Despite Europeans youths returning to schools, colleges and universities, the new widespread adoption of tighter lockdown rules is likely good news for the video games sector.
A report from investment bank Jefferies says: “In demand terms, we believe that surveys support a significant and lasting increase in the market for games. Our global survey of 5,500 consumers made three points: gaming is up (+26 per cent balance playing more vs playing less), this net gain actually grew in the August update vs peak lockdown April (was +24 per cent) and, we note here the biggest gains come in the 25-54 demographics: [which is] very positive for holiday season sales of games and consoles.”
“Our earlier concerns,” says Jefferies, “that a lockdown boost would be followed by a recession hit to holiday spending now seems wrong: the recession impact is cushioned by state support, and far outweighed by the shift in spend from holiday/out of home entertainment to video games and home entertainment. Add four force multipliers, starting with 1) dark winter nights. 2) I already have Netflix, Prime, Disney and AppleTV: in games, there is great scope to buy more this year. 3) We were recently asked if a vaccine announcement would crimp gaming: on the contrary, we suspect a vaccine, for say 1Q21, would only encourage switching spend (defer the holiday until its safe, game now) versus ‘never vaccine’ (no point waiting, holiday now). 4) did we mention M&A?”
The bank says thecVideo games sector has “proven highly resilient” and it expects production and hiring to be largely unaffected by even a return to stringent lockdowns – even the harder-to-WFH testing and audio studios seem likely to have adapted (more than the TV and film sectors).
As if to endorse the Jefferies study, another bank report (from Exane/BNPP) says that August’s digital games revenue totalled $10.8 billion, up 16 per cent year-over-year. Digital console earnings grew the most and were up 88 per cent compared to the same month in 2019. Revenue also rose by 15 per cent on PCs and 3 per cent on mobile. Digital games have earned $82.8 billion through the first eight months of 2020, a growth of 13 per cent from the same time span last year.
Importantly, Exane/BNPP says that Gaming revenues took off in March as COVID-19 lockdowns spread worldwide. Since then, each game device type (mobile, PC or console) has generated higher year-over-year revenue.