A report from equity analysts at investment bank Berenberg on the games and gaming sector, and covering such high-profile businesses as Ubisoft, Electronic Arts, Activision and others, says that while some observers were forecasting a collapse of the sector as the world comes out of Covid, the bank suggests otherwise.
Berenberg says that after more than a year of significantly boosted player engagement and accelerated player base growth as a result of lockdowns across the globe, we believe that expectations of a complete reversion to previous levels of video gaming engagement are overcooked.
“Instead, we expect an acceleration of structural growth factors, such as gaming as a form of socialising. While we do expect a dip in engagement as global restrictions ease, we view this as a short-term bump in the road before a continuation of tailwinds within the sector,” says Berenberg.
The bank recognises that Covid has changed the game, saying: “While some investors expect a cliff-edge drop in engagement as we emerge from the pandemic, user data (such as Steam and Twitch statistics) tell a story of a more robust industry. As we dig into the specifics of the motives for gaming, we can see why this has been the case thus far. Of particular note is the emergence of video gaming as a form of socialising; as games become more interactive and streaming platforms such as Twitch gain traction, gaming is becoming less of an individual pastime and more of a social experience – particularly among younger cohorts. With the exception of CD PROJEKT, we believe that all of the companies in our coverage are well set up to take advantage of this trend through their multiplayer and free-to-play titles.”
The report also looks at ‘next generation’ user devices, noting: “The roll-out of the PlayStation 5 (PS5) and the Xbox Series X is roughly in line with the volumes of the previous generations of hardware after the same amount of time, but there is certainly a significant excess of demand over supply, with Covid-19 restrictions having hindered progress within the supply chain. The more protracted roll-out of hardware could prove a longer-tailed boost to game sales as consumers often purchase games to go with the new consoles. This effect may, however, be blurred somewhat by the backwards compatibility element of the next-generation consoles – as, for example, PS4 games can be played on the PS5.”