Metaverse Gaming: Time for Investors to Play?
January 14, 2022
Read Time 4 MIN
What’s in store for investors in the video gaming industry in 2022? We review some of the major themes and companies that drove performance in 2021, both good and bad, and discuss potential breakout areas for 2022. In particular, we discuss why we believe mobile and metaverse gaming are the segments to watch this year.
2021 Top Themes and Contributors from Mobile to Metaverse Gaming
Semiconductor stocks with high exposure to gaming were the biggest contributors to positive performance in 2021. NVIDIA (9.1% weight) contributed over 7% to portfolio performance, and Advanced Micro Devices (7.7% weight) contributed approximately 3.8% to portfolio performance. High demand for semiconductors from a range of industries, combined with supply chain disruptions linked to the COVID-19 pandemic, have led to semiconductor stock outperformance in the past two years.
Mobile and emerging markets-focused companies also helped to boost performance in 2021. Sea Limited (6.9% weight) contributed 1.9% to portfolio performance, as the company continued to enjoy the benefits of a massively popular mobile game focused solely on emerging markets consumers. Sea Limited announced the game had a record high of over 150 million daily active users in the second quarter of 2021. (source: Sea Limited Q2 2021 Results). Despite a primarily Chinese userbase, NetEase (5.2% weight) was also a top performer, contributing 0.7% to index performance.
Metaverse-focused gaming companies came into focus in the second half of 2021; leading companies also boosted performance. Roblox (2.4% weight) and Unity (4.6% weight) each contributed approximately 0.7% to portfolio performance. Both companies went public relatively recently, and despite remaining unprofitable throughout the year, investors benefitted from their massive userbase (Roblox) and widespread use of development tools (Unity).
Video Gaming Companies Performance Leaders
| Company | Theme | Index Weight (%) | Total Return (%) | Contribution To Return (%) |
| NVIDIA | Semiconductors | 9.1 | 125.5 | 7.2 |
| Advanced Micro Devices | Semiconductors | 7.7 | 56.9 | 3.8 |
| Sea Ltd. | Mobile and Emerging Markets | 6.9 | 12.4 | 1.9 |
| Roblox | Metaverse | 2.4 | 25.0 | 0.7 |
| NetEase | Mobile and Emerging Markets | 5.2 | 7.1 | 0.7 |
| Unity Software | Metaverse | 4.6 | -6.8 | 0.7 |
Source: Factset as of 12/31/2021. Returns reflect MVIS Global Video Gaming and eSports Index returns from 12/31/2020 - 12/31/2021. Past performance is not indicative of future results.
2021 Bottom Themes and Detractors
Companies dependent on Chinese gamers suffered in 2021. Nexon (3.9% weight) contributed the most to negative performance for 2021, down -37% and contributing -1.9% to the portfolio. Nexon obtains approximately 27% of its revenues from China, and the stock fell dramatically on fears the company would not be able to get new games approved in China. (source: Bloomberg News)
Tencent (7.5% weight) contributed -1.6% to performance, and Bilibili (4.7% weight) contributed -1.5% to performance. Both companies are Chinese-based and suffered under the prospect of a more restrictive environment for Chinese internet and gaming companies.
Other companies fell due to post-pandemic growth issues or because of idiosyncratic single-game risk. After a year of outstanding growth in 2020, Nintendo’s (5.7% weight) growth prospects fell in 2021, resulting in a year of negative stock returns. Nintendo fell -24.4% for the year and contributed -1.7% to the portfolio. Korean-based NCsoft (3.8% weight) contributed -1.7% to negative performance, after its much-anticipated “Blade & Soul 2” was released to poor critical and user-reviews.
Video Gaming Companies Performance Detractors
| Company | Theme | Index Weight (%) | Total Return (%) | Contribution To Return (%) |
| NEXON | China | 3.9 | -37.2 | -1.9 |
| Nintendo | Growth cool-down after 2020 | 5.7 | -24.4 | -1.7 |
| NCsoft | Idiosyncratic game risk | 3.8 | -36.1 | -1.7 |
| Tencent | China | 7.5 | -19.2 | -1.6 |
| Bilibili | China | 4.7 | -45.9 | -1.5 |
Source: Factset as of 12/31/2021. Returns reflect MVIS Global Video Gaming and eSports Index returns from 12/31/2020 - 12/31/2021. Past performance is not indicative of future results.
What’s in store for 2022?
Mobile gaming will continue to dominate gaming revenues. According to Newzoo, mobile gaming accounted for more than 50% of gaming revenues in 2021, and that trend is expected to continue. We believe companies that focus on emerging markets mobile consumers (ex-China) will have longer growth runways than companies focused on non-mobile consumers in developed markets.
M&A activity will continue at a high rate. In the last few years, M&A activity has been driven by the need to break into the mobile gaming space, or conglomerates positioning for the coming cloud wars. We expect these two driving forces to continue to drive M&A activity into the foreseeable future.
Metaverse platforms and events continue their soft rollout. The metaverse hit the mainstream in 2021, with a Facebook rebrand and a massive spike in interest in what defines the metaverse, and how to invest in it. While a fully-realized metaverse is years away, we expect to see more companies devote resources to developing its potential.
Crypto and digital assets become more integrated into traditional video gaming. Crypto gaming ecosystems exploded in popularity in 2021. Crypto gaming combines elements of gaming and finance, allowing players to earn crypto tokens by playing a game (also known as play-to-earn). Non-fungible tokens (NFTs) should also see more integration in 2022, and we expect a major game publisher to successfully launch an NFT ecosystem that can allow players to buy and sell their digital assets to others.
Video Gaming and Esports: Taking Media and Entertainment to the Next Level
Access the opportunity
Consider the VanEck Video Gaming and eSports ETF (NASDAQ: ESPO) when positioning your portfolio to include video gaming and esports companies.
- Video gaming and esports supported by global demographics trends and tech innovation
- Mobile gaming, new business models and esports have helped propel industry to forefront of media and tech entertainment
- Companies must derive at least 50% of total revenues from video gaming and/or esports to be initially eligible for the Index
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Important Disclosures
Source: VanEck; Factset
All company weightings as of December 31, 2021.
Nothing in this content should be considered a solicitation to buy or an offer to sell shares of any investment in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction, nor is it intended as investment, tax, financial, or legal advice. Investors should seek such professional advice for their particular situation and jurisdiction.
This is not an offer to buy or sell, or a solicitation of any offer to buy or sell any of the securities mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. Information provided by third-party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. Any opinions, projections, forecasts, and forward-looking statements presented herein are valid as of the date of this communication and are subject to change without notice. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.
An investment in the Fund may be subject to risks which include, among others, investing in the video gaming and esports companies, software, internet software & services and semiconductor industries, equity securities, communication services and information technology sectors, small- and medium-capitalization companies, issuer-specific changes, special risk considerations of investing in Asian, Chinese and Japanese issuers, emerging markets issuers, foreign securities, foreign currency, depositary receipts, market, operational, cash transactions, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversified, and concentration risks, all of which may adversely affect the Fund. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund's returns. Small- and medium-capitalization companies may be subject to elevated risks.
MVIS Global Video Gaming and eSports Index is the exclusive property of MarketVector Indexes GmbH (a wholly owned subsidiary of the Adviser), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MarketVector Indexes GmbH, Solactive AG has no obligation to point out errors in the Index to third parties. The VanEck Vectors Video Gaming and eSports ETF is not sponsored, endorsed, sold or promoted by MarketVector Indexes GmbH and MarketVector Indexes GmbH makes no representation regarding the advisability of investing in the Fund.
Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not generally backed or supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. The value of cryptocurrency may be derived from the continued willingness of market participants to exchange fiat currency for cryptocurrency, which may result in the potential for permanent and total loss of value of a particular cryptocurrency should the market for that cryptocurrency disappear. Cryptocurrencies are not covered by either FDIC or SIPC insurance. Legislative and regulatory changes or actions at the state, federal, or international level may adversely affect the use, transfer, exchange, and value of cryptocurrency.
Investing in cryptocurrencies comes with a number of risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. There is no assurance that a person who accepts a cryptocurrency as payment today will continue to do so in the future.
Investors should conduct extensive research into the legitimacy of each individual cryptocurrency, including its platform, before investing. The features, functions, characteristics, operation, use and other properties of the specific cryptocurrency may be complex, technical, or difficult to understand or evaluate. The cryptocurrency may be vulnerable to attacks on the security, integrity or operation, including attacks using computing power sufficient to overwhelm the normal operation of the cryptocurrency’s blockchain or other underlying technology. Some cryptocurrency transactions will be deemed to be made when recorded on a public ledger, which is not necessarily the date or time that a transaction may have been initiated.
- Investors must have the financial ability, sophistication and willingness to bear the risks of an investment and a potential total loss of their entire investment in cryptocurrency.
- An investment in cryptocurrency is not suitable or desirable for all investors.
- Cryptocurrency has limited operating history or performance.
- Fees and expenses associated with a cryptocurrency investment may be substantial.
There may be risks posed by the lack of regulation for cryptocurrencies and any future regulatory developments could affect the viability and expansion of the use of cryptocurrencies. Investors should conduct extensive research before investing in cryptocurrencies.
Information provided by Van Eck is not intended to be, nor should it be construed as financial, tax or legal advice. It is not a recommendation to buy or sell an interest in cryptocurrencies.
Investing involves substantial risk and high volatility, including possible loss of principal. Past performance is no guarantee of future results. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
Related Funds
Important Disclosures
Source: VanEck; Factset
All company weightings as of December 31, 2021.
Nothing in this content should be considered a solicitation to buy or an offer to sell shares of any investment in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction, nor is it intended as investment, tax, financial, or legal advice. Investors should seek such professional advice for their particular situation and jurisdiction.
This is not an offer to buy or sell, or a solicitation of any offer to buy or sell any of the securities mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. Information provided by third-party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. Any opinions, projections, forecasts, and forward-looking statements presented herein are valid as of the date of this communication and are subject to change without notice. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.
An investment in the Fund may be subject to risks which include, among others, investing in the video gaming and esports companies, software, internet software & services and semiconductor industries, equity securities, communication services and information technology sectors, small- and medium-capitalization companies, issuer-specific changes, special risk considerations of investing in Asian, Chinese and Japanese issuers, emerging markets issuers, foreign securities, foreign currency, depositary receipts, market, operational, cash transactions, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversified, and concentration risks, all of which may adversely affect the Fund. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund's returns. Small- and medium-capitalization companies may be subject to elevated risks.
MVIS Global Video Gaming and eSports Index is the exclusive property of MarketVector Indexes GmbH (a wholly owned subsidiary of the Adviser), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MarketVector Indexes GmbH, Solactive AG has no obligation to point out errors in the Index to third parties. The VanEck Vectors Video Gaming and eSports ETF is not sponsored, endorsed, sold or promoted by MarketVector Indexes GmbH and MarketVector Indexes GmbH makes no representation regarding the advisability of investing in the Fund.
Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not generally backed or supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. The value of cryptocurrency may be derived from the continued willingness of market participants to exchange fiat currency for cryptocurrency, which may result in the potential for permanent and total loss of value of a particular cryptocurrency should the market for that cryptocurrency disappear. Cryptocurrencies are not covered by either FDIC or SIPC insurance. Legislative and regulatory changes or actions at the state, federal, or international level may adversely affect the use, transfer, exchange, and value of cryptocurrency.
Investing in cryptocurrencies comes with a number of risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. There is no assurance that a person who accepts a cryptocurrency as payment today will continue to do so in the future.
Investors should conduct extensive research into the legitimacy of each individual cryptocurrency, including its platform, before investing. The features, functions, characteristics, operation, use and other properties of the specific cryptocurrency may be complex, technical, or difficult to understand or evaluate. The cryptocurrency may be vulnerable to attacks on the security, integrity or operation, including attacks using computing power sufficient to overwhelm the normal operation of the cryptocurrency’s blockchain or other underlying technology. Some cryptocurrency transactions will be deemed to be made when recorded on a public ledger, which is not necessarily the date or time that a transaction may have been initiated.
- Investors must have the financial ability, sophistication and willingness to bear the risks of an investment and a potential total loss of their entire investment in cryptocurrency.
- An investment in cryptocurrency is not suitable or desirable for all investors.
- Cryptocurrency has limited operating history or performance.
- Fees and expenses associated with a cryptocurrency investment may be substantial.
There may be risks posed by the lack of regulation for cryptocurrencies and any future regulatory developments could affect the viability and expansion of the use of cryptocurrencies. Investors should conduct extensive research before investing in cryptocurrencies.
Information provided by Van Eck is not intended to be, nor should it be construed as financial, tax or legal advice. It is not a recommendation to buy or sell an interest in cryptocurrencies.
Investing involves substantial risk and high volatility, including possible loss of principal. Past performance is no guarantee of future results. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.