Bolstered by robust growth expectations for the e-sports, the VanEck Vectors Video Gaming and eSports ETF (NYSEArca: ESPO) has been on fire for most of its short lifespan. ESPO, which debuted last October, is up 22.59% year-to-date.
As its name implies, ESPO is designed to provide investors with exposure to the e-sports phenomenon as well as the video game industry. The fund tracks the track the performance of the MVIS® Global Video Gaming and eSports Index (MVESPO). The index is a rules-based, modified capitalization weighted, float adjusted index intended to give investors a means of tracking the overall performance of companies involved in video gaming and eSports.
While growth estimates for e-sports are garnering plenty of attention, the global video game market is expected to expand at a rapid rate as well.
“The video games market will more than double to become a $300bn-plus industry by 2025, according to GlobalData,” a leading data and analytics company. “According to the company’s latest thematic report, ‘Video Games’, the market will grow from $131bn in 2018 to $305bn in 2025, at a compound annual growth rate (CAGR) of 13%.”
Not Just Fund And Games
ESPO components may include developing video games and related software, streaming services, and/or those involved in eSports events. To be included in the index, companies must generate at least 50% of their revenues from video gaming or eSports, which allows ESPO to have the highest concentration, among U.S.-listed ETFs, of pure play names participating in this fast-growing space.
Data suggest mobile gaming is expected to be a major driver of video game growth in the coming years.
“Mobile gaming has already outstripped the console games and personal computer (PC) games markets,” according to Global Data. “Over the coming years, with the increased maturity of cloud gaming technology (supported by 5G), more gamers will shift towards mobile gaming platforms, driving the expansion of this market to over $100bn by 2022, up from $55bn in 2018.”
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Evolving technologies, such as 5G and cloud computing, are expected to play significant roles in the expansion of mobile gaming.
“Latency and bandwidth limitations will serve as a brake on the development of mobile gaming services,” said Ed Thomas, Principal Analyst for Technology Thematic Research, at Global Data. “The maturing of cloud technologies and development of 5G will reduce these network issues, creating an increasingly competitive market in which several leaders have already emerged.”
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