In this video, I will be talking about the gaming industry and why I believe this industry will outperform the market in the years to come.

The gaming market

When we think about gaming, it's not just video games anymore. It's everything from graphics cards -- AMD (NASDAQ:AMD), NVIDIA (NASDAQ:NVDA), and Intel (NASDAQ:INTC) -- to streaming to in-game purchases. Today, 45% of U.S. gamers are women. The average age of a gamer is 34. And the average household has two gamers. In fact, women represented around 65% of the total mobile gaming population and were observed to spend more on in-game purchases than male gamers.

Millennials became the largest generation in 2016. In 2021, they'll hit their peak purchasing power and will be the prime gaming demographic. 

Now let's talk numbers. U.S. video game spending increased 30% in Q1 2021. Gamers downloaded around a billion titles every week in the quarter, up 15% year over year with games such as Among Us, Nintendo's Animal Crossing: New Horizons, and Call of Duty: Black Ops Cold War among the best-selling and most-played games for the quarter. Google Play game downloads grew 20% year over year to 11 billion, while total consumer spend on gaming hit $22 billion. iOS gamers spent the most at $13 billion, up 30% year over year, while gamers spent $9 billion on Google Play, up 35%.

In-game cosmetics

Gaming over the past two decades has also given rise to live-service games, which are often free to play and are typically monetized via skins for in-game avatars. Brands are finding that in-app gaming experiences are a successful form of monetization. For example, Louis Vuitton announced in-game skins for League of Legends in 2019, which proved to be a popular cosmetic item for gamers. Fortnite, which is in the spotlight right now with the Epic Games v. Apple trial, has previously partnered up with Air Jordan, the NFL, soccer teams, and most recently Neymar Jr to bring real-world items into the game. 

It's usually a win-win for the game and the brand. The most popular games, including Fortnite, Roblox, League of Legends, and Call of Duty, feature skins prominently. Big spenders called "whales" spend, on average, more than $15 a month on skins. The whales tend to be older. Almost 80% of Fortnite's recent players engage with its cosmetics in some way.

Streaming

According to Newzoo, there are 2.7 billion gamers, and that number is expected to surpass 3 billion in the next three years. NVIDIA estimates the number of Twitch streamers doubled in 2020, while Corsair (NASDAQ:CRSR) estimates that there were 6 million committed streamers last year. This growing market should support demand for Corsair's streaming products, such as microphones, streaming decks, and studio accessories. There's a reason why the stock has more than doubled since the pandemic started. 

How can you invest?

There are various ways to get exposure to the gaming industry. The obvious ones are the gaming companies and publishers such as Electronic Arts (NASDAQ:EA), Activision (NASDAQ:ATVI)Nintendo (OTC:NTDOY)Tencent (OTC:TCEHY), Take-Two Interactive (NASDAQ:TTWO), or platforms such as Roblox (NYSE:RBLX) and Unity (NYSE:U). Then you have Sony (NYSE:SONY) and Microsoft (NASDAQ:MSFT), who make two of the most popular consoles on the planet, the Xbox and Playstation as well as various games. 

You could also get exposure outside of the U.S. by looking at companies like Bilibili (NASDAQ:BILI), Huya (NYSE:HUYA), or the great Singaporean internet company Sea Limited (NYSE:SE), which owns Garena, the maker of Free Fire (one of the most popular games today). 

But if you don't want to pick individual stocks you could go the ETF route with VanEck Vectors Video Gaming and eSports ETF (NASDAQ:ESPO) or Global X Video Games & Esports ETF (NASDAQ:HERO), which are the two biggest ones that will get you exposed to most of the above-mentioned stocks. 

During Netflix's (NASDAQ:NFLX) Q4 2018 earnings report, the company said its biggest competitors weren't other streaming platforms but video games like Fortnite. No wonder Netflix wants a piece of the video game market. 

Watch the video below to get the full insights.  

*Stock prices used were the closing prices of June 3, 2021. The video was published on June 4, 2021.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.