Video game companies are quietly thriving as coronavirus rages.
Around the world, hundreds of millions of people have been forced to stay at home to prevent the spread of COVID-19. As it happens, one industry is custom-built for people to stay indoors and socialize over long distances: video games. Video game usage has skyrocketed in recent weeks – more people than ever are tuning in to livestreams of their favorite games and esports are filling the hole left by the absence of live sports. All of this should translate into profits for the biggest names in gaming (and for their shareholders). Here are the seven video game companies poised to profit in the age of coronavirus.
Microsoft (ticker: MSFT)
At first glance, Microsoft’s gaming business doesn’t seem to be doing all that well, with Xbox content and services revenue down 11% year over year in its most recent quarter. But, understandably, gamers are saving their money now, given the company’s upcoming release of its new Xbox Series X console. Microsoft has reaffirmed that coronavirus won’t delay the new console’s release, and in the meantime, it’s enjoying “record numbers” for Mixer, its livestreaming service, as well as its Xbox Game Pass and Xbox Live services. As for the release of upcoming games, so far only “Minecraft Dungeons” has been delayed by coronavirus – but that’s a small price to pay for what is likely a huge increase in Xbox usage.
Sony (SNE)
Sony is in the same boat as Microsoft. Last quarter, Sony’s game and network services revenue was down by a whopping 20% year-over-year, with consumers buying fewer PlayStation 4 consoles and games as the release of the PS5 approaches. But usage numbers will undoubtedly be higher than average this quarter, as indicated by Verizon’s announcement that it saw a 75% increase in video game traffic across its networks. There’s little doubt that Sony will reap the rewards from this massive surge of gamers, but in the meantime, the company will profit from Electronic Arts’ (EA) decision to release the remake of the beloved game “Final Fantasy 7” (only playable on PlayStation) earlier than expected in Australia and Europe.
Nintendo (NTDOY)
The final console maker among the big three, Nintendo is in a unique position during this crisis. While Sony and Microsoft’s sales always slip before new console releases, Nintendo just released one of its biggest games smack in the middle of social isolation. “Animal Crossing: New Horizons” is a smash hit, selling 1.88 million copies in Japan during its first three days on the market – and since Nintendo doesn’t release digital download numbers, actual sales figures are surely higher. The new Animal Crossing game comes at the perfect time – parents stuck at home with their children are grateful for the new family-friendly game, and its easy-going gameplay is a great way to unwind from weeks of social isolation.
Activision Blizzard (ATVI)
Speaking of new games hitting the market at the right time, Activision couldn’t have timed the release of its new “Call of Duty: Warzone” any better. The free-to-play game attracted about 15 million players within three days of its release, setting itself up nicely as the new battle royale game du jour. Activision is capitalizing on gamers stuck indoors thanks to coronavirus, giving “World of Warcraft” players bonus experience points through April 20, and releasing a remastered version of “Call of Duty: Modern Warfare 2” that will have in-game items that tie into “Warzone.” As for its canceled esports tournaments for “Call of Duty” and “Overwatch,” Activision has announced it will pursue ways to continue tournament play online.
Take-Two Interactive (TTWO)
While Activision looks for ways to keep its esports tournaments going somehow during the coronavirus pandemic, Take-Two Interactive’s esports are thriving. That’s thanks to the deal Take-Two made with the NBA in 2017 to launch the NBA 2K League, the first esports league sanctioned by a professional sports league. With the NBA on hiatus until further notice, viewers desperate to watch some basketball are tuning in to NBA 2K games played by professional athletes. Some teams have already announced they’ll play the rest of their previously-scheduled games via NBA 2K played by professional esports players, while 16 NBA players will compete in a players-only NBA 2K20 charity tournament that will be televised on ESPN during April.
Amazon (AMZN)
Amazon acquired Twitch, the world’s largest livestreaming platform, back in 2014; since then the platform has only grown, with an average of 1.2 million concurrent viewers in the fourth quarter of 2019. Last year most of those viewers watched people playing video games, but this year Twitch viewership is booming thanks to the growth of different segments. Professors and personal trainers alike are teaching classes on Twitch, while professional musicians with no crowds to play for are streaming their performances – and people are tuning in like never before as COVID-19 changes peoples’ habits. In the first quarter, Twitch hit new records in concurrent viewers, hours streamed and total hours watched (a ridiculous 3.1 billion), and those numbers will only continue to go up.
Twitch isn’t the only livestreaming service enjoying an impressive increase in viewership right now. Alphabet’s YouTube Gaming viewership increased 13% in the first quarter of 2020 compared with the final quarter of 2019, and the total hours watched in this quarter shot up to more than 1 billion. Alphabet’s deal with Activision to be the publisher’s exclusive streaming partner worldwide for all esports events means that once Activision figures out a plan for tournament play Alphabet’s viewership will only increase. Meanwhile, Alphabet continues to invest in Google Stadia, its cloud streaming service; the company has promised a free version of the service sometime this year. Hopefully, it will be when everyone is stuck inside playing video games.
