Tips for Investing in the Gaming Industry

These side quests will have you laughing and crying

In the past, games were mostly played by kids and the nerdiest of adults. Today, some of these nerdy kids grew up to be IT specialists with hefty paychecks and significant assets. Why wouldn’t they want to go back to where it all started and further increase their affluence by investing in the gaming industry?

Sure, if you want to get clinical, one might argue that by buying games, watching YouTube ads, and donating money to your favorite streamer, you’re already contributing to the industry. However, this is not the topic of today’s article. Today, we want to learn about the way you can actually buy stocks of companies involved in game development and publishing and make money off it. Don’t assume that because you’ve been playing games your entire life and know which company owns which license, you’re automatically qualified to make a good investment. Here are a few things you should know before you get started.

1) Pick the right investment platform

The first thing you need to do is figure out how actually to execute the purchase of these stocks. What you need to do is learn how to invest in the video games industry. Buying a game is easy, but it wasn’t the first time. You were probably bothered by the security of leaving your payment information with Steam and by all the steps you had to take, from adding the game to the shopping cart to installing and downloading content. Again… this is incredibly simple, but not for someone who’s never done something like this before.

The same applies to investing in and buying video game stocks. The first thing you need is the right exchange. There are many apps for beginners that will help you master the technical aspect of trading without much problem. The UI is usually simple and intuitive, often even fully customizable. However, for a first-time trader, this is really not that important. The default setting will work just fine. Pick an app (using personal preference to pick the right one from any top list is a sensible move), do your research, and start making first trades. Ideally, you would start small so that you can develop a sense of what’s really going on. Learning from experience is important, but it’s irresponsible to start out too ambitious. Keep the first few trades small and work up from there.

2) You still have to diversify

Next, you need to learn how to diversify. The thing is that you just can’t put all your money into a single company. You want to split your investment money, but which factors do you prioritize when choosing how to diversify?

First, you want to look at the brand’s strength. Sure, companies like EA Games, Blizzard, Bethesda, and Paradox may be seen as using predatory monetization practices, but they’re still performing quite admirably. The truth is that they have a unique product that their customers need and will pay for, regardless of what their personal feelings toward this are. You may hate Paradox’s DLC policy, but you’ll still buy the next expansion for EUIV and CKIII.

Next, you need to pay close attention to intellectual property. When it comes to licensing, these things are incredibly valuable. Just take a look at the D&D or Warhammer franchises. Do a quick check and see just how many games on these licenses were released in the previous few years. From boomer shooters to strategies and RPGs, there are too many pipelines for firms holding the license ever to fail. Technology can also be a huge problem. For instance, one of the biggest shifts in the world of RPGs was when games like Ultima and Wizardry failed, mostly because they tried to jump to the 3D models before the technology was ready for it. As a result, isometric 2D games like BG and Fallout performed great, while these huge companies with iconic licenses failed spectacularly. Investing in something new and daring should be done, but only with a portion of your investment money that you can actually afford to lose.

3) It’s not about the quality or the preferences

When investing, you have to think like an investor. You can’t let your judgment be clouded by what you like or what you think is quality. Even when you’re objectively right, you must understand the business aspect of the gaming industry. Take, for instance, Vampire the Masquerade: Bloodlines. It’s an iconic game with many great characters, lines, and quests. Sure, the game was buggy at the release, but so are many other games. Despite all the bugs, the game still has a cult following, and people are still buying it to this day.

So, what caused the Troika studios to go bankrupt after releasing its arguably best game to date? It’s simple – a poor business decision or, to be even more precise, a string of poor business decisions. The truth is that, at that time, RPG games migrated to consoles, and any game that was on console or even console exclusive (like the first KOTOR game) was a massive success. At the same time, PC-exclusive games didn’t do that well.

The game was released within two weeks of Half-Life 2, Halo 2, World of Warcraft, and NFS: Underground. The market saw so many releases, all of which will become classics in their own right. If you were a kid looking to buy a game, you had a huge decision to make. Anyone who saw these two business decisions could have guessed that the company wouldn’t do so well. The problem is that gamers focus on the gaming aspect instead. They see a good game, they think, “I would pay to play that,” and automatically assume that the company has to prosper after the release.

4) Understand what constitutes the industry

In order to make better investments in the industry, you need to understand it from the perspective of an investor, not a gamer. Gamers mostly focus on the developers, but if a firm is both a developer and a publisher, it often loses track of what’s what. This is why you have to understand some of the key players in this game:

• Game publishers: These are the companies that handle the distribution of the games. We’re talking about companies like Ubisoft or Tencent.
• Developers: These are the companies like Activision Blizzard, Electronic arts, erc. These are the companies that are actually making games.
• Game distributors: Here, we’re talking about vendors like GameStop or Amazon.
• Platform owners: These are the companies that own the OS for which the games are developed. We’re talking about Microsoft (for Xbox and Windows games), Sony (for PS games), and Nintendo (for Switch).

Ultimately, you need an institutional understanding of the field in order to make the right investment-based decisions.

The gaming industry is huge and growing

Ultimately, you need to understand that the video game industry is huge, and it’s only going to get bigger and bigger. This is why you have a chance to be an early adopter. However, the field is more volatile than you think, and there are a lot of developers who have made huge (even iconic) games that are no longer around.