Can the digitisation of gaming encourage strong returns for Private Equity?

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The gaming industry has been no stranger to technological disruption. Innovations such as Virtual Reality (VR) and mobile gaming have propelled valuations of this industry with research firm Juniper Research anticipating nearly $132 billion of value by 2021. Gaming has permeated so many arenas that it is now the highest searched category on YouTube with two of the most subscribed channels being gaming related.

Unsurprisingly, much of the anticipated growth is set to occur in Asia, with China leading the charge. Research company Statista noted that the Chinese gaming industry surpassed the American gaming industry by $7bn for the first time in 2017, and the Asian gaming research company Nico Partners valued the Chinese gaming market at $42bn by 2022. Indeed, investors are aware of the strong commercial opportunities in gaming. Finance houses have sought to capitalise on these changes with Goldman Sachs reportedly investing $200m in French mobile video game maker Voodoo, and Sycamore partners apparently in talks to acquire struggling retailer Games Stop.

Although industry analysts have evaluated the industry using financial data, little insight has been derived using digital information. So what can digital data tell us about the key drivers of this growth, if any, and how can investors effectively use this insight to leverage these opportunities? Using onefourzero‘s search demand and social media data we were able to test some of the market assumptions regarding the growth of this industry.

Consumer migration to mobile is core to the projected upward trend in gaming. No longer confined to pricey consoles, consumers are now able to game everywhere at their convenience. We analysed the top 100 gaming related websites and data indicated over 53% of consumer activity occurred on desktop. This is an important insight because it illustrates that, outside of in-app gaming, consumers are still using desktops to access games and related information. Investors seeking to reach consumers in this populated market cannot afford to dismiss the importance of desktop which many analysts have judged as slowly redundant in the games market.

Further to mobile adoption, another disruptive force that has been expected to propel this industry is the demographic shifts. The introduction of mobile gaming apps has radically changed the demographic makeup of gamers, with the average gamer no longer considered the teenager with idle time but also working age commuters and pensioners alike. Using onefourzero data, we analysed over 4 million social media conversations related to console, app store and play store games, and the digital data strongly supports this market assumption. In fact, consumers of all ages are engaging with gaming – interestingly, over 35s are significantly overrepresented in the category. For businesses wishing to invest in the games market, this demographic dividend is welcome news.

Along with demographics, broader technological innovations in immersive gaming have come to the fore. Initial attempts at 3D gaming have largely failed to gain consumer traction as highlighted by Nintendo President Satoru Iwata. However, virtual reality is expected to significantly influence gaming consumers. Tech giants companies such as Samsung, Facebook and Google have recently brought to market a number of virtual reality headsets over the last year.

Using onefourzero data, we were able to test consumer demand for virtual reality products over the last three years. Data indicated that between 2016 and 2017, consumer demand for VR gaming products evidenced a sharp increase of 77%, but between 2017 and 2018 the demand for these products fell by 29%. While these findings do suggest that the initial consumer speculation has declined over the past year, market demand is still higher than it was in 2015.

For many investors, gaming may represent an unchartered territory. However, digital data has evidenced that demographic shifts alongside the rapid expansion of gaming technology have significantly expanded the scope to maximise. The future of the gaming market is largely positive, but investors who wish to enter this market should leverage digital data to better understand market growth, consumer demand and strategic navigation.

To find out more about how onefourzero’s data analysis and insights can help you identify opportunities for growth and potential risks, click here or contact