(Bloomberg) – Netflix Inc. Subscriber Win earlier this year many were ready to crown it as king of quarantine. Instead, it is the video game industry that claims the throne.
The Solactive Video Games and Esports index has won 77% since the start of the U.S. state lockdowns in March, while Netflix rose 44% in the same period. And returns on exchange-traded funds through video games have totaled more than 50% revenue this year.
“Video games and esports are the true champions,” said Pedro Palandrani, a research analyst at Global X Management Company LLC, an investment firm that manages HERO, a video games and esports ETF that has seen a 51% return this year.
Palandrani expects the sector to flourish, even after the initial bump of home stays. “This is something that will continue for years to come,” he said.
Electronic Arts Inc., the publisher behind Apex Legends and Madden NFL, recently reported record sales on tens of millions of new player sign-ups. Activision Blizzard Inc. and Take-Two Interactive Inc. also saw strong results. This all comes before pre-holiday releases of new consoles from Sony Corp. and Microsoft Corp., which are expected to add fuel to the gaming fire.
However, some investors shrugged off the sector. Bloomberg Intelligence calculated that while cloud computing ETFs had an average return of 49% this year – among gaming ETFs 56% – they have seen total inflows that are eight times greater.
“It’s strange to me that video games are being ignored by advisors,” said Eric Balchunas, an ETF analyst at Bloomberg Intelligence. “The numbers are there.”
He said he was surprised that financial advisers for baby boomers “do not know how big it will get” from seeing children in their families.
Palandrani warns that some investors these days may not be aware of how broad and dynamic online games are and the ways to complement or replace other forms of social media.
“These behaviors are sticky,” Palandrani said. “As video games continue to reach their audiences and add extra features, it appears to be potentially the next generation of the Internet: a metaverse filled with millions of users participating in a truly viable virtual reality.”
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