Video games sector benefitting from lockdown

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A detailed report from investment bank Exane/BNPP says that while commercial TV across Europe is suffering evaporating revenues because of the coronavirus, the video games sector is expected to continue outperforming in the current environment.

The video games sector is “benefitting from attractive underlying sector trends, increased player engagement during lockdown, likely resilience during a period of recession and no financing/liquidity issues,” says the bank’s report.

The bank picks out Activision-Blizzard, Electronic Arts, Take-Two Interactive and Ubisoft for specific mention. It also highlights gaming platform Steam which broke various records in terms of number of concurrent players and concurrent active players:

(1) Number of concurrent players reached a peak of 24.5 million on April 4th;
(2) Number of concurrent active users playing a game on Steam hit a new high of 8.1 million, also on April 4th.

On average, the number of concurrent players reached 20.4 million in Q1 20 (+16 per cent increase vs Q1 2019). If we focus only on March, the average number of concurrent players reached 23.6 million (+37 per cent vs March 2019).

The latest Nielsen Games study is also examined. The bank says: “As part of its monthly Video Game Tracking survey, Nielsen Games polled roughly 3,000 individuals across France, Germany, the UK and the US The study showed an increase in:

(1) time spent playing video games (+20 per cent to +45 per cent increase vs previous survey, depending on the country);
(2) time spent playing multiplayer games (12 per cent to 29 per cent of respondents);
(3) spending (23 per cent to 39 per cent of respondents),
(4) digital purchases (23 per cent of respondents on average).

Indeed, the uptick in player involvement is significant. “Rising player engagement during lockdown period could support c.+5/10 per cent boost in Q1/Q2,” says the bank. “There is now various evidence showing a rise in player engagement and monetisation during the current lockdown. Based on the data and assuming lockdowns are generally in place until early May, we expect a boost to net booking of +5 per cent in calendar Q1/20 and of c.+10 per cent in calendar Q2. We also expect an acceleration in the shift to digital, which is accretive on gross margin. It remains to be seen if the boost will be sustained or reversed once quarantine measures are lifted,” says Exane.

“Publishers have implemented remote access for their developers to work from home and this should help mitigate the impact of lockdown measures. That said, it is almost certain that productivity will suffer. At this stage, we don’t expect a material impact on major Western publishers’ pipeline for FY/21 or on live services content,” the bank adds.

“While the sector is not immune to recessions and a decline in consumption, publishers’ business models have sharply improved in recent years, notably in terms of player engagement, recurring revenues, profitability and digit7al distribution, and they now appear much better positioned. At this stage, we assume a negative impact from a recession will be offset by lockdown measures boost,” states the bank.


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