Gaming: The future of EJINSIGHT social interaction

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The widespread and profound impact of COVID-19 on people’s daily lives has also had a major influence on global capital markets, with investors making a strong foray this year into themes such as’ working from home ‘and’ learning. at home ”, but one the topic that has been relatively neglected is“ entertaining at home ”, although it is becoming a big part of people’s hobby.

Video games are an interesting combination of not only “entertaining at home” but also “socializing at home”, and the video game industry is extremely large on a global scale. There are over 2.5 billion gamers in the world who spend over US $ 150 billion per year. Gaming as a form of entertainment is highly interactive, but also highly social. In today’s environment where it is difficult to meet friends at a restaurant or go out, gambling has been the perfect way to not only be entertained, but also to socialize and stay in touch with friends and family.

An interesting aspect of the game that could have real-world implications revolves around the concept of “metaverse”. This idea was first coined in the 1992 sci-fi book Snow Crash to describe a virtual reality-based internet with user-controlled avatars. The digital avatars you controlled also varied depending on your socioeconomic status and wealth, so it was essentially an extension of the physical world in digital format.

A recent example of this is portrayed in the movie Ready Player One, but the Metaverse, as it will evolve, will be more than just a virtual reality video game. There will certainly be elements of that, but it will be bigger than a game. Venture investor Matthew Ball expects there to be elements of persistence and real time. What is likely to happen is that as technology continues to advance, the metaverse will gradually evolve, where much of what is happening physically today will shift to a digital realm. There will be metaverse-type businesses first, just as there are smartphone-first businesses today.

In the video game space, Esports is also a very dynamic segment, with a lot going on. It takes a lot of skill to play these games and it’s also a lot of fun to watch, putting them on par with some of the same types of elements as traditional sports.

Esports has evolved over the years and some of the more popular games now include Counter-Strike, developed by Valve; League of Legends from Riot, which is owned by Tencent; and Activision Blizzard’s Overwatch. Each of these games has nuances, but what they have in common is that they have huge player bases, huge following, and they’re growing fast. For example, as one of the most popular Esports right now, League of Legends actually drew over a hundred million viewers in its last World Championship, more than the Superbowl in the United States. . This is how big, popular and global these Esports are.

Considering everything that is going on in the video game space, especially in the context of the ongoing global pandemic, the market appears to be undervaluing some of these companies. When you take a look at some of the top performing stocks since the onset of COVID-19 and put them in different compartments, the ecommerce industry and software makers have appreciated more than video game stocks, even though they own some of the same qualities that lead to outperformance. .

Video games are like mini social networks with sticky user bases. When you dig deeper into a typical video game business, it really is a software business. Games are created on software platforms, and game engines are very sophisticated software with complex math and physics, but video game companies don’t trade near multiples of software as a service companies ( SaaS) and there is probably room for a re-rate in this regard. It is high time for a more permanent power up!

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Sean Sun

Managing Director and Portfolio Manager at Thornburg Investment Management


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