The video game industry has already seen a major shake-up in 2023 with the sudden end to the 14-year partnership between U.S. studio Blizzard Entertainment and NetEase Inc., China’s second-largest gaming company.
But with China’s easing of covid-era restrictions on travel, executives from NetEase attended the Game Developers Conference in San Francisco in March, as they shift their focus to developing original hit games for both Chinese and international markets.
Following its rapid acquisition of global studios and talent, NetEase is now pivoting to providing full support to these studios to deliver high-quality products. They expect their overseas investments to see returns within the next two to three years, and the company aims to be involved in a quarter of all AAA premium titles in the global market and generate half of its gaming sales from outside China within the next five years.
NetEase aims to position itself as a distinct alternative to Tencent, with a strong focus on game creation and a willingness to take risks, allowing its studios autonomy to develop new intellectual property. The company has already recruited star producers behind popular franchises Watch Dogs and Yakuza to help them do just that.
In addition to its game development efforts, NetEase plans to embed its own AI chatbot into games, starting with the upcoming mobile release of Justice in June. This move aims to create more realistic non-player characters and reduce production costs in the long run.1
Company Specific Updates
In March, Roblox Corporation announced key metrics from the month of February 2023. Daily active users (DAUs) were up 22% year-over-year, at 67.3 million, while hours engaged were up 24% year-over-year to 4.6 billion hours. Estimated revenue was between $214 million and $217 million, representing 20%-22% YoY growth, and estimated bookings were between $243 million and $247 million, representing growth of 18%-19% YoY.
Roblox also announced that approximately 5% of its $3 billion in cash and securities balance was held at Silicon Valley Bank (SVB) prior to its collapse and that on March 13, 2023, Roblox moved all of its SVB deposits of cash and securities to another financial institution.2
Activision Blizzard Inc
The first major in-game collaboration for Overwatch 2 was announced by Activision Blizzard in March. Available for a limited time only, a series of collectible cosmetic skins based on the globally beloved anime One-Punch Man launched for Overwatch 2, Blizzard’s cross-platform, free-to-play team-based action game. This collaboration provides a model and test case for future crossover promotions within the Overwatch universe and other Blizzard properties.3
Also in March, Activision Blizzard announced pre-orders for Crash Team Rumble, a new team-based multiplayer game for Activision’s multi-million selling Crash Bandicoot franchise. Crash Team Rumble will be released on PlayStation 5, PlayStation 4, Xbox Series X/S and Xbox One on June 20, 2023, with pre-orders granting access to a closed beta available April 20 through April 24.4
HERO ETF: Diversified Investing in Video Games
Interested in a diversified approach to investing in video games? Canada’s first esports and gaming ETF, the Evolve E-Gaming Index ETF (HERO ETF), is an index-based exchange-traded fund that invests in the leading video game companies across the globe. To learn more about HERO ETF, please click here: https://evolveetfs.com/hero/.
HERO ETF Portfolio Strategy and Activity
For the month, Roblox Corp made the largest contribution to the Fund, followed by Netease Inc and Activision Blizzard Inc. The largest detractors to performance for the month were Bandai Namco, followed by NCSoft Corp and CD Projekt S.A. On last rebalance, these securities were added to the portfolio: Webzen Inc and Paradox Interactive AB.
- Huang, Z., & D’Anastasio, C., “Life After ‘World of Warcraft’ Starts with NetEase Searching for Its Own Hits,” Bloomberg, March 29, 2023; https://www.bloomberg.com/news/articles/2023-03-29/life-after-warcraft-starts-with-netease-searching-for-own-hits
- “Roblox Reports February 2023 Key Metrics,” Roblox, March 15, 2023; https://ir.roblox.com/news/news-details/2023/Roblox-Reports-February-2023-Key-Metrics/default.aspx
- “First Major In-game Collaboration for Overwatch® 2 Adds Cosmetic Collection Based on Beloved One-Punch Man Anime,” Activision Blizzard, March 7, 2023; https://investor.activision.com/news-releases/news-release-details/first-major-game-collaboration-overwatchr-2-adds-cosmetic
- “Crash Team Rumble Spins Onto Consoles June 20,” Activision Blizzard, March 21, 2023; https://investor.activision.com/news-releases/news-release-details/crash-team-rumble-spins-consoles-june-20
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