How the coronavirus is impacting the gaming and esports sector…

As we all know coronavirus (aka COVID-19) is currently causing havoc with the stock markets. In the real economy some sectors are losing while others are winning. For example, tourism is being smashed while health care is in huge demand. Today I give an update on the gaming and esports sector to see how it is being impacted in the real economy.

Gaming

Gaming in China is booming as a result of the coronavirus enforced lockdowns and more time spent at home. Anecdotal reports suggest gaming in China has increased in early 2020 as consumers were stuck at home.

SensorTower reported:

“The top mobile game by worldwide revenue for January 2020 was PUBG Mobile from Tencent with more than $176.3 million in user spending, which was nearly four times more than the title generated in January 2019. Approximately 52.8 percent of PUBG Mobile’s revenue was from China……Honor of Kings from Tencent was the second highest earning mobile game by worldwide revenue for January 2020 with more than $151.3 million in gross revenue, which represented 25 percent year-over-year growth from January 2019.”

The Gaming Recap reports (no link):

“Year over year in January, aggregate online game time spent for Tencent’s most popular games would increase 28%, monetization of these games was seen to be up 50-60% from normal seasonality, with nation-wide online games seeing cash grossing increasing 30-50%. In February, China would see a 62% jump in mobile game downloads.

Bloomberg reports:

“Virus quarantines in China spur Tencent, NetEase gaming surge. Mobile gaming DAUs grew 48% since December, topping year prior. For Mahjong and Game For Peace (PUBG), two of Tencent’s most popular titles, daily active users increased 109% and 44%, respectively, in the two months through February.”

Daily Average Users for popular games in China

Source

Back in January in the InvestorIntel article “The Wuhan Coronavirus crisis leads to some investment opportunities“, I wrote:

“As consumers choose the safety of home, online shopping and entertainment sites should be winners……online shopping companies Alibaba (NASDAQ: BABA) and JD.com (NASDAQ: JD), food delivery giant Meituan, and gaming and social media giant Tencent (OTC: TCEHY).”

Online gaming has been a big winner simply because it is a popular form of entertainment and in many cases provides some online social interaction. Both of these will continue in future years, and in the short term with coronavirus leading to increasing global lockdowns the thematic will only get stronger. There will be a shift towards more global consumers matching the coronavirus global pandemic shift, where previously it was mostly a China problem. This will lead to increased revenues for gaming companies that service the global marketplace. Tencent will still be a leader, but other gaming related stocks will also do well.

Some other global gaming companies include Sony Corp. (NYSE: SNE), Activision Blizzard (NASDAQ: ATVI), Electronic Arts (NASDAQ: EA), NCsoft Corporation (OTC: NCSCF), Nexon Co Ltd (OTC: NEXOF), NetEase, Inc. (NASDAQ: NTES), Nvidia (NASDAQ: NVDA), Advanced Micro Devices (NASDAQ: AMD), Changyou.com Ltd. (NASDAQ: CYOU), and SciPlay Corp. (NASDAQ: SCPL).

The current most popular gaming model has been free to air games with players spending money on in-game purchases. While this will continue, a new model of cloud gaming will allow a whole new breed of online players to play the latest and greatest online games, from practically any device, for a small monthly subscription. This new trend is known as ‘cloud gaming’ (or Gaming as a Service (GaaS)) as it involves internet streaming to deliver games on your device of choice. Key companies in the market are Google Stadia, Microsoft xCloud, Sony Playstation Now, Apple Arcade, Shadow, Vortex, Parsec, and Nvidia’s GeForce Now.

Esports

Esports has been impacted by the coronavirus as stadium tournament events with large crowds are being canceled, due to new rules limiting crowd gatherings (usually to <500, and sometimes to <100).  This then impacts the number of events that can be held, or if they are held with no crowd it can reduce the excitement. The flip side is that as conventional sporting events are canceled due to coronavirus then this may attract new viewers to esports.

Closing thoughts

For the next few months, the gaming sector is looking a stronger bet than the esports sector. The good news for investors is that the market-wide sell-off in equities has been almost across the board in every sector. This means gaming companies with booming revenues are now more attractively valued and should be on investor’s radars. The esports sector may not get the same revenue boom but again stocks have been sold down indiscriminately leaving plenty of bargains.

What we need to remember is that in bad times people want to have fun and tune out from all the stress and worry of coronavirus. And that is exactly what the gaming and esports sector offers, and why it will continue to have success in 2020.




Canadians in the lucrative global gaming and eSports market

You could be forgiven for thinking that the Canadian stock exchange covers nothing more than mining and cannabis stocks; however Canada has so much more. Canada has a thriving gaming industry. Canada’s gaming industry is diverse, from online gambling to fantasy football, and online multi-player first person shooter games.

Gaming is a big business in Canada and it’s also a big employer, with openings for game designers, producers, programmers, artists, as well as business, sales, and marketing roles. The Entertainment Software Association of Canada reports that Canada’s gaming industry contributes $3.7 billion to the country’s GDP. With Montreal emerging as Canada’s leading hub for gaming job creation (closely followed by Vancouver), Canada has the third largest video game industry in terms of employment numbers following those in the US and in Japan. 

The global gaming market (including the very popular e-sports)

The good thing about the modern online world is that gaming industry participants based in Canada can sell into a global market valued in 2018 at US$77.306 billion. This means companies in the sector have a large market opportunity selling globally, with most gaming revenue in China (US$22.8 billion), USA (US17.4 billion), and Japan (US$11.4 billion). The chart below shows mobile games revenue is by far the largest followed by downloaded and online games.

Global gaming revenue was US$77.3 billion in 2018

eSports

eSports (also known as electronic sports, e-sports, or eSports) is a form of competition using video games. Most commonly, e-sports takes the form of organized, multiplayer video game competitions, particularly between professional players and teams. In recent years eSport competitions have become very popular – some examples are League of Legends, StarCraft, WarCraft, Hearthstone, Overwatch, Player Unknown’s Battlegrounds (PUBG), Dota 2, and Fortnite. Players compete online for huge price pools as much as US$25 million.

Sponsors overwhelmingly make up the bulk of e-sport team revenues, with brands featured on jerseys, in-stream promotional content, and hardware exclusivity deals. Like the game developers, various third party companies run their own competitions, whilst also planning and producing coverage around them. The rights to these broadcasts are then sold to streaming platforms (or TV), or tickets to watch an event are sold online. Online betting can also add to revenues.

Fortnite’s free-to-play (FTP) games-as-a-service model appears to be accelerating as it now seems inevitable that more games will adopt this platform. Console video game revenue growth accelerated in 2018 as free games like the Fortnite platform expanded the market.

5G, augmented and virtual reality should boost the gaming sector in the near future

In the future augmented and virtual reality will play a different role on how gamers approach the industry with new games and ideas becoming more interactive, and the further deployment of 5G is going to be another “game” changer. For now there are enough gaming companies in Canada to keep many gamers and investors interested. One day very soon expect to see Fortnite’s new platform of interactive multi-player games being played across smart cities all powered by 5G.

Canada has many gaming companies worth having at look at that could be pioneers in this coming new wave of gaming, but right now just sit back at home in front of your current games console and enjoy the entertainment, it’s all about fun.

Meanwhile here’s a starting list (with links) of Canadian gaming companies to consider.

As you can see from the above list, Canada’s gaming industry is growing and has many listed participants.

If it’s online casino play, fantasy eSports gaming, or massive multi-playing console gaming; there is no doubt Canada’s gaming industry is involved and a growing part of the action.