Pandemic's stay at home culture has leveled up video game industry

If there is one industry that has continued to weather the coronavirus pandemic, it's video games. The main reasons are fairly obvious; more people staying home for longer periods of time and looking for ways to entertain themselves equals more time buying and playing games. But what has since been assumed over the initial months of the pandemic has proven true over the last week as company earnings, sales reports and usage reports have started to come in for the first half of 2020: The video game industry is thriving.

Let's take a look at some of those results and what they mean for the future of the video game industry and the impact.

But first, here's a stock photo of somebody "playing" video games showing exactly how nobody actually plays video games.

(PHOTO: Getty)

If you ever see an article with a photo like that above the headline, don't read it. Now that we've established credibility...

?? No gaming conventions? No problem (at least for the big publishers)

(PHOTO: Getty)

The biggest gaming convention wasn't held this year because of the pandemic and many had wondered if major publishers would be able to showcase their games and products at the level they could have with E3. Turns out, "It looks like the biggest publishers will be absolutely fine without big conferences like E3, but indie and mid-size developers may fall behind during this new normal." according to a Superdata report by analyst Carl Rogers.

?? Video game spending best in a decade

Video game spending hit a 10 year high in June in the U.S. This isn't particularly surprising until you consider that June performed better than April and May at the height of lockdowns in the U.S. Though June is when summer comes into swing and kids are off from school, even if they were tele-learning. Consider that Grand Theft Auto V, which launched in 2013, was the fourth best selling game during the month and you can get a sense of just how strong the game buying market has been months into the pandemic.

In Europe, a B2Boost report on the market suggested a"remarkable impact of the COVID-19 pandemic on consumer games spending," according to Gamesindustry.biz.

?? Game publisher gains

All across the board game publishers have been reporting strong gains for the first half of the year. Grand Theft Auto V's publisher Take-Two Interactive Software raised its sales forecast after the recent success and probably feeling pretty confident about themselves announced a game price hike from the standard $59 to $69. That didn't last long. Take-Two retreated from a price hike after a predictable backlash.

Electronic Arts (EA) beat quarterly estimates and raised its full year forecast "encouraged by strong player engagement and increased video game sales to stuck-at-home gamers" after posting strong results. EA's two upcoming releases of the major popular franchises FIFA and Madden are also anticipated big sellers.

For the quarter ending on June 30th, Capcom reported net sales of game content up by $203 million, an increase of 54 percent year-over-year. Activision-Blizzard, publisher of popular games Overwatch, Call of Duty and World of Warcraft claimed success this year and boosted its forecast after record levels of engagement but also warned "economic uncertainty could hurt gaming surge."

Sony Corp just this week announced "its April-June profit jumped 53% as its video game and other online businesses thrived with people staying home amid the coronavirus pandemic," which came as consumer demand for their electronics products plunged. Sony's strength in the gaming division has helped shares hit a 19 year high.

Microsoft (LinkedIn's parent company) saw gaming revenue up by $189 million, or 2 percent, year-over-year, while hardware revenue was down 31% year-over-year.

With both Microsoft and Sony looking to launch their next generation consoles the Xbox Series X and PlayStation 5 later this year, there are high expectations for each company to maintain a strong showing for video games. Microsoft also announced it will be launching Xbox Game Pass, their Netflix-like service, for mobile devices in September through Project xCloud gaming technology. This will allow subscribers to to service to play Game Pass games on their phones for the first time and is a major step in expanding both the Game Pass service to a wider audience.

?? The Animal Crossing effect

Even if you don't own a Nintendo Switch or the Animal Crossing game, you've likely heard of it. Animal Crossing launched on March 20th, right as the coronavirus pandemic was impacting more countries and keeping people at home. When people couldn't go outside, they could plant flowers in Animal Crossing.

It had the biggest launch of any Nintendo Switch game, set records and has become a cultural phenomenon. It sold systems, and the Switch is still sold out everywhere as we enter early August. In Japan alone it has had a massive impact on the industry.

The Switch continues to be hottest gaming console going, which isn't a surprise considering the timely success of Animal Crossing and the family-friendly and portable nature of the system has been a huge draw for those stuck at home and with families and limited space to work with.

As the pandemic continues on with no real sign of slowing down, interest in the Switch will likely continue to keep them off the shelves, as noted by Nintendo president Shuntaro Furakawa in a recent investor call, "We cannot currently answer when the shortages will be resolved."

So far, Nintendo has been the champion of 2020 when it comes to gaming. Even with the new console launches by Sony and Microsoft and the strength of mobile gaming. It will be a real challenge to dethrone Nintendo and Switch will continue to be a money maker for the Japanese company.

?? Mobile gaming skyrockets

Everybody has a mobile phone already, so they already have access to games. Sorry for being Captain Obvious here, but that also means playing games is something we generally all do, and do more of when bored or stuck at home. My mom, and probably your mom, plays at least one mobile game, even if it isn't likely to be PUBG or Mobile Legends. It could be Words With Friends or something else equally casual, but still a game.

According to recent analysis by WARC, "2.9bn people (71% of internet users, up from 63% in 2015) now play games on their smartphones, making mobiles the most popular gaming devices in history. Uptake is highest in Asia, with women leading the way."

Within Asia, mobile gaming is showing exceptional growth in Southeast Asia with significant market share and by 2021, the number of mobile online gamers in Southeast Asia could rise to 250 million. Speaking to the older age group of players in SEA, 55 percent are around 55 years old while 8 percent are teens.

?? Esports future turning into present

Looking around the world at the various news around Esports it's easy to find Esports stories like the thriving Esports scene in the Philippines, a rise in Esports betting, more gamers joining and watching competitions online or record breaking viewer numbers in Brazil. In 2019 Esports revenue was reported to be upwards of $500 million in Asia alone, 50 percent of global Esports revenue. In an industry like Esports which was generally still trying to figure out how to really monetize and make money, the pandemic has pushed the industry to the forefront in a way it couldn't possibly have achieved in such a short amount of time.

Granted, many in-person competitions have been cancelled and that has had an impact, but an industry based on playing video games is if anything adaptable with the many digital streaming options like Twitch and YouTube. This is leading some companies to recruit tech power players to help fortify the future of Esports streaming in a world where its difficult to host major events.

Just don't expect to see these kind of Esport event turnouts for quite some time.

(PHOTO: Overwatch Grand Finals 2019 / Getty)

Add in companies like Tencent entering into talks to create a $10 billion game streaming behemoth in a China market crazy about competitive gaming and there's really no argument to be made that Esports hasn't already "made it." It has. Its here.

?? Free-to-play?

As "free" to play games have quickly taken up a major share of the games market, there's been no slowdown in the trend since the start of the pandemic and even major gaming franchises like Halo are making the switch from multiplayer being part of a paid base game to that of a separate free-to-play experience.

In the context of a global crisis where people have less money to spend and are more likely to fewer AAA titles because of tightened wallets, having the option of free-to-play AAA games like Fortnite, Call of Duty: Warzone, PUBG, Valorant, League of Legends and more lets players jump in without spending any money. The problem exists, and has existed, when the free-to-play model also exploits pay-to-win as a part of the base game, such as with a game like Clash of Clans or with the addictive nature of loot boxes.

Gamers have have gotten more savvy to the practices used to part them from their money in order to win, and will continue to do so when there's less money to spend. Publishers that seek to push gamers to pay-to-win will likely, and should be punished for it. Loot boxes with powerful items are now a no-no.

?? What about virtual reality?

I didn't even touch on VR and where that could lead. VR has been boosted by the pandemic, but is still in the realm of "potential" when it comes to gaming as it has a high cost entry point and takes a certain amount of dedication to get started with. It can be an incredible experience and there's every possibility VR goes mainstream as a result of the rise of gaming, but the verdict is still out. Plus, I recently read a science fiction story where there was a global pandemic and the entire population of the planet turned to VR as a means to cope and it basically killed off the human race because nobody wanted to leave the house. Hit a little too close to home. So there's that.

What does it all mean?

Pretty simple really. Video games are keeping big companies like Sony in the green, jobs in place, people entertained, social connections intact and acting as an alternative to the crashing film industry. I mean, did you see Disney's earnings report? Yikes. When you've got major studios releasing delayed franchise big-budget films on their own networks for $30, you're in a bad way.

Worth pointing out that even with all the good gaming news, that doesn't mean the video game industry doesn't have its issues. It certainly does. There's been an ongoing conversation around working conditions at major publishers with Blizzard now facing rising tension among staff who have been anonymously sharing salaries and recent pay increases, highlighting disparities. Then there was Riot Games while benefiting from a successful launch of Valorant, had to pay $10 million in a gender discrimination suit in December 2019 after reports of a toxic work culture. Mixing in company controversy, a pandemic, staff spread around the globe working from home and hitting launch dates can take a toll.

Edit (August 6, 2020 11 am SGT): Not two days have passed and Trump just signed an executive order which could impact Tencent's business, and who does business with Tencent, in the U.S. This impacts a number of gaming companies which are either fully owned or partially owned by the Chinese giant. Including the above mentioned Riot Games.

Even with the challenges, unless a global war breaks out or there's an asteroid impact (which would be just so 2020, and fingers crossed neither happens) there's not much that could slow down the video game march into our homes and social fabric of culture over the next year. Yes, there will be degrees of gaming burnout, but that won't be any different than spending too much time online or binge watching your streaming service of choice.

Games are here to stay.

As always, stay safe and wear a mask. ??

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