Bogdan Maioreanu (eToro): Gaming industry on track for another round of exceptional results

Mihai-Alexandru Cristea 18/08/2021 | 16:10

The gaming industry is poised for another round of exceptional results, despite the lifting of restrictions in much of the Western world this spring. Last year, pandemic boredom nudged older generations to rediscover games, while younger people spent even more time on their consoles.

By Bogdan Maioreanu, eToro analyst and markets commentator

 

Already bigger than film and music combined, the global gaming industry has been growing rapidly for decades and is on track to hit $200 billion in sales in 2023. While the industry did benefit from the extended lockdowns, the expansion of gaming preceded the pandemic and the high growth trend is likely to continue for years.

In the first seven months of 2021 Americans spent $33.5 billion on video games content, hardware and accessories, a 14% increase compared with the same period of 2020, according to a survey by NPD Group.

If in June Xbox was the best sold console in terms of dollars, in July Sony’s PlayStation 5 came on top. Nintendo was again number one in terms of units sold.

While the consoles are largely a three-way competition, if we look at the games the market is much more diverse, ranging from console-based games to PCs and phones. Now, even Netflix is adding gaming, with the streaming platform opening yet another revenue stream.

If we look at the games that grossed the most year to date, Activision’s Call of Duty Black Ops: Cold War is on top. Activision Blizzard (ATVI), which is also the home of World of Warcraft, Diablo, Overwatch and Candy Crush, had a good earnings call this month with strong revenue of $2.3B and EPS (Earnings per share) of $1.20, $0.29 above expectations and increased guidance for next quarter. But the company is in the middle of a labor scandal and was sued by California authorities, which accuse the company of fostering  a “sexist culture.” As a result, several top officials, including Diablo 4 game director Luis Barriga and lead designer Jesse McCree were let go, raising some concerns about this highly expected game release path.

Electronic Arts Inc. (EA) is the home of very well known franchises like Fifa and Madden NFL, Apex Legends, Sims, Battlefield and F1- Formula one racing. The company, which has over 1,500 employees in its Romania studios, posted very good Q1 2022 earnings with bookings  of over $1.34 billion (though 4% less than last year) but beating consensus, with EPS (Earnings per share) of $0.71 beating guidance by $0.32. EA  announced new sports games with Madden 22 to be launched later this month and Fifa 22 at the end of September. The new Battlefield 2042 (release date 22.10), raised great interest from players, with trailers generating more than 210 million views across multiple channels.

But gaming is not always about exclusivities and AAA titles. A new trend is emerging, the meta verse that can be defined as a persistent collective 3D virtual shared space. We are still far from the Ready Player One type of meta verse but there are several applications that propose to the players such experience. Probably the best known is Minecraft, but also Dreams on PlayStation, RecRoom, GTA Online, Second Life and Roblox.

Over half of the US kids under 16 played Roblox in 2020. Roblox is a metaverse different from anything else in the games industry because users are not only playing games, they are also making games and gaining money from sales of ingame items, transforming some creative kids into early tech entrepreneurs. Currently, the official website boasts that its users have published over 20 million games on the platform and Roblox paid $329 million to the creators at the end of 2020.

Roblox Corporation (RBLX) went public this year in March and posted its second quarter results yesterday, falling short of expectations on bookings and profitability. The company showed bookings rising 35% yoy to $665.6 million with the loss widening to $140.1 million, worse than analysts were expecting. Revenue increased 127% over Q2 2020 to $454.1 million. However, user numbers and engagement rose to record levels, average daily active users (DAU) jumping 29% to 43.2 million. Users spent a combined 9.7 billion hours on the platform, a 13% increase YoY. One of the important metrics is the rise in users over 13 years and this increased with 29% YoY. Roblox is planning to show premieres in the fall on its platform, starting with the Bakugan anime franchise. It has already launched music with hip-hop artist KSI’s first virtual launch party a few days ago.

According to the eToro Investor Beat survey, 45% of the questioned Romanian investors plan to invest in companies involved in the digital transformation of our lives. Investors interested in the gaming industry can invest in the diversified  InTheGame copyportfolio on eToro – a fully allocated thematic investment portfolio which includes 30 large gaming companies.

 

About the author

Bogdan Maioreanu, eToro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania among others. Bogdan is an Executive MBA from Asebuss and Washington University.

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