Creating a Video Game Market Index

Video Games is a $180Bn industry (source : newzoo)
Gaming & Streaming are outperforming other industries in 2020 (source : Dealroom.co)

The fascination of stocks

Ubisoft #metoo crisis was quickly forgotten by markets

Index and ETF

  • ETF include esport stocks. Esport industry is closer to sport industry, with a completely different business model, excepted for video game publishers, who capture most of the revenue. So, in a portfolio supposed to reflect video game industry, GFinity seems like an outlier.
  • Weight of individual shares requires careful consideration. General practice is to weight each company with its market cap or its share price. This is good to reflect the global sector size evolution, but index will be driven by the biggest companies, crushing the variations of smaller companies under their market cap. Equal-weight ETF seem like a good solution, however they require frequent portfolio rebalancing (sell most expensive stocks and buy cheapest one) which, in the physical world, is simply impractical due to transaction fees.

Video Game Index : C.H.O.I.C.E.S

(Source : Bethesda)
  • Removal of esport-centric stocks
  • Trim the list of US companies, even though they are arguably the most powerful game builders as of 2020, to avoid building a “US video game index”, thus reinforcing their culture hegemony. As Peter Warman said in a conference of video game financing in Europe in december 2020, “more than half of new IPs are created in Europe, and then they thrive in US and Asia due to lack of financing”. As all choices, this one is subjective and tainted by my european nature : I accept that responsability.
Europe is great at creating IP, so in spite of smaller companies, it should be well represented in an Index
  • Have a well-balanced portfolio across Asia, US and Europe, as well a diverse representation of mobile/PC/Console and hardware/middleware and even game contractors companies such as Keywords, which has become one of the biggest studio in the world.
  • Regarding weighting, I chose equal-weight to make sure Team17 stock is not less valuable than Take-Two. I could create an virtual ETF and theoretically rebalance the portfolio every day, free of transaction fees constraints, but I don’t really care about the value of a physical portfolio of shares : what I really want is to compute the average return of every stock, which is really what indexes are about.
  • I want a limited selection of companies : a few dozens of the most widely known companies seem enough, so that we can get intimate with those companies and their brownian moves. For the companies that are listed on several exchanges, I generally chose the most liquid market or at the very least, the most convenient, data-wise.

K.I.S.S : Keep it simple and stupid.

  • Share price are snapshots of closing, using yfinance API which wraps yahoo finance.
  • A python script is scheduled daily and retrieves the value of 30+ tickers, stores them and compute the relative return of every stock.
  • The result is agregated in a tweet, pushed daily through twitter API.
Video Game Index was almost named Stonks.

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Video Game finance and economics

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Stéphane

Stéphane

Video Game finance and economics

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