November 3, 2020
The COVID-19 pandemic is boosting the multi-billion-dollar video-game industry into the stratosphere, and Big Tech companies predict the trend will endure past the pandemic. Microsoft, for example, plans to acquire the company behind the “Doom” game franchise for $7.5 billion. NPD Group reported that about 244 million people in the U.S. play video games, up 15 percent from a 2018 study. The report added that, “Americans spend an average of 14 hours a week playing video games … compared with 12 hours weekly in 2018.”
The Wall Street Journal reports that NPD analyst Mat Piscatella noted, “we’ve jumped ahead a couple years in terms of consumer behaviors around gaming.” “We’re not likely to return to pre-pandemic baselines around engagement or spending,” he added.
Carnegie Mellon University professor George Loewenstein noted that, “the pandemic has been the perfect breeding ground for the mushrooming of what was already a very large industry.”
In the process, gaming, once a socially stigmatized activity, has entered the social mainstream, and game companies have been quick to capitalize on this. Zynga, publisher of “Words With Friends,” for example, is “among those promoting the idea on social media with the hashtag #PlayApartTogether.” Facebook head of gaming Vivek Sharma noted, “the social connection, that’s the thing that really anchors growth.”
“It’s not that your shared bond is shooting aliens,” he said. “It’s a sense of adventure when you’re inside this space with somebody else.”
Newzoo, which predicted at the start of the year that global consumer spending on gaming software would reach $159 billion this year, now upgraded sales to almost $175 billion. Microsoft said that, “Xbox content and services revenue increased 30 percent” for the quarter ending September and Activision Blizzard reported that, “net revenue rose 52 percent from a year earlier to $1.95 billion.”
At Discord, monthly users grew 67 percent between January and August. Streamlabs reported that, in Q3, “people watched 7.46 billion hours of live streams, nearly twice as much time as they spent a year ago.”
PitchBook reported that, “the gaming industry has had $10.3 billion worth of mergers, acquisitions and buyouts and $1.7 billion of venture investments this year through mid-October.” Shares of Unity Software, whose software is used to create mobile games, have shot up 80+ percent since its September IPO.
Investors are also “driving up valuations of closely held gaming startups as well as publicly traded veterans … triggering a surge in initial public offerings, acquisitions and fundraising deals.” But Meritech Capital Partners general partner Max Motschwiller stated that, “investor interest in video-gaming is so strong that the best funding opportunities are drying up.”
“Many of these companies don’t need to raise additional capital,” he said.