In looking for new investing opportunities, it is often difficult to separate the fads of the moment from those with true growth and profit potential. In the area of video gaming, failures and successes have both been recounted, but overall analysts consider this industry recession-proof. [1]
So, what is driving this thriving industry? After all, as quickly as consumer tastes change and the new becomes stale and boring, how do you know if this is really an area of good return on your investment?
Consider a report by PricewaterhouseCoopers (PwC) which projects growth in the video game industry to reach as high as 19 percent. Global sales are projected to grow from US$41.9 billion in 2007 to US$68.3 billion in 2012. Online and wireless games are showing the most promise at 16.9 percent and 19 percent, respectively.
More specifically, the Asia-Pac region offers significant promise in online gaming. Broadband penetration is on the rise, which will help to drive online gaming in general, especially in China. Throughout the region, PwC expects that online games will grow at a 13.3 percent CAGR to reach $5.6 billion in 2012. [2]
Now that you know the projections, it’s time to look at why these numbers are so strong. Much of the opportunity lies in casual gaming, which is readily available through broadband connections and wireless mobile from a variety of sources. These games are designed to appeal to a general and wide audience and they are easy to learn and play. [1]
The video game market has long been dominated by the enthusiast-focused games that draw in very dedicated players willing to spend a lot of money. But, from a developer’s standpoint, this area is harder to break into as it requires significant investments of time and capital. The opposite is true for casual games, creating the opportunity for high profit margins. This eliminates certain barriers to entry, opening up the market for new developers, such as those in Hong Kong.
Hong Kong offers an exciting and rapidly growing video game market. While demand is strong and growing, there are still only about 20 active video game developers in the region. [1] With the right investments, this number could easily grow to accommodate demand and generate a strong return.
One entrepreneur recognized the wealth of opportunity in Hong Kong and established the headquarters of his company there in 2003 while focusing on a global audience. Christian Heilesen, CEO of Funmobile Ltd., answered six questions on HKTDC regarding Hong Kong, the potential for the gaming market and why his company, which markets and distributes mobile and online entertainment products and services in 30 countries, hasn’t been impacted by the sliding global economy.
According to Heilesen, the quality of the talent in Hong Kong is strong and the pool offered is much bigger compared to other places in the Asia-Pac segment of the world. When you combine the wealth of available talent with the low cost of operation and the emerging gaming market in Hong Kong, Funmobile is in a prime location to ride the anticipated growth.
But, aside from its location, the industry in which Funmobile competes offers significant protection against the rise and fall of the economy for a couple of reasons. For one, it markets small-ticket items that are affordable even in a recession. Second, it targets the under 30 crowd with disposable income – a steady stream of revenue.
Heilesen pointed out another promising aspect in this market. Getting started in mobile and online entertainment and gaming requires smaller capital investments than other ventures, offering opportunities for new angel investors who want to venture into this industry. And, because the business is done through broadband and mobile connections, it doesn’t have to rely on customers physically walking into a store. [3]
As broadband and mobile penetration continues to grow throughout the world, the number of consumers that can be reached with gaming options will only increase, offering significant growth for those companies that can appeal to this wide base. True, not every game will appeal to every consumer, but a good mix of options can trigger interest in nearly every market. With this kind of promise, what can you really lose?
Notes:
2. Global Entertainment and Media Outlook: 2008 2012
* For series, references are published in the last installment of the series.
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