How the coronavirus is impacting the gaming and esports sector - InvestorIntel

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

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.

     Axion Ventures Inc. (TSXV: AXV | OTCQX: AXNVF)
     Backstageplay Inc. (TSXV: BP)
     Bragg Gaming Group Inc. (TSXV: BRAG)
     Contagious Gaming Inc. (TSXV: CNS)
     Enthusiast Gaming Holdings Inc.     (TSXV: EGLX | OTCQB:
     EGHIF)
     ePlay Digital Inc. (CSE: EPY)
     eQube Gaming Limited (TSXV: EQG)
     Fandom Sports Media Corp. (CSE: FDM)
     Global Daily Fantasy Sports Inc. (TSXV: DFS)
     Global Gaming Technologies Corp. (CSE: BLOC.U)
     Jackpot Digital Inc. (TSXV: JP | OTCQB: JPOTF)
     Kuuhubb Inc. (TSX: KUU)
     Mad Catz Interactive Inc. (TSX: MCZ)
     Millennial Esports Corp. (TSXV: GAME | OTCQB: MLLLF)
     Shoal Games Ltd. (TSXV: SGW)

The Stars Group Inc. (TSX: TSGI | NASDAQ: TSG)
     Versus Systems Inc. (CSE: VS | OTCQB:VRSSF)
     Victory Square Technologies Inc.     (CSE: VST | OTCQX:
     VSQTF)

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.