Financial

Gaming Industry Report: Q2 2024

1 June 202433 pages4,822 words

Summary

**Gaming Industry Report – Q2 2024 – Executive Summary** --- ### 1. Market Overview & Public‑Equity Performance | Metric | Q2 2024 | YoY / QoQ Change | |--------|---------|-----------------| | **Global gaming market size** | **$189.3 b** | **+2.9 % YoY** | | **Public gaming ETFs vs. S&P 500** | ETFs up **7‑20 % YTD** | S&P 500 up **15.1 % YTD** | | **Key takeaway** | The sector continues to expand modestly, out‑performing many traditional equities, but the outperformance gap varies widely across individual ETFs. | --- ### 2. Venture‑Capital Activity | Aspect | Q2 2024 | Trend | |--------|---------|-------| | **Total VC funding** | **$492 m** | **‑20 % QoQ** | | **Number of rounds** | **574** | Slight decline | | **Deal‑stage mix** | **≈90 %** of capital in **early‑stage** (seed‑pre‑Series A) | Late‑stage & growth rounds remain scarce | | **M&A volume** | Down **17 % YoY** | Consolidation slows | | **Private‑market funding** | Already **exceeds full‑year 2023 total** | Indicates strong pipeline despite lower deal count | **Interpretation:** - Investors are concentrating on the “frontier” segment—pre‑seed to Series A—where they can secure larger ownership stakes at lower valuations. - The dip in late‑stage financing and M&A suggests a cautious macro environment (inflation, higher cost of capital) and a shift toward building IP and technology foundations before scaling. --- ### 3. Konvoy Capital – Fund III Snapshot | Item | Detail | |------|--------| | **Assets under management (AUM)** | **$260 m** across three funds | | **Investment count** | **51** total; **40 %** outside North America | | **Geographic focus** | North America, Europe, Asia, Brazil (see event list) | | **Deal focus** | Frontier gaming technologies, **pre‑seed → Series A**, **$1‑5 m** checks | | **Key personnel** | Managing Partners: **Josh Chapman, Jason Chapman, Jackson Vaughan** | | **Support team** | Dedicated investment & platform professionals | | **Top newsletters** | • “Gaming IPO Watch List” <br>• “Mobile Gaming Post‑IDFA Deprecation” <br>• (3 additional curated newsletters) | | **Strategic events (Q2 2024)** | 15 industry conferences & expos (Jan‑Nov) across NA, EU, APAC, Brazil – covering gaming, media, and tech. | **Strategic Implications for Konvoy** - **Diversified pipeline:** 40 % of investments outside the U.S. mitigates regional risk and taps high‑growth markets (e.g., Southeast Asia, Brazil). - **Frontier focus:** Aligns with the broader VC shift toward early‑stage, high‑potential tech (cloud gaming, AI‑driven personalization, blockchain‑based economies). - **Thought‑leadership:** Curated newsletters and event participation reinforce Konvoy’s brand as a go‑to source for emerging gaming trends, especially around regulatory changes (e.g., IDFA deprecation)

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The analysis presents a comprehensive overview of the global gaming market in 2022 and its projected trajectory to 2027, emphasizing a modest expansion of the sector’s revenue base and a shifting investment landscape. The market reached $184.4 billion in 2022, a 2.3 % year‑over‑year increase, and is forecast to climb to $283 billion by 2027, reflecting an annual growth rate of roughly 9 %. Mobile platforms remain the dominant distribution channel, accounting for $116 billion of consumer spend in 2021, or 64 % of total gaming revenue, while console and emerging XR segments experience divergent pressures. Venture capital activity illustrates a pronounced contraction after a 2021 peak, with total funding falling from $8.8 billion to $5.3 billion in 2022 and growth‑stage deals declining despite a stable number of transactions. Funding for web3 gaming collapsed by 83 % in Latin America and saw a global downturn, driven by concerns over token utility, game quality, and high-profile fraud incidents. Concurrently, regulatory scrutiny intensified, particularly around data‑privacy measures such as Apple’s IDFA and Google’s AAID, which have raised user‑acquisition costs and forced developers to prioritize content depth over advertising efficiency. Corporate liquidity underscores a robust M&A environment: gaming firms collectively hold $47.7 billion in cash, while major tech companies with gaming divisions command $157 billion. Nevertheless, gaming‑focused ETFs underperformed, with ESPO and GAMR posting year‑to‑date declines of 35 % and 37 % respectively. The report draws on a blend of public market data, venture‑capital databases, and industry surveys from sources such as CB Insights, Newzoo, and major console manufacturers, covering all major regions and spanning the period from 2019 through Q4 2022.

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The analysis presents a comprehensive snapshot of the global gaming industry in the second quarter of 2023, emphasizing the sector’s continued expansion and shifting investment dynamics. The market is projected to reach $201 billion in 2023, reflecting a 9 % year‑over‑year increase, while public gaming ETFs have risen between 10 % and 30 % since the start of the year, underscoring strong investor confidence. Cash reserves across leading public gaming firms total roughly $45 billion, supporting a robust merger‑and‑acquisition environment. Venture capital activity shows a pronounced contraction, with total gaming VC funding falling to $1.23 billion in Q2 2023—a 38 % decline quarter‑on‑quarter—driven primarily by a 60 % drop in growth‑stage investments. The number of deals fell 22 % to 194, with early‑stage financing in North America down about 60 % and Europe remaining essentially flat. Asia remains the most active region, accounting for the majority of growth‑stage capital, while South America’s activity is concentrated in Brazil and Africa recorded no deals during the period. Data are drawn from CB Insights, Newzoo, public market filings and company disclosures, covering all VC rounds from pre‑seed through late‑stage across 2019‑2023. Strategic developments highlighted include Apple’s launch of the Vision Pro spatial computer, Embracer Group’s restructuring toward first‑party IP, and the near‑completion of Microsoft’s acquisition of Activision Blizzard pending regulatory clearance in the UK, EU and US. Emerging trends point to a new era for user‑generated content, where popular IP will drive platform growth, and the expanding role of generative AI in asset creation, map design and NPC behavior. The report also outlines the 2023 conference calendar and provides a brief profile of Konvoy’s investment focus, assets under management and recent activity in frontier gaming technologies.

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KonvoyApr 2023

Gaming Industry Report: Q2 2024

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