Video gaming has been one of the big beneficiaries of the Covid-19 pandemic, as people look for sources of entertainment while cooped up in their homes. But the industry’s rise is not exceptional to this crisis – coronavirus has merely accelerated an underlying trend. As investors look for where the best opportunities lie, we think it’s worth examining companies with strong intellectual property (IP) – those that have built up enduring brands, franchises and fan loyalty that can be tapped into again and again.
According to Andrew Vaughan, manager of the CFP SDL Free Spirit Fund (GB00BYYQC271), IP makes for a good investment for two reasons: “The economic moat and the financial shape that IP provides. IP can generate revenues for many years to come and turn a business into a wonderful compounding machine.” IP is also a strategic driver of merger and acquisitions (M&A) activity, providing access to additional content, markets and customers. Hasbro (US:HAS) trotted away with formerly London-listed Entertainment One at the end of last year for £2.9bn, scooping up successful brands such as Peppa Pig, which is the most viewed pre-school show in the world on YouTube.
Matthew Ball, former global head of strategy for Amazon Studios, says popular IP “ages like whiskey and becomes increasingly rare”. With that in mind, we’ve set about examining how three big companies are harnessing this valuable resource.