Posted on August 31st, 2017 by | Leave a comment

I love video games. You probably do too or you wouldn’t be reading this (but hey, everyone is welcome).

So what if I told you that your passion could make you rich? No, I’m not suggesting you enter the competitive streaming market, sell virtual gold, or start an e-sports career. What I’m suggesting is much simpler – investing. I know reading about money isn’t as exciting as playing a new MMO game, but reading about money could lead to buying more MMOs. So in a way, this post is about playing more MMORPGs and games of all kinds!

World of Warcraft stocks

Want Proof?

If you had invested the cost of a $14.99 World of Warcraft monthly subscription into Activision Blizzard on an annual basis between November 2004 to November 2007, your $539.64 (yes, that’s how much we all spent) would now be worth $5,972. It literally would have paid for itself ten times over. And while Activision Blizzard technically existed as only Activision before 2008, the point isn’t any less valid.

For those unfamiliar with stock investments, they are a great way to grow your wealth. The easiest and most common recommendation for investors is to purchase index funds. There’s no doubt that strategy pays off in the long term. For example, $100 invested into the S&P 500 in 1977 would be worth approximately $2,500 today. By contrast, a savings account at today’s interest rates wouldn’t even earn you $100 in 40 years.

There is a small optimization problem with the index fund strategy. Not only is buying and holding index funds not very exciting, but video game related stocks vastly outperform index funds. Fair warning: prepare yourself for some math below.

Be aware that I am not a professional financial advisor in any capacity and the following information should not be construed as financially sound or professional advice. So don’t blame me if this article blows up your retirement fund, but do feel free to PayPal me some money if this information gives you the means to ‘pay to win’.

Baseline Investment

To really assess the performance of video game stocks, we need to set a few baseline values. For that, I’ll follow the performance details of three major index funds. The S&P 500 is the most common index fund to invest in and provides consistently strong returns. NASDAQ tracks technology stocks and thus is particularly relevant to compare against video games. Finally, Asia is a huge player in the video game industry so I’ll also be analyzing the Japanese index, Nikkei 225. So how have these indices performed over the years?

Let’s take a look at percentage gains from four points in time: one year ago, five years ago, ten years ago, and in January 2000, right before the dot-com bubble burst. Later, we’ll measure these indices against key video game stocks.

S&P 500

1Y: +13.72%
5Y: +75.52%
10Y: +67.5%
January, 2000: +68.04%

NASDAQ

1Y: +23.1%
5Y: +109.25%
10Y: +147.18%
January, 2000: +57.71%

Nikkei 225

1Y: +20.08%
5Y: +122.24%
10Y: +18.57%
January, 2000: +5.71%

Unsurprisingly, the best gains have been over the past five years as the market has only ticked upwards since the United States housing crash bottomed out in 2009. More importantly, it’s a positive sign to see that even investing at the peak of a stock market bubble will lead to long term gains. Even the best investors can’t time the stock market so consistent investments is the best route to leveling up your bank account.

bears-bulls-vs-madden-mario

Bears & Bulls vs. Madden & Mario

Plenty of companies sell video games so it would be pretty impractical to research them all. Instead, I’ll focus on those where their primary business is video games (which excludes publishers like Tencent Holdings) with at least some stake in the MMO market. Without further ado, I present our contenders who represent evidence for fiscally sound investment in video games.

Activision Blizzard is responsible for World of Warcraft. Electronic Arts is best known for their sports titles, but don’t forget that this giant owns Bioware and thus, Star Wars: The Old Republic. NEXON is one of the world’s largest free-to-play MMORPG publishers.  Ubisoft merely dabbles in the MMO market, but everyone has heard of game series like Assassin’s Creed. Square Enix owns and operates the beloved Final Fantasy franchise, which now includes two MMORPGs. NCSoft Corp’s ownership of Guild Wars, Lineage, and more has long made them a major player in the MMO space. Finally, if I’m looking at video games, I’d be hard pressed not to include Nintendo even if they’ve avoided MMOizing any of their IPs (come on, let’s get a real Pokemon MMORPG).

Activision Blizzard, Inc.

1Y: +58.39%
5Y: +457.19%
10Y: +572.74%
January, 2000: +5,027.15%

Electronic Arts Inc.

1Y: +49.92%
5Y: +813.58%
10Y: +130.03%
January, 2000: +479.9%

NEXON Co Ltd

1Y: +105.93%
5Y: +142.96%
10Y *: +149.36%
January, 2000 *: +149.36%

Ubisoft Entertainment SA

1Y: +59.07%
5Y: +831.11%
10Y: +145.65%
January, 2000: +459.6%

Square Enix Holdings Co Ltd

1Y: +23.68%
5Y: +194.59%
10Y: +7.66%
January, 2000: -64.08%

NCSoft Corp

1Y: +44.01%
5Y: +52.28%
10Y: +392.95%
January, 2000 *: +1,047.76%

Nintendo Co., Ltd

1Y: +68.93%
5Y: +320.18%
10Y: -31.64%
January, 2000: +130.44%

(* – Some companies have not been publicly traded for 17 or even 10 years. In these cases, the percentage gains relate to to their IPO date which stands for initial public offering. This will greatly skew the January, 2000 numbers in particular due to the company avoiding the market crash.)

What Does it Mean?

what does it mean double rainbow

These percentages tell us something important, but they’re also hard to wrap one’s head around. For that, we need to illustrate real world cash gains over time. Below you’ll see what gains one would earn investing $1,000 evenly across the three example funds compared to distributing $1,000 evenly over five to seven of the video game stocks (discounting companies that did not exist for the time period).

1-Year Gains:

Funds: +$189.66
Video Games: +$585

5-Year Gains:

Funds: +$1,023.66
Video Games: +$4,016.98

10-Year Gains:

Funds: +$777.50
Video Games: +$2,028.98

Gains since January, 2000:

Funds: +$438.20
Video Games: +$12,066.02 (+$2,514.65 without Activision Blizzard’s massive 50x gain)

In short, investing in video games at any of these four points in time would have netted you gains of 3x compared to recommended index funds. To put it another way, someone who had invested in video games at the turn of the century could today afford 193 more $60 AAA titles than someone who had invested in index funds.

That said, it’s important to note the only period points with losses belong to the video game stocks. While individual stocks can produce greater rewards, they are also inherently more risky. Even while I laud the performance of the video game industry, I would still suggest a heavy mixture of index funds to offset the risk.

Gross Assets to Win (GA2W)

Sadly, paying money to ‘win’ online games is never going to vanish from the industry. But with some smart investing you could be the whale everyone hates. And how poetic would it be to make that money from the very games you play? (Of course investing takes time so until then, here are a few good free MMOs that aren’t pay-to-win.)

This is as far from a get rich quick scheme as you can get. The foundation of investing is built on bankrolling good companies over a period of several years. And at some point in the next ten years, the market will likely crash again. However, given time and smart investments you will see your real world money grow to levels that make virtual currency such as Elder Scrolls Online crowns, Guild Wars 2 gems, and SW:TOR cartel coins a drop in the bucket.

You should do your own research before investing in anything, but hopefully this has opened your eyes a bit (and if so, I highly recommend Scottrade for individual stocks and Vanguard for index funds). And if you’re a teenager who thinks you don’t have enough money for any of this to matter, think again. The sooner you start investing, the more money you’ll end up when you hit “adulthood”, the faster you’ll retire, and the more MMORPGs and video games you can spend playing guilt-free during that retirement.


Leave a Reply

Your email address will not be published. Required fields are marked *