The video game industry is not for the faint of heart. Investing in video game companies has a high reward for risk, but you should be interested in which ones are ready to go up. Many companies do very well with a popular hit of the year. Even if they have a bunch of games that don’t perform well, one good hit is all they need to be profitable for a whole year.
The problem is that many video game companies have ups and downs in their cycle of success. A game that is normally a big hit will eventually lose its profit margin and people will move on to better games. Also, as the industry improves, games take longer to produce. Designers, writers, and programmers must be involved full-time in development. If one of them doesn’t do their job, the game will be ruined.
Take-two (TTWO) created a game called Grand Theft Auto. It was the only one-of-a-kind game: a smash action game that brought real-life realism to the streets of Los Angeles, Las Vegas, and other cities we too can relate to. Millions of fans bought the game. Since more people liked it, they told their friends. Word of mouth spreads and becomes a huge success. Since those days, Take-Two has not done well. They have lost their profit margins and have been unsuccessful ever since.
Another company, Activision, makes a game called World of Warcraft. This is a massively multiplayer role-playing game for PC. They have a subscription model where players pay a low monthly fee. When you get a lot of players of more than 1000 subscribers, the income easily goes into the company. As they expanded globally, the amount of money they raised even increased.
So what do you have to look for? Read the news. Look for demos of the game and research the reviews the writers post. The game must be highly rated and rated on scales of 80% or higher. The game should be massively followed by gamers and pre-orders should be very high.
Also, make sure the video game company is doing well. Look for companies that continue to increase earnings per share. They must be on a positive track for the past 5 years. This means that they have the amount of money needed to be successful and launch successful games in case others don’t work for them.