More than a game: UK gaming stocks are worth a closer look
John Baker, portfolio manager for the JPM UK Dynamic Fund, looks at the video game market, and the opportunities for investors.
Gaming is a serious business. In 2017, global video game revenues overtook global TV revenues for the first time, having grown at a compound rate of 13% since 2013.
While the US and Asia both have a concentration of games publishers, the UK remains Europe’s largest gaming hub and an important global player. “The UK’s games industry is one of the fastest growing, most cutting edge in the world, home to 2,255 games companies in 2017”, according to Department for International Trade official, Ross Allen.
Tap into an explosion in demand
This growth is set to continue. The easy availability of gaming devices, the development of cloud computing platforms and increasingly fast digital delivery is contributing to an explosion in the number of consumers playing games. UK gaming companies, which support more than 33,000 British jobs, are tapping into the sector’s rapid growth while also taking advantage of UK government programmes designed to boost the industry, such as the Video Games Tax Relief scheme.
Investors can access the growth potential of the industry through several quoted companies, such as Team17, Codemasters, Frontier Developments and Keywords Studios. These companies are behind some of the biggest and most well-known games franchises of recent years.
Cutting edge gaming companies
Take Team17, for example, which is one of the longest-running independent video games companies. Best known for creating the tactical-based artillery game series, Worms, Team17 is currently helping independent creators bring their games to market by giving them access to its games studio and commercial team. In return for this support, Team17 earns a share of the revenue for games released under its label.
Codemasters, meanwhile, specialises in racing games and holds exclusive licencing rights for Formula 1 titles. F1 2017 is the highest rated racing game on PlayStation 4. With 500 employees, Codemasters is one of the largest independent racing-focused gaming studios in the world.
Frontier Developments is the developer behind Jurassic World Evolution, which was launched in June 2018 following the release of the movie. The company has 20 years of experience in developing and publishing gaming titles, including Elite Dangerous and Planet Coaster.
Keywords Studios partners with developers and publishers to provide technical services to the video games industry. Developers are increasingly looking to use specialist providers in the same way as the automotive industry moved from a production model where all car components were manufactured in-house in the early 1900s, to a business today where many inputs, such as tyres, windows, seats, are outsourced.
Opportunities for investors
The UK has established a formidable presence in the global gaming industry, boasting some of the world’s leading games designers and publishers. With gaming revenues expected to continue to grow at a strong pace for many years to come, the UK market provides investors with several attractive quoted investment opportunities to gain exposure to this fast growing industry.
John Baker is a portfolio manager for the JPM UK Dynamic Fund. Find out more>
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