Investment Opportunities in Gaming: The What and When
As you take your daily commute to work how many people do you see hunched over or zealously tapping away on their Smartphones and tablets? Can you count them off on your hands alone? When was the last time you set foot in a gaming café/hangout and heard crickets?
This does not happen to be mere coincidence. Worldwide videogame revenues were set at $52 billion back in 2011. DFC Intelligence projects this number to go past the $70 billion mark by 2017.
Videogames are fun, addictive, a unique form of escapism, and a great way to get away from our often stress-heavy lifestyles. It does not come as a surprise then, how games have always been at the forefront of entertainment, and have often rivaled and even toppled over hits at the Hollywood Box Office.
Are there opportunities to be had for investors in this industry? Well, if the numbers alone aren’t convincing enough, I assure you now is a super-duper time to invest in game development.
The tendency to hesitate before dropping a large amount of cash on any major industry player, is only natural. How do you know which company to invest in or whether your returns will be fruitful? We lay it on you, the bare essentials.
EA Sports – “It’s in the Team”
When games were first making appearances on mobile devices and Facebook, they were not taken that seriously by gamers, let alone investors. Some barely qualify as games, others were fairly basic ports of existing games. The trend has shifted since. Game quality has soared notably and the brakes are non-existent.
What makes a game company great at what they do? A highly experienced team of designers and developers, along with business-minded individuals who know the ins and outs – these are just some key ingredients. Not to mention a successful streak of several hundred thousand past shipments, a keen understanding of how mobile and social games are unique and different from PC and console games. And, also coming to terms with how ‘games as a service’ and ‘free to play’ games differ from games packaged on storage media.
One Hit Wonders
All games must undergo what’s called “title risk”. Nobody can tell for sure if a title’s going to be an instant hit the moment it lands on shelves or arrives online. Developers and game entrepreneurs are usually very excitable by nature, given their line of work. They have to be, in order to communicate the same vision to their consumers.
However, it isn’t etched in stone that their game will be a raving success. Games do flop, and these games are also built by devs who truly believed in their product. Here’s one marker of long-term success: what the users think.
Game developing tools are getting better as we speak. The development process is not as complicated as it used to be more than a decade ago, so it’s easier to launch games in beta to get user feedback and initial impressions.
When investing in game development, you also need to check out real, concrete data from actual gamers to see what they think of the whole package, and how often they are playing it. There’s no better indicator than the aggregate time gamers spend exploring, sharing and recommending a particular product. This is in fact, the best predictor for monetization. If early users are hooked and returning for more, the company is a fine prospect for long-term investment.
A great game development company hinges on the success of multiple titles. Even though a first crowd pleaser can get the momentum moving, it will only give developers recognition for so long. Back in the golden days of gaming, devs simply looked at games as projects, with a predefined or in most cases, estimated shelf life.
Ambitious developers look at their titles as service rather than just a game, focusing on titles that retain players in the long run. If all goes according to plan, a company may enjoy several years of staying power and billions in profits. Though, even the best of the best start to show signs of wear and tear – World of Warcraft, Call of Duty, or Gran Turismo.
League of Legends is the most played game around the globe today, but it’ll eventually run its course. An investment-worthy company needs to have long-term projects planned; they can’t just build a hit and lean on that the entire time. They should be working on a complete hit factory.
Chinese game publishers have also pointed out how developers shouldn’t ride on just one game and sit on their hands from thereon. Developers leveraging their successes and experiences from their very first title into future ones, are rife a great place to start for investors.
Bungie is a good example – a company that has used one franchise to branch into another, penetrating gaming niches everywhere. Their revenues continue to grow today
Room for Investments
We’ve had to bear with a few “false dawns” every now and then. Franchises that were slated to take the gaming world by storm, bombed in a matter of weeks. I believe it’s fair to say the golden age of game development is practically knocking on our doors, especially with the release of the Xbox One and PS4, not to mention the way mobile apps are taking over. The path ahead is bright indeed.
Seasoned developers understand the importance of self-publishing. You need to look for this particularly, as you make up your mind to invest in game development. This is indeed an exciting time to be an investor.
Go right ahead and leave your comments. We are always pleased to know your thoughts and opinions on the subject. You can also drop us a line to discuss anything on investments or gaming in general.