2 Niche Players That Keep Customers Entertained

How we would capitalize on the proposition that people never get bored of being amused

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Steven Chen
May 03, 2020
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People never get bored of being entertained – this is one of the three “big ideas” from Nick Train. Under such a thesis, the British fund manager that consistently beats the market bought stakes in consumer electronics giant Nintendo (

TSE:7974, Financial), media conglomerate Disney (DIS, Financial) as well as successful soccer franchises Manchester United (MANU, Financial) and Juventus (MIL:JUVE, Financial). Unfortunately, none of these names intrigues us, as they either are widely covered or deliver low returns (or even have no profit at all). Moreover, many of these content developers like movies and video games are mostly hit-driven, meaning that they, even as the leading players, constantly need some hits to stay successful and new entrants with limited resources may steal market share through a one-off blockbuster.

But we are indeed sold on the idea of investing in businesses that can keep entertaining their customers with a strong growth prospect. Browsing our investable universe, we landed on two niche names in this dimension.

Games Workshop

U.K.-based Games Workshop Group PLC (

LSE:GAW, Financial) is the world’s largest hobby miniatures business with an IP-driven moat in a self-created niche. The company is best known for the iconic "Warhammer" games, through which it has built a long-standing brand identity for the past three decades or so. Games Workshop employs a vertically-integrated operational model, retaining control over every aspect of design, manufacturing and distribution. It has earned an unparalleled reputation for producing high-quality miniatures for the games and published hundreds of novels to grow a loyal fan base.

Games Workshop generated an average 50% return on assets and achieved top-line growth of 30% per year over the last three years. Moving forward, the global board games market is expected to grow at a high-single-digit annual rate. Meanwhile, the company can continue to expand globally and launch new products to recruit more hobbyists as well as up-sell to existing customers.


Team17 Group PLC (

LSE:TM17, Financial), which is also based in the U.K., is a leading video games label and creative partner for independent developers. Instead of having to go all-in on high-cost projects like triple-A games, Team 17’s primary strategy is to shoot for premium “indie games” through a revenue share partnership. These indie games are generally known for innovation, creativity and artistic experimentation, thanks to small size and scope as well as no creative restrictions. The niche has been experiencing robust growth due to the adoption of digital distribution and reduced barriers to entry for smaller development teams through middleware gaming engines. As the company diversifies its bets across small-scale projects with no single franchise or title dependency, the hit-driven business risk is limited. The average lifetime of the games in the company’s portfolio is around six years. Roughly three-quarters of the total annual revenue comes from titles released in previous years, while the business is seeding additional revenue lines at a rapid pace via new titles (of existing franchises) and new franchises.

Over the past three years, Team17 delivered an average 12% return on assets and achieved an annual sales growth of 66%. The global video gaming industry is expected to grow at a mid-to-high-single-digit yearly rate going forward. While the superior growth may moderate at some point, Team17’s low-risk business model is sound with high scalability and predictability.

Disclosure: The mention of any security in this article does not constitute an investment recommendation. Investors should always conduct careful analysis themselves or consult with their investment advisors before acting in the stock market. We do not own any security mentioned in the article.

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