With the announcement that Netflix is moving into video games, the crucial role of the US technology giants known as the FAANNGs – Facebook, Apple, Amazon, Netflix, Nvidia, Google – in supporting gaming is coming under the spotlight.
Investors are often surprised to learn how large the video games industry is. According to data from research house IDC, the video games industry now generates more revenue than movies and North American sports combined. What is more: the video games industry is growing faster than film and sport, with help from both covid-19 and the uptake of smartphones.
COVID-19 fuels global surge in videogame revenue
The FAANNGs are some of the most important companies in the video games industry, forming a surprising large part of their businesses. Below we go through each.
Facebook has recently allowed gamers to stream their games on Facebook Live. According to the company, each month more than 700 million people play, watch, or engage in gaming groups on Facebook.
Twitch, from Amazon, is the main video games streaming platform, which allows professional video game players (“esports”) to monetise their audiences. Meanwhile Amazon’s online shop sells more video games than almost anything else.
Total active streamers on Twitch by months (thousands)
Source: Business of Apps, March 2021
Apple makes 70% of its app store revenue from video games. As more gaming moves onto smartphones Apple is well positioned to capture larger market share.
iOS gaming app revenue (billions)
Source: Business of Apps, July 2021
Nvidia’s graphics cards are the engine behind gaming consoles and PCs. The company started out in the 1990s building graphics cards for gamers. It has become a larger and more diversified business since, but video games remain the core of its business.
Netflix has made producing video game-related content a core part of its strategy. To this end, it has created TV series based on video games such as The Witcher, Dota and Castlevania. Mass Effect is reportedly on the way. The company recently announced it was adding video games to its platform.
Google, like Apple, makes two-thirds of its Android app store revenue from video games. In addition to smartphones, Google also runs YouTube, which holds a vast repository of video gaming guides and eSports highlights. It also runs Stadia, a large video games platform and potential competitor to Steam.
More diversified than game developers
It is sometimes suggested that the best way to invest in video games is to buy video games developers, or funds that focus on them. The big-name developers include Nintendo, (Zelda, Mario, Smash Bros), Sony (God of War, Spider-Man, Unchartered), Activision Blizzard (Overwatch, World of Warcraft, Call of Duty), Take Two Entertainment (Grand Theft Auto, Red Dead Redemption) and Electronic Arts (The Sims, FIFA, Star Wars).
CD Projekt’s share price since Cyberpunk