Tencent a minute

Searching for a moped in Huinan, southern Taiwan, I was directed a couple of streets over. Turning the corner, I saw about 100 mopeds parked outside a building and headed in. As it turns out, this wasn’t the moped shop at all. It was actually an icafe. Now, the last time I used an internet café was in the pre-iPhone days. That was many moons ago, when the only people you found in them were either lost or the flip-flopped unwashed travellers perched on half-broken stools, emailing home to confirm they were still alive. Or the slightly odd-looking types, whose screens you desperately avoided for fear of going blind.

These days, an icafe is quite a different experience. Blue neon lights skirt the walls, the latest Samsung LED curved screens adorn the desks and comfy seats that looked like a cross between a lazy-boy and high-end custom leather Porsche seats welcomed more than fifty 14 to 30-year-old Taiwanese – mostly but not exclusively male. All were engrossed in video games bar one who was playing online poker. Another 30 or so hung around the pool tables at the back, presumably waiting for a computer to become available – or maybe just resting their eyes!

After hovering long enough to feel like one of those creeps from the good old traditional internet cafes, I dragged myself out and across the road to the actual moped store – where It turns out there were no mopeds outside … or for hire. Reduced to exploring the local sights on foot, and despite being 6,100 miles away from my desk, I (sadly) couldn’t help but think about back home and our investment in gaming.

Gaming is a rapidly growing industry, with global revenues greater than Hollywood at around $100bn. And all this before we have even factored in the potential for the rise in augmented and virtual reality. We have benefited from this theme by building and investing in our own basket of gaming-related stocks last year. We did this because we were excited about the overall gaming boom, but also cautious about taking big bets on specific franchises. Investors in these companies can be as fickle as the customers who play the games. A recent example is Electronic Arts (EA), one of the companies in our basket. EA’s share price has been hit recently by fans grumbling about the latest version of flagship title Fifa 18. We believe this is a great company, but – like others we own in the basket – it can be very volatile. We think the structure we’ve created helps smooth this out, and despite its recent travails, is still up 70% over 12 months.

The reach of this industry may surprise you too. Activision Blizzard, which makes games such as Call of Duty, has half a billion monthly users; the latest Call of Duty release made over $500m in its first three days. E-sports (where fans watch the best gamers play in competitions) is growing fast. About 12,000 fans packed Seattle’s KeyArena to watch the finals of the Dota 2 competition, where gamers competed for a prize pool of $24.7m, and where the winning team took home $10.8m – or $2.2m each (Roger Federer took home £2.2m for winning Wimbledon). Then there’s Twitch, where people can watch their favourite gamers play by streaming over the web. More than 100m people visit every day, on par with CNN. But the average Twitch viewer stays for two hours a day – I suspect a news network would kill for that amount of engagement.

Sure internet cafes aren’t a big thing in the West anymore – I’m yet to see a similar icafe in the UK – but that just hides an even greater number of gamers huddled in front of PCs and consoles at home. Then there’s the middle-aged woman playing Candy Crush next to you on the tube – not your traditional gamer by any stretch! Gaming is spreading swiftly across the world and it’s not just spotty teenage boys playing anymore.

I should add that as I was exploring Taiwan, an island that’s about 40% larger than Sicily, I couldn’t help wondering if there was a further fillip for the gaming market across the Taiwan Strait. China’s controversial one child policy has led to a gender imbalance of roughly 30 million more men than women. As a single man in an evenly populated country, I can’t help but think odds like that might just tempt me to call it a day and get a PS4 myself ...