The Electronic Entertainment Expo, commonly known as E3, wrapped up last week. These were some of the investor takeaways from E3 2018, the biggest gaming conference of the year.
The year’s largest gaming event, The Electronic Entertainment Expo, known as E3, wrapped up recently in Los Angeles. The event showcased 3,250 products from more than 200 exhibitors. Over the years since E3 started in 1995, the video game industry has grown into the largest component of the entertainment industry with $100 billion-plus sales worldwide, according to industry tracking firm Newzoo.
As the premiere video game industry trade event, the expo is widely followed by analysts and investors looking to stay on top of the latest trends in gaming. These were some of the takeaways and highlights for investors from E3 2018.
New console launches have always been a primary focus at previous conferences, however, with no new consoles unveiled this year, companies were emphasizing new games and software.
At its Xbox E3 press conference, Microsoft (MSFT) announced it was acquiring four gaming studios that will add to its game lineup: Ninja Theory, Playground Games, Undead Labs and Compulsion Games. Microsoft also announced it would be creating a new in-house game studio called The Initiative that would produce new games for Windows PC and Xbox.
The acquisitions and new game studio come as Microsoft continues to expand Xbox Game Pass, which allows users to download and play more than 100 games via a subscription service, as opposed to purchasing individual titles.
Up until recently, game streaming, similar to how Netflix (NFLX) and Amazon (AMZN) Prime operate for video, wasn’t a possibility. The reason is that unlike video streaming where a movie or TV show is being played from start to finish, video game players are providing inputs via controllers and reacting to the game. The environment needs to constantly adapt to their movements, as well as everybody else in multiplayer games.
Improvements in internet speeds and the pace at which cloud servers can process information have gotten to the point where streaming technology can keep up with rapidly changing gameplay. At E3 2018, Electronic Arts (EA) was demonstrating its version of what it calls “cloud gaming”, a game streaming service still in development that allows users to play on pretty much any device.
Microsoft’s executive president of gaming, Phil Spencer, also announced at E3 that Microsoft was working on a game-streaming service that would allow users to play games on any device.
Instead of needing a console like Microsoft’s (MSFT) Xbox or Sony’s (SNE) Playstation, gamers just need a device that they can connect to a controller and the internet, whether it’s a smart TV, tablet, laptop or phone. All the processing takes place via a cloud platforms like Amazon Web Services or Microsoft Azure.
In an interview with Variety before E3, Ubisoft (UBSFF) founder and CEO Yves Guillemot said he believes game streaming will eventually make consoles obsolete. EA’s Chief Technology Officer Ken Moss and Microsoft’s Phil Spencer, on the other hand, have said they don’t envision consoles being killed off by growth in streaming.
While games and new consoles draw a lot of the attention at E3, gaming accessories are another big part of the show. Newzoo estimates the global gaming accessories market will reach $3.12 billion in sales in 2018, with $2 billion of that generated from headsets.
Headsets have become a key component of gaming, providing players with an immersive experience as they coordinate with teams and trash talk competitors relentlessly. At E3, Turtle Beach (HEAR) announced two new headsets, adding to its sizable lineup of gaming-dedicated headsets.
Turtle Beach’s stock has climbed rapidly in 2018 and is up 1132% year to date, so you might want to tread cautiously if you’ve been considering investing. In its most recent earnings report, net revenue was up 185% year over year to $40.9 million. Management has attributed its recent sales results to strength in the console gaming market, which it says has been driven by the success of Fortnite and PlayerUnknown’s Battlegrounds, both produced by game studios that Tencent (TECHY) owns stakes in.
The video game industry has evolved a lot over the years and it doesn’t look like it’s slowing down anytime soon.
Watching live streams of other people gaming via platforms like Amazon’s Twitch, Alphabet’s (GOOGL) YouTube Gaming, and Microsoft Mixer has started to become as popular as playing the games themselves.
Free-to-play games, such as Fortnite and PlayerUnknown’s Battlegrounds, both of which generate hundreds of millions a month from in-game purchases according to digital game sales tracker SuperData Research, have shown that there are multiple models that can be successful within the industry.
And esports are still in their infancy, but everyone from Activision Blizzard (ATVI) to professional sports leagues are getting involved. The International Olympic Committee has even been evaluating them to see if they might have a place at the Olympics in the future.
Research is an important component of any sound investing strategy. Learn more about the tools and resources TD Ameritrade provides to help you look for your next investment opportunity.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
All investing involves risk, including loss of principal.
TD Ameritrade and all third parties mentioned are separate and unaffiliated companies, and are not responsible for each other’s policies or services.
Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2018 TD Ameritrade.