddies at the majlis (lockdown or otherwise!).

Retro games 

Never change a winning team! Nintendo (NTDOY) has enjoyed the most success in using this strategy for the past three decades, having released ever-popular games like Mario, Pokémon, Zelda (and the list goes on and on). Nowadays, its early classics like “Super Mario Bros” and “Space Invaders” have become assets in their own rights, as the price of the original games (the ones that you needed to put into an old-school console) have grown in price. In fact, just a couple of years ago, a really rare Super Mario game was sold for more than $100,000!

Video game collectibles have an evergreen appeal to their fans because their value is linked to sentimental and cultural significance. And, as each generation of fans matures into a market force, their value translates into appreciation. Even those coin-operated games that come from the Golden Age of arcade (the ones you only see in movies from the 80s) are worth more than you think nowadays. Remember Pac-Man? Well, on eBay (EBAY), its arcade machines can be found going for up to $6,500!

If we convinced you to get in on the retro games investing, the platforms you should check out are Mythic Markets, a specialist marketplace that caters to an audience of dedicated collectors, and Heritage Auction (HGBL), the world’s largest auctioneer for rare items with a huge selection of WATA-certified vintage video games. 

Players 

E-sports too are scoring big. For those who didn’t feel like starting a running routine during the lockdown, Electronic Arts (EA) offered a more sedentary alternative — e-tournaments. The company reported gaining over 230m e-players and viewers in the last year alone! Looks like Covid-19 did the magic, we just hope everyone got their 10k steps in each day as well.

Rather than investing in game publishers or developers, investors (and e-sports enthusiasts) can buy their favorite teams directly. Most e-sports companies, such as Turtle Entertainment (ESL), offer this possibility to increase engagement (and monetization — duh!), while companies like Huya (HUYA) and Douyu (DOYU) even allow you to secure streaming rights to major tournaments and live events.

And it doesn’t stop here — leagues are allowing fans (and savvy investors) to invest in individual players too! In fact, athletes are using equity crowdfunding to sell shares in themselves in exchange for dividends tied to their future contract revenues. It’ll be only a matter of time until this global trend trickles down to your local Ahli team. With Qatar’s FIFA World Cup coming up, this might be the best time to start scouting the next football player you’ll invest in (our hearts belong to Mo Salah at the moment).

Merchandise 

When the gaming culture got so big that the seemingly boundless virtual realm became too tight, there came merchandise! From limited-edition posters to clothing, to accessories and memorabilia, games’ most valuable pieces quickly sell out and true connoisseurs are willing to invest all the way in.

There are toys and action figures that are worth fortunes years after being put on the shelves for sale. Among them, the original Boba Fett action figure is now worth $150,000! What a great excuse to let the inner child inside you go on a shopping spree. But, we warn you — often, these action figures make for worthy investments if they’re resold in their original packaging, so be wary of the temptation to open them! If there’s one thing Toy Story taught us is that used toys are not as desirable as shiny, new ones (we hear you, Woody).

Even the big names in private capital seem to agree on the collectibles market’s bright future — billionaire investor Steven Cohen and Dan Sundheim’s D1 Capital Partners sunk $700m into Collectors Universe, the largest sports memorabilia grading and authentication company. So, collectors out there, do your research, find your niche, and hunt the classics!

why it matters
You've heard it before — the gaming industry has soared in popularity in the last 12 months as users worldwide spent more time at home during the pandemic. Nowadays, businesses in the industry, like Twitch, Roblox (RBLX), and Discord, are reaping the benefits. Though investors can invest in the biggest gaming companies’ stocks, they can also consider other areas of the industry as alternative assets to mix things up — for both fun and diversification of their portfolios, of course.