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Content Spree Could Lift This Video Game ETF

January 24, 2020 12:20 pm
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Content Spree Could Lift This Video Game ETF

It's often said that content is king. It is indeed royalty in the video game space, underscoring what's already a well-heeled thesis for exchange traded funds such as the Roundhill BITKRAFT Esports & Digital Entertainment ETF (NYSE:NERD).

NERD, which debuted last June, follows the Roundhill BITKRAFT Esports Index and does one of the better jobs of melding the esports and video game concepts under the umbrella of a single fund.

“The Index consists of a modified equal-weighted portfolio of globally-listed companies who are actively involved in the competitive video gaming industry,” according to Roundhill. “This classification includes, but is not limited to:video game publishers, streaming network operators, video game tournament and league operators/owners, competitive team owners, and hardware companies.”

Why It's Important

Top 10 holdings in NERD's underlying index include well-known content purveyors, such as Activision Blizzard (NASDAQ:ATVI), Electronic Arts (NASDAQ:EA) and Take-Two Interactive (NASDAQ:TTWO). That exposure is important at a time of growth for gaming content.

"U.S. video game content generated $35.4 billion in revenue in 2019, a 2 percent increase over 2018," according to data published Thursday by the Entertainment Software Association (ESA) and The NPD Group.

In a bright spot for NERD, an ETF that allocates 40.1% of its weight to game makers, are data suggesting consumer spending on gaming is on the rise.

“Consumer spending on entertainment software increased in 2019, driven by the expanded reach and accessibility of content across a variety of platforms including console, PC, mobile and virtual reality,” said Mat Piscatella, industry analyst at NPD Group. “2020 is expected to be a year that sets the stage for the next period of rapid spending growth for video game content. New hardware, subscription, and cloud gaming offerings are poised to give players even more options to engage with gaming content wherever, whenever and however they wish.”

What's Next

With esports and gaming poised to be disruptive, transformational themes for years to come, NERD isn't just a traders' ETF. It can be useful for investors looking for a long-term, tactical play on disruptive technologies.

“As new platforms and technology continue to reach more players across the country, we expect 2020 to be yet another exciting year of engaging content and innovation as video games cement their place as the leading form of entertainment in America,” said ESA President and CEO Stanley Pierre-Louis.

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