The gaming industry is growing at a robust pace. In fact, the pandemic has really accelerated growth in the video games industry, and the ripple effects are still being felt. In 2022, the video games industry is expected to be worth $170.0 billion—that’s five times as much as the global box office.
So far, the biggest game of the year has been Call of Duty: Modern Warfare II. It took this game just 10 days to hit sales of $1.0 billion. Compare that to the highest grossing movie of 2022, Top Gun: Maverick—it took the film a whole month to gross $1.0 billion after being released.1
That said, the box office and video game industry are still closely linked. Electronic Arts Inc. said recently that it has ironed out a deal to develop three games inspired by characters in the Marvel Cinematic Universe (MCU). This deal gives Electronics Arts access to one of the biggest and well-known entertainment franchises in the world.
It is also a big win for Electronics Arts since Marvel character-based games could bring in new customers who may not be too keen on the company’s existing brands like FIFA.
The first video game Electronics Arts is developing will be based on Iron Man. It will be a single-player action-adventure game for PCs and consoles. The company hasn’t elaborated much on how it plans to use the Marvel character and it hasn’t provided a timetable. However, it will be a video game based on Iron Man’s history and original story.2
Beyond everything else, there’s a lot of buzz around what’s happening with Microsoft Corp.’s acquisition of Activision Blizzard, Inc. It has gotten a lot of attention from regulators. This is Microsoft biggest acquisition and one of the largest in the history of the video game industry.
Regulators from 16 territories have probed this takeover by Microsoft. The Federal Trade Commission (FTC) is expected to make a decision about it, while Britain’s Competition and Markets Authority (CMA) and the European Commission have looked into this deal in depth.1
GAMING COMPANY SPECIFIC UPDATES
NetEase Inc., one of the biggest gaming companies in China, is experiencing a setback as Activision Blizzard will be suspending most of its games in China due to the expiration of licensing agreements with NetEase.
Blizzard said the two parties couldn’t reach a deal to renew an agreement. With this, the 14-year deal between the two gaming companies will end and most of Blizzard’s titles will stop operating in China.3
Playstudios Inc., the developer and publisher of the playAWARDS loyalty platform and various games, including Tetris, Solitaire, Spider Solitaire, Soduku, myVEGAS Blackjack, and myVEGAS Bingo, posted strong financial performance for the third quarter of 2022.
Andrew Pascal, CEO of Playstudios said that despite macroeconomic headwinds, the company was able to hold its daily active users (DAU) and monthly active users (MAU) flat compared to the previous quarter.
Furthermore, the company is encouraged by the recent acquisition of Brainium and its portfolio of 10 highly engaging casual games that have close to two million DAU. The company views Brainium as an excellent complement to Playstudios’ existing portfolio and an important aspect when it comes to their playAWARDS expansion.4
Investing in Video Games with HERO ETF
Interested in a diversified approach to investing in video games? Evolve E-Gaming Index ETF (TSX Ticker: HERO) may be the right investment for you. HERO ETF gives investors access to equity securities of companies, listed domestically and globally, with business activities in the gaming industry. This ETF invests in companies involved in hardware, software, and services relating to the electronic gaming industry. Learn more about this fund by clicking here.
HERO ETF PORTFOLIO STRATEGY AND ACTIVITY
For the month, NetEase Inc. made the largest contribution to the Fund, followed by Nexon Co Ltd. and Krafton Inc. The largest detractors to performance for the month were Embracer Group Ab. followed by Take-Two Interactive Software and Roblox Corp. On the last rebalance, these securities were added to the portfolio: Neowiz, Nexon Games Co Ltd., Gamania Digital Entertainment Co Ltd., Digital Bros SpA, Playstudios Inc., and Sciplay Corp.
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- “Microsoft, Activision Blizzard and the future of gaming,” The Economist, November 29, 2022; https://www.economist.com/business/2022/11/29/microsoft-activision-blizzard-and-the-future-of-gaming.
- Shaw, L., “Electronic Arts Strikes Three-Game Deal With Marvel,” BNN Bloomberg, October 31, 2022; https://www.bnnbloomberg.ca/electronic-arts-strikes-three-game-deal-with-marvel-1.1839605.
- Liao, R., “Blizzard ends 14-year licensing deal with NetEase in China,” TechCrunch, November 17, 2022; https://techcrunch.com/2022/11/16/blizzard-ends-14-year-licensing-deal-with-netease-in-china/.
- “PLAYSTUDIOS, Inc. Announces Third Quarter Results,” Yahoo! Finance, November 8, 2022; https://finance.yahoo.com/news/playstudios-inc-announces-third-quarter-211500395.html.