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Bank: Covid continues to benefit video games sector

September 25, 2020

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.

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