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Game On: How To Access Exciting Video Game Trends

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Game On: How To Access Exciting Video Game Trends

Video games is one of the fastest-growing forms of entertainment in the world and exchange traded funds, such as the Roundhill BITKRAFT Esports & Digital Entertainment ETF (NYSE: NERD), stand ready to satisfy investors' appetites for that growth.

What Happened

NERD, which debuted in June, follows the Roundhill BITKRAFT Esports Index. That index hones in on not just video software makers, but hardware producers and the booming esports theme, including companies such as as “video game publishers, streaming network operators, video game tournament and league operators/owners, competitive team owners, and hardware developers.”

Knowing that the video game and industries are growing is one thing. Understanding what's powering that growth is another, and NERD makes the job easy for investors, putting them at the forefront of some exciting trends.

Why It's Important

“The first area of interest is the ongoing Netflix-ization of the video-game space in terms of subscription models,” Morningstar said in a recent note. “The all-you-can-eat model has come to the video-game space in the last five years, as companies like Microsoft, Ubisoft, and EA have all introduced plans over this time period.”

NERD holds 25 stocks with a median market value of $4.8 billion, putting the video game ETF at the lower end of mid-cap territory and underscoring its growth feel. Software and hardware makes combine for 62.5% of the fund's weight. Two of the fund's top three holdings are Turtle Beach Corp (NASDAQ: HEAR) and Activision Blizzard, Inc. (NASDAQ: ATVI).

Importantly, NERD also features some exposure to cloud gaming, which along with esports, is expected to be a major growth driver for the video game industry in the years ahead.

“In cloud gaming, the rendering and processing of the game is done on a server and then uses a local client to upload the game, versus consoles and PCs, where everything is done in the home itself,” said Morningstar. “Google is launching its Stadia service in November, an attempt to replace the console and gaming PC in the home.”

What's Next

Data confirm robust industry growth expectations.

“Video gaming market of $152 billion in 2019, and is expected to grow at an estimated 9% per year from 2018 – 2022,” according to Roundhill. “By 2022 the global video game market is expected to surpass $190 billion in revenues.”

Adding to the importance of 2022, by that year, esports viewership could rise to 645 million, up nearly 50% from this year's expected levels.

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