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A Thorough Guide to Video Gaming ETFs

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The coronavirus pandemic has lent a push to the video gaming industry as people stayed indoors and switched over to in-house entertainment sources. It also seems like the boom in the video gaming space may remain in the post-pandemic era as the outbreak has changed the lifestyle and preferences of Americans to a large extent.

Video Gaming Industry Thriving Amid Pandemic

It seems like there is no stopping video game players, with the health crisis forcing people to stay at home. According to a report from The NPD Group, total consumer spending on video gaming in the United States continues to soar as it registered a 26% year-over-year rise to $18.6 billion in the fourth quarter of 2020. For the pandemic-stricken 2020, consumer spend across all categories within the U.S. games industry came in at $57 billion, climbing 27% from 2019.

Notably, digital console and PC content, mobile and subscription spending as well as across hardware and accessories categories witnessed significant traction in 2020.

Going on, there was a 23% rise in content spending in the fourth quarter of 2020 to $14.5 billion. Meanwhile, for the full year, content spending came in at $49 billion, up 26% year-over-year increase. Hardware and accessories also witnessed double-digit increase for the quarter and 2020, climbing 47% and 15%, respectively, in the fourth quarter, and 35% and 22%, respectively, for the last year, per The NPD Group report.

The best-selling and most played games in the fourth quarter were Among Us, Animal Crossing: New Horizons, Assassin’s Creed: Valhalla, Call of Duty: Black Ops Cold War, Candy Crush Saga, Cyberpunk 2077, Fortnite, Grand Theft Auto V, Minecraft, NBA 2K21, andPokémon Go, per the same report.

Commenting on the industry, Mat Piscatella, games industry analyst at The NPD Group, reportedly said that “growth across almost all gaming segments drove the market to record spending in both the fourth quarter and the year. Video game content growth was led by mobile, both the biggest and fastest growing segment, while console, PC and other segments such as cloud gaming also experienced significant increases,” as mentioned in the report.

How Are Key Players Performing?

Activision Blizzard (ATVI - Free Report) is a leading developer and publisher of console, online and mobile games. Its Call of Duty is one of the most popular gaming franchises globally. The company is seeing an expanding user base for Call of Duty (COD), Hearthstone, World of Warcraft and King's franchises. This is expected to boost in-games spending, thereby driving net bookings and top-line growth in the near term. Markedly, the COD franchise has enjoyed an 80% year-over-year rise in net bookings in 2020 and a 40% increase in total units sold. In December 2020, Activision revealed that the COD franchise’s net bookings have surpassed $3 billion over the past year. Call of Duty: Mobile, developed in collaboration with Tencent (TCEHY - Free Report) , has played an important part in driving user count. Moreover, more than 200 million people have played a title in the series so far this year, setting an all-time record. Additionally, the success of World of Warcraft: Shadowlands, which has become the fastest-selling PC game, is a key catalyst.

Zynga Inc. is a leading developer, marketer and publisher of social game services. Its gaming portfolio includes CSR Racing 2, Empires & Puzzles, FarmVille, Merge Dragons!, Words With Friends, Mafia Wars, Zynga Poker and Treasure Isle. Meanwhile, Nintendo Co. (NTDOY - Free Report) is a worldwide leader in the creation of interactive entertainment. It manufactures and markets hardware and software for its popular home video game systems, including Nintendo 64 and Game Boy. The company stole the show in 2020 with its Switch turning out to be the bestselling console.

Video Game ETFs to Keep Shining

It seems that the first half of 2021 will continue to bear the brunt of the coronavirus outbreak as the number of cases continues to rise. Going by a Statista report, revenues in the Video Games segment are expected to reach $154,630 million in 2021. According to the same report, revenues are expected to see a CAGR of 9.3% between 2021 and 2025, leading to a market volume of $220,549 million.

Against this backdrop, investors can take a look at the following video gaming ETFs:

The Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD - Free Report)

The fund is designed to offer investors exposure to esports & digital entertainment by providing investment results that closely correspond, before fees and expenses, to the performance of the Roundhill BITKRAFT Esports Index. It holds 35 stocks in its basket. Top gaming companies like Activision Blizzard and Tencent have spots in the first 10 holdings. With AUM of $89.3 million, the fund charges 50 basis points in expense ratio. It trades in three-month average volumes of about 51,000 shares (read: Sports Betting ETFs, Stocks to Surge on More Legalization).

VanEck Vectors Video Gaming and eSports ETF (ESPO - Free Report)

The fund seeks to replicate, as closely as possible, before fees and expenses, the price and yield performance of the MVIS Global Video Gaming and eSports Index, which is intended to track the overall performance of companies involved in video game development, esports, and related hardware and software. It holds 25 stocks in its basket. Top gaming companies like Tencent, Nintendo and Activision Blizzard have spots in the first 10 holdings. With AUM of $839.9 million, the fund charges 55 basis points in expense ratio. ESPO trades in three-month average volumes of about 171,000 shares (read: ETF Areas Thriving During Coronavirus Pandemic).

Global X Video Games & Esports ETF (HERO - Free Report)

The fund seeks to invest in companies that develop or publish video games, facilitate the streaming and distribution of video gaming         or esports content, own and operate within competitive esports leagues, or produce hardware used in video games and esports, including augmented and virtual reality. It holds 40 stocks in its basket. Big gaming companies like Nintendo, Activision Blizzard and Zynga are in the top 10 holdings. With AUM of $731.2 million, the fund charges 50 basis points in expense ratio. It trades in three-month average volumes of about 283,000 shares (read: 5 ETFs to Pick as Coronavirus Cases Continue to Soar Globally).

Wedbush ETFMG Video Game Tech ETF (GAMR - Free Report)

The fund provides pure-play and diversified exposure to a dynamic intersection of technology and entertainment. It also corresponds generally to the price and yield performance of the EEFund Video Game Tech Index. The index is designed to reflect the performance of companies involved in the video game technology industry, including game developers, console and chip manufacturers, and game retailers. It holds 92 stocks in its basket. With AUM of $174.4 million, the fund charges 75 basis points in expense ratio. GAMR trades in three-month average volumes of about 43,000 shares (read: 5 Sector ETFs That Outperformed in a Volatile January).

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