US equities Everything you wanted to know about video games but were afraid to ask Chief Investment Office GWM | 23 April 2019 7:24 pm BST Robert Samuels, Consumer Discretionary and Media Analyst Americas,
[email protected]; Reid Gilligan, Equity Associate Analyst Americas,
[email protected] • Although growth is slowing, the video game market continues to expand driven by macro tailwinds, new titles and in-game expenditures. • Mobile devices eclipse consoles and PCs as the primary tool for gaming. • Revenue model is in flux with the rise in popularity of free- to-play games like Fortnite. • Subscription gaming services and cloud gaming are likely to Fig. 1: 2018 video game revenue by region disrupt the industry over the next several years. Latin America Europe, 4% Middle East & Africa The video game industry has seen explosive growth over the past 22% few years driven by favorable demographics, a growing addressable market, improving product quality, and faster internet speeds. Asia-Pacific We expect these trends to continue although competition within 49% the space, and for share of the consumer's wallet and time, is likely to make share gains for individual game publishers more challenging. Furthermore, the popularity of free-to-play games such as Fortnite has altered the industry's revenue model, which creates North America both opportunity and risk for game makers. 25% Before jumping into some of the most frequently asked questions Source: Newzoo, UBS around gaming, there are several macro trends to understand that help expand the landscape. The success of current video games relies on fast and dependable network speeds as more consumers are playing online.