How might COVID-19 impact the gaming industry, according to social mentions and sentiment?
The number of consumers playing video and PC games was increasing prior to the COVID-19 lockdown protocol, but social mention volume accelerated significantly as social distancing was enacted globally.
How much did social sentiment rise? Gaming mentions are up 115% in the last 30 days, according to LikeFolio data (see figure 2).
Not only is social distancing increasing the number of video games being played, it’s also bringing an unprecedented amount of first-time gamers to the table.
Social mentions of individuals buying or playing a video game for the first time are at all-time highs. The lightly shaded quarter below (beginning March 1, 2020) reveals a +113% year-over-year growth (see figure 3).
These new and existing gamers are fueling industry-wide increases in gaming-related spending with noted strength in demand for new gaming consoles (see figure 4).The NPD Group reported spending across video game hardware, software, accessories, and game cards totaled $1.6 billion in March 2020, the highest reported spend for March since 2008.
Three companies in the gaming industry have exhibited a considerable increase in consumer demand over the last month, according to LikeFolio data. They are:
1. Nintendo Co., LTD. (NTDOY)
Nintendo gaming mentions increased 176% year-over-year in the last month (see figure 5).
This increase in gaming social mentions places Nintendo above its peers in LikeFolio consumer data (year-over-year change in 30-day moving average):
Tweet analysis from LikeFolio confirmed Nintendo’s March 20 release of ‘Animal Crossing: New Horizons’ helped propel NTDOY platform gaming mentions (see figure 6).
Sales figures released by Famitsu reported Animal Crossing is pacing to be one of the best-selling video games of all time in Japan, selling 1.88 million physical copies in its opening three days.
LikeFolio purchase intent mentions for the Nintendo Switch (a device used to play Animal Crossing) increased nearly 600% since March 12, compared with prior 90 days (see figure 7).
Purchase Intent mentions for Nintendo across the board (all games and devices) reveals substantial year-over-year growth at 165%.
Nintendo will report Q1 2020 earnings on May 7.
2. Activision Blizzard, Inc. (ATVI)
ATVI owns popular game brands such as Call of Duty: Modern Warfare, making it a prime beneficiary of the surge in PC gaming.
Mentions of playing Call of Duty in the last 90 days are up +169% year-over-year (see figure 8 above) and still rising, six months post-release.
The second peak on the chart above (circled in red) is unprecedented. What drove this renewed interest? A March release of Call of Duty: Warzone, a free-to-play “battle royale” game. While the release was already planned prior to COVID-19, the timing was opportune for gaming adoption. The “free” game-mode can also be a driver of revenue. Warzone takes inspiration from games like Fortnite and Apex Legends by encouraging microtransaction payments.
These microtransactions are significant for ATVI. Across the board, microtransactions constituted more than half of Activision’s total revenue in 2019, more than $3.3 billion.
Although Call of Duty has already increased its player base from 40 million to 100 million in less than a year, LikeFolio data suggests continued growth in consumer demand.
Activision will release its Q1 2020 results on May 5.
3. Take-Two Interactive Software, Inc. (TTWO)
With quarantined fans desperate for sports content, TTWO’s NBA 2K franchise is filling in the gaps for many consumers that were left by a suspended basketball season.
Purchase intent mentions for the NBA 2K franchise have risen to a +212% year-over-year gain so far in 2020.
This uptick is relevant, as NBA 2K’s “MyTeam” mode drives recurrent consumer spending via in-game purchases.
As discussed with ATVI, these microtransactions contribute to TTWO’s bottom line. Microtransactions processed across all of Take-Two’s offerings moved the needle for TTWO on its last earnings announcement.
“During the third quarter, recurrent consumer spending (microtransactions) grew 6% and accounted for 41% of our total net bookings,” CEO Strauss Zelnick of Take-Two Interactive reported.
Overall purchase intent levels for TTWO are displaying 52% year-over-year growth at the current 90-day pace, thanks to strength in NBA 2K and Grand Theft Auto.
Looking ahead, it’s important to watch for continued increases in digital deliveries as console-based revenue declines and PC gaming soars.
TakeTwo Interactive’s earnings release date for Q4 2020 has not yet been announced but is estimated to occur in early May.
Moving forward, it's noteworthy to monitor consumer demand to understand the long-term implications for these gaming companies noted that are currently exhibiting surges in consumer demand. A key indicator of potential success will be their ability to retain new consumers post COVID-19 restrictions. Game on.
Andy Swan is not a representative of TD Ameritrade. TD Ameritrade and LikeFolio are separate and unaffiliated companies. The views and opinions expressed in this article are are solely those of the author.
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