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Video game industry goes for the win

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Capital Group investment professionals Nathan Meyer and Alan Wilson discuss their optimistic outlook for the multi-billion-dollar video games industry.

Key takeaways
  • Gaming is the fastest growing segment of the media and entertainment industry.
  • Smartphones are enabling a new generation of gamers around the world.
  • Leading companies are putting a focus on internet streaming and free-to-play games.

As a child growing up in Bettendorf, Iowa, Capital Group equity analyst Nathan Meyer had two passions: sports and video games. “There wasn’t much else to do in Bettendorf,” he says of the small, rural town about 170 miles west of Chicago.

Fast forward a few years and Meyer is now covering the video game industry as part of the broader media and entertainment landscape, tracking its rapid growth and the trends driving it.

“Video games make up the fastest growing segment of the $1.5 trillion global media industry,” Meyer explains. “Worldwide gaming revenue rose by an estimated 11% last year and, in my view, that kind of healthy growth trajectory should continue as interactive gaming becomes a more and more popular form of mainstream entertainment.”

Mobile drives growth
Indeed, gaming is rapidly moving into the mainstream as a wide variety of games become available on mobile devices. Even some graphics-intensive games can now be played on the latest smartphones, allowing users to enjoy the experience with or without an expensive gaming console or PC. In addition, the popularity of internet-streaming games and free-to-play games has opened the market to more gamers than ever before.

“It’s no longer just 15-year-old boys playing video games in their parents’ basement,” Meyer says. “This is a big business, and it’s attracting many types of players all over the world.”

Need more data? Consider these stats:

  • More than 164 million adults play video games in the U.S., according to a recent report by the Entertainment Software Association, and they spent about $43 billion on game-related purchases. The average age of a U.S. gamer is 33; 54% are male and 46% are female.

  • China is the world’s fastest growing video game market, with sales rising about 14% a year. China has 598 million gamers and roughly 95% of them play on mobile devices, according to a study by research firm Niko Partners.

  • There are far more people around the world watching eSports events — online and in-person video game tournaments — than watching the Super Bowl, according to data gathered by Statistica. And much like professional athletes, contestants in eSports events can earn millions in prize money and endorsements.