| Total video game sales jumped 35% YoY to $1.6 billion in March, reversing a seven-month streak of declines, marking the industry’s strongest March since 2008, according to industry-tracking firm NPD Group. Digital games revenue soared to $10 billion, making March the best month ever for digital spending.
The rebound is unsurprisingly a symptom of the global response to the ongoing COVID-19 pandemic. Lockdowns and quarantines have left many jobless, home from school, or simply stuck with nothing else to do on weekends.
Verizon Communications Inc. has said gaming jumped 75% on its network after people started going into lockdown. By late March, between 57% and 71% of people surveyed in the US, France, Germany and the UK were playing more, according to Nielsen. Nielsen also reported that total play time was up by 45% during the last week of March.
The week of March 15, people spent three-quarters of what they shelled out on games during the run-up to Christmas, according to SuperData. Bloomberg writes that the biggest game publishers could see a 10% to 20% increase in revenue over the stay-at-home period.
As the New York Times reports: The shooter game Doom Eternal, released in mid-March, had the best sales weekend of any game in the series, which has been ongoing since 1993. The latest iteration of Animal Crossing, another long-running franchise, has become a cultural phenomenon amidst the Coronavirus, selling 5 million digital copies in March, a new record for any console game.
The latest offering in the Call of Duty franchise ― the free-to-play Call of Duty: Warzone, which launched March 10 ― also benefitted from the lockdown. Warzone, a new add-on mode to 2019’s best-selling title Call of Duty: Modern Warfare, increased monthly active users in the game by more than 150%, peaking at nearly 63 million active players.
From the fourth quarter of 2019 to the first quarter of 2020, the premier video game streaming platform, Twitch, exceeded three billion hours watched for the first time, per a report from the software service Streamlabs.
Since the halt on nearly all real world sports is still in effect, e-sports competitions have become a major feature of ESPN programming. The network aired the NBA 2K20 Players Tournament in April, while baseball players have an entire MLB The Show league airing on Twitch and YouTube.
The modern era of gaming is almost perfectly positioned to benefit from our current global predicament. Not only are games a fun way to ward off monotony and boredom amid quarantine measures, but also provide a way to keep in touch with friends and family. Since online gameplay is now so ubiquitous, the social aspects of voice chat and interactive game modes give people a way to communicate with millions of fellow players around the world.
Though this reprieve is welcomed by investors, the circumstances of the rally do raise questions about its sustainability. January and February of this year saw cumulative sales decline 26% and 29%, respectively, before March managed to dig the industry out of its sustained downturn.
Additionally, in-game spending could likely decline as well. Though gamers are now rich on time, they are worried about the impending global recession. Dedicated gamers might shell out enough to buy a single console game, but many casual gamers are focused on free content. As Blomberg notes, Google searches for free games in March jumped to their highest level in four years, while searches for paid games remained flat.
The fate of this most recent video game rebound is likely tied to how long our current lockdown conditions persist. Depending on how much gaming they’ve done, many consumers might even be tired of gaming, and seeking to alieve their stir-craziness more than anything. It’s quite possible that, just as we’ve seen a dramatic spike in video game playtime amid quarantine, we could see a similar downturn on the other end of it.
The real catalyst for video games in 2020 lies in the hardware market.
The Xbox One and PlayStation 4 saw their sales figures rise by more than 25% in March, bucking a downward trend that’s engulfed most of the gaming hardware market since 2018. The rebound was most significant since the Microsoft and Sony consoles, respectively, have been a major factor in the downturn in console spending over the last couple of years.
That decline can be chalked up to consumers slowing their purchases and saving some cash in anticipation of the oncoming jump to next-gen consoles – the Xbox Series X and PlayStation 5 – in late 2020. NPD’s estimated that spending on hardware, tallied only $4.4 billion, a decline of 12% when compared to 2018. While that downturn initially looked set to intensify in the first quarter of this year, March shifted the trajectory and spending on consoles eked out a 2% rebound in the first quarter.
However, this most recent data point is likely an outlier in the broader downtrend that should intensify through Q2 and Q3 as gamers await the holiday releases of the aforementioned next-gen consoles. While some gamers and investors have worried that the timeline for the next iterations of the Xbox and PlayStation would be delayed, it looks like both are still on schedule.
In a recent PlayStation blog post, Jim Ryan, President and CEO of Sony Interactive Entertainment, re-affirmed the PS5 holiday season release. While mystery still surrounds many aspects of the console, Microsoft will be holding an Xbox Series X gameplay reveal later this week, allowing fans to see games running on the console for the first time. Microsoft’s executive vice president of gaming Phil Spencer recently told CNBC Thursday that coronavirus hasn’t upended Microsoft’s launch plans. “Overall, I think we’re in line with where we thought we would be,” Spencer said. “I’d say the bigger unknown is probably the game production,” he noted.
Several major titles have indeed been delayed beyond their initial release dates. The debut of The Last of Us: Part II, one of the most highly anticipated games of the year, has been pushed back from May 29 to an undetermined date. Developers at Naughty Dog, the studio behind the game, said the delay was because of the current challenges of printing, shipping and selling physical copies of video games. Amazon’s New World and Microsoft’s Wasteland 3 have both been bumped to August, for now. Delays remain relatively minor, but if distribution continues to be a problem and release delays continue, that could begin creating a problems for several major studios.
Overall, the outlook for video games in the short term is uncertain, but likely to recede when quarantine measures in the US and other markets start to ease. Q4 releases of next-gen consoles look to be the highlight of the year and, if sales are strong enough, the shot in the arm the industry has been waiting for. With economic conditions being what they are, though, strong sales of consoles that will retail for around $500 are far from a sure thing.
Investors can gain exposure to video games via the Wedbush ETFMG Video Game Tech ETF. |
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