Minicast: The rise of cloud and mobile gaming signals a decline in hardware profitability

Hardware has long been an integral component of the gaming industry, from gaming consoles to computers, display devices, and peripherals. However, Clayton Larcombe, chief investment officer at PAC Capital believes the profitability of hardware is now diminishing as cloud and mobile gaming continue to grow.

According to Larcombe, the company has sold its hardware holdings in favour of investing in companies that are poised to profit from the rise of cloud and mobile gaming.

Larcombe explained, "The emergence of mobile gaming and also cloud gaming has taken the need for people to go out and buy big hardware machines or interact is becoming less and less."

He further noted that the trend is likely to continue over the next few years, indicating a shift away from hardware consoles and PC games as more players move towards cloud and mobile.

While hardware has been a significant part of PAC's gaming portfolio in the past, the company is now selling its hardware holdings due to the flat revenues and slow growth of these companies over the last five years. Instead, the focus is on investing in companies that are growing in revenue and have the potential to be profitable for investors in the long run.

Larcombe emphasised that the emergence of mobile and cloud gaming is taking a lot of revenue away from hardware companies. With mobile gaming and cloud services becoming more accessible to players, the need for expensive hardware machines is diminishing, signalling a decline in the profitability of hardware in the gaming industry.

The rise of cloud and mobile gaming has reshaped the gaming industry in recent years. As more players shift towards these platforms, companies that can adapt to this trend and capitalise on it are likely to succeed in the long run.