Is the Gaming Industry an Attractive Proposition in 2023?

Gaming has had another strong year in 2022. Console sales continued to increase throughout the year, despite shortages of chips. Meanwhile, microtransaction revenues also remained on their upward trajectory as more players purchased increasing amounts of in-game content. We also saw online casino games stay as a firm favourite, helped in part by sites like oddschecker that list the many bonus offers which new players can claim for signing up and making a deposit. 

In the financial markets, gaming companies did not see the same bumper share price gains as we had seen in the previous few years. But investors can’t be too upset by that given that almost every sector suffered losses as sentiments changed to a more bearish outlook. 

But as any financial advisor will tell you, past performance is not a guarantee of future results and, therefore, looking only at 2022 is not going to give you an accurate picture of what to expect in 2023. 

Of course, no one has a crystal ball, so predictions and forecasts can never be relied upon entirely, but they can be helpful in getting a better understanding of the overall direction of travel. So, with that in mind, let’s examine what the gaming industry has in store for investors over the next 12 months. 

The Easing of the Chip Shortage

The last few years have seen the gaming industry suffer at the hands of global shortages of silicon microchips. These chips are used in almost every industry and have affected a large number of different areas of the economy, including white goods, cars, and computers. 

It has also meant that gamers have found it a struggle to get their hands on new hardware to enjoy the latest titles on. Both PC and console owners have suffered at the hands of this breakdown in inter-continental supply chains as graphics cards and new consoles have been in short supply. 

For manufacturers like Sony and NVIDIA, this has been a double-edged sword as it has meant that sales volumes have been down but they’ve not felt the need to lower their prices by as much or as soon as they would normally, as their products aged. 

For example, the PlayStation 5 continues to be sold at the full launch price, despite being two years old now. In contrast, the PlayStation 4 was selling at a discount of almost 50% by this point in its lifecycle. 

It’s likely the easing of the chip shortage will have a negative effect on prices but this may be offset by the general upwards trend of prices overall. Therefore, companies could enjoy a bumper year as supply begins to meet demand while overall prices remain roughly static. 

For investors, this could be positive, but you’d need to examine the other elements of their businesses too. 

Even More In-Game Monetization

There’s no getting away from microtransactions; they’ve worked their way into almost every game released in the last few years. They started out in Elder Scrolls IV: Oblivion but were popularized by free-to-play titles like Farmville in the late 2000s. They were then quickly adopted by developers of larger paid-for games like Call of Duty and Forza. 

Over time, publishers big and small have found more creative ways to add purchasable content to their games, including AAA blockbusters. 

In the last few years, many big games have been converted to free-to-play to take advantage of this trend, with notable examples including PUBG and CS:GO. At the same time, Activision has created dedicated free-to-play versions of its popular Call of Duty franchise while Take-Two has run promotions to give away Grand Theft Auto V for free for short periods to encourage more players onto its GTA Online platform where they can make digital purchases. 

Microtransactions are much more profitable than other forms of monetization and, therefore, publishers who can derive more of their revenues from them can create more value for shareholders. 

As we travel through 2023, we’re only going to see more of this, which could be an opportunity for investors. 

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