The Best Game Developer Stocks for 2023

The Best Game Developer Stocks for 2023

Game developer stocks came to the forefront of investors' minds during the 2020 coronavirus crisis. Many people spent a lot of time at the computer during the quarantine. This boosted the sales of gaming companies. Gainy often offers its clients exactly like Roblox IPO. In previous years, companies used the new potential of digitalization and technological innovation. However, in early 2021, the "coronavirus boom" ended again. Since then, the shares of game developers have been in a rather strong decline. However, this may soon change.

Shares of game developers have benefited from the coronavirus pandemic

Shares of game developers recovered relatively quickly after the initial price drop during the pandemic in February and March 2020. It quickly became clear to investors that lockdowns would lead to people spending more time at home. And that, to reduce their free time, they are likely to play games and spend time on social media. Either on a smartphone, or on a computer, or on a game console. And this assumption was confirmed. According to research, during the "hard" lockdown, video games were played by 75% more. This meant a significant increase in the revenues of gaming companies and led to an increase in the prices of game developers' shares. However, the euphoria subsided after the lockdowns ended.

Digitalization stimulates the online gaming boom

Online games and video games are one of the most popular leisure activities today. And not only among young people but also in other age groups. Gamers who want to immerse themselves in increasingly realistic virtual worlds, either alone or in teams, are increasingly subscribing to monthly or annual subscriptions.

The profitable and easily scalable business model of game providers is based on software that is offered for download online. This is done via streaming or the cloud. Games can now be played on all devices with an internet connection (computers, game consoles, laptops, tablets, and smartphones). These are virtual reality glasses that you can play with in three-dimensional space. Characters can be intuitively controlled using gestures. Currently, all major gaming companies are developing their own VR headsets.

Up to 90% of game sales are carried out in a digital format

For a long time, the main distribution channel for the gaming industry was the sale of media (DVD, CD-ROM) through retail or online stores. They have been overshadowed by digitalization and now play only a marginal role. The development is comparable to video rental stores.

Game providers bypass retailers to increase their profits. In addition, they generate recurring revenue through subscription models. Researching the market and specializing in online games and e-sports, she predicts that more than 90% of all game sales are now made digitally.

Purchases for game upgrades and bonuses: microtransactions bring high additional revenue

But that is not all. Players of modern video games can purchase a variety of in-game upgrades and bonuses. Usually, these are special abilities and equipment for the game character. Players can end up spending many times more on additional features and upgrades for a game that costs between 50 and 100 euros. Thus, these microtransactions and purchases have become an important source of revenue for the gaming industry. 

Since it is up to each player to decide how much time and money to invest in the game world, the gaming community mostly accepts this business model. In many cases, basic versions of games are even offered for free download, so the potential revenue comes solely from in-game purchases.

Global gaming industry revenue in 2022: More than $200 billion

  • Nearly 2.9 billion people worldwide currently play video games at least occasionally. 
  • The 3 billion mark is expected to be crossed as early as this year. 
  • For 2022, analysts predict global gaming revenues of approximately USD 203 billion, up +5% from the previous year and looking it growing in 2023.
  • The largest gaming market is in the US. And with a volume of approximately USD 51 billion. China follows with USD 50 billion. 
  • China has by far the most active gamers (more than 660 million). 

Overall, the global gaming market (including hardware) is expected to reach a whopping US$223 billion by 2024.

Mobile game revenues will reach $103.5 billion.

  • Smartphone and tablet games account for the largest share of sales by segment. They now account for almost half of the total volume and are growing strongly, especially in Asia. 
  • In populous countries such as China, India, or Indonesia, PCs and consoles are not yet widespread. Games are mainly played on widely used smartphones. 
  • It is estimated that the growth of mobile games is twice that of traditional PC and console games. We predict that sales in this sector will reach $103.5 billion.

The growth of the entire sector is estimated to be around 10% per year in the coming years. Specialized sectors such as virtual reality, augmented reality, and e-sports (organized competitions between individual players or teams) are also contributing increasingly. 

  1. Global eSports sales are expected to reach USD 1.4 billion in 2022 and high growth expected in 2023. 
  2. The annual growth rate is expected to be approximately +25% until 2025.

A particularly fast-growing trend is games for educational and learning purposes. These have become particularly important during the coronavirus pandemic. Educational curricula are often supplemented with game elements. For example, the user receives a digital reward for reaching a level or has to compete virtually with other players.

Game engines allow the creation of online games

So-called game engines are becoming increasingly popular. These are computer game development platforms that control the flow of the game and are responsible for the visual 2D or 3D representation of the game. Professional game developers can use them to create and sell their own games. The most popular 3D engines include CryEngine, Frostbite, Unity Engine, and Unreal Engine. In addition, platforms such as Roblox offer users the ability to create their own computer games using the Roblox Studio engine and offer them to other users for free or for a fee. Games created using the engines are increasingly competing with major game publishers. These include companies such as Unity Software and Roblox.