General Overview

Apple’s Wonderlust Event in September took a surprise turn with the announcement that AAA games like Resident Evil 4 and Assassin’s Creed Mirage will be available on the iPhone 15 Pro. This high-end smartphone is powered by Apple’s cutting-edge 3-nanometer A17 Pro chip, offering features such as HDR support for a premium gaming experience.

Apple’s decision to emphasize mobile gaming with the iPhone 15 Pro stems from the recognition that gaming is a compelling way to showcase the device’s power. Gaming already plays a significant role in Apple’s service revenue, and the trend of high-end gaming on smartphones, especially in regions like China and Japan, is on the rise.

Notably, popular titles like Genshin Impact and Call of Duty Mobile have attracted millions of players to mobile gaming. The success of this strategy will depend on how Apple manages the pricing and delivery of AAA games, given the predominantly free-to-play nature of the mobile gaming market. Overcoming potential sticker shock for premium games will be a key challenge.¹

Source: iPhone 15 Pro gaming

And Epic Games CEO Tim Sweeney has announced that the Epic Games Store will welcome games utilizing generative AI. This decision comes in response to Valve’s removal of a game featuring a ChatGPT-powered mod from its Steam store, citing concerns about AI and copyright issues.

Sweeney emphasized the lack of strong legal precedent for classifying AI-supported works as derivative, especially considering the vast amount of training data involved. He expressed a general stance against banning games that harness new technologies during development.²

As the generative AI debate gains traction in the gaming industry, the stance of individual studios and developers will be intriguing to watch. Prominent figures like John Romero, co-creator of Doom, see the potential for sophisticated AI-driven feedback, such as character dialogue and tactical responses tailored to players’ actions, offering unique and customized gaming experiences that he calls “really ground-breaking.”³

Company Specific Updates

Activision Blizzard Inc

Activision Blizzard’s $69 billion deal to be acquired by Microsoft has received preliminary approval from the UK’s Competition and Markets Authority (CMA), ending more than 18 months of limbo for the biggest-ever gaming deal.⁴

Source: The Verge/William joel

Initially, the CMA had blocked the acquisition due to concerns related to cloud gaming. However, Microsoft recently restructured the agreement, transferring cloud gaming rights for both current and future Activision Blizzard games to Ubisoft for the next 15 years. The CMA has deemed this revised deal to effectively address their earlier concerns.

It’s important to note that this preliminary approval is a significant milestone, though it is not the final decision. The CMA is actively seeking input from third parties regarding the proposed remedies offered by Microsoft and Activision Blizzard. The deadline for providing feedback is October 6. The CMA intends to reach a final ruling before the deal’s extended closing deadline of October 18.⁵

Roblox Corp

Roblox, the popular user-generated content platform, is set to debut on PlayStation consoles (PS4 and PS5) in October. This move follows Roblox Corp’s strong Q2 2023 financial results, with revenues reaching $680.8 million, 65.5 million daily active users, and 13.5 million monthly subscribers.

Source: Playstation/Roblox

For Roblox, this expansion into PlayStation represents a significant opportunity to broaden its market reach. Notably, a substantial portion of Roblox’s user base is under 13 years old, potentially introducing younger players to the PlayStation ecosystem. This aligns with PlayStation’s strategy to diversify its user demographic.

Sony, the company behind PlayStation, stands to benefit as well. They have sold over 41.7 million PS5 consoles and have amassed 108 million PlayStation Plus subscribers. Additionally, Sony will receive a 30% share of all Roblox purchases made through PlayStation consoles, further enhancing its revenue stream and expanding its gamer demographic.⁶

Investing in Video Games with HERO ETF

Looking to invest in video games? Consider Canada’s first esports and gaming ETF, the Evolve E-Gaming Index ETF (HERO 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/.

Portfolio Strategy and Activity

For the month, Activision Blizzard Inc made the largest contribution to the Fund, followed by International Games System Co Ltd and Roblox Corp. The largest detractors to performance for the month were Nexon Co Ltd, followed by Bandai Namco Holdings and Capcom Co Ltd.

 

Sources

  1. Wijman, T., “AAA gaming is coming to iPhone 15 Pro, Valve’s esports strategy is evolving, and more from the games industry,” Newzoo, September 19, 2023; https://newzoo.com/resources/blog/gaming-industry-trends-roundup-september-19
  2. Elliott, R., “Starfield attracted 6 million players in two days, Sea of Stars is an indie hit, and more from the games industry,” Newzoo, September 14, 2023; https://newzoo.com/resources/blog/gaming-industry-trends-roundup-september-14
  3. Ore, J., “AI could upend the video game industry. Developers worry it threatens their jobs,” CBC, September 23, 2023; https://www.cbc.ca/radio/video-games-artificial-intelligence-1.6974408
  4. Gemmell, K., “Microsoft’s Activision Deal Set to Clear Final UK Hurdle,” Bloomberg, September 22, 2023; https://www.bloomberg.com/news/articles/2023-09-22/microsoft-s-activision-deal-set-to-get-uk-s-cma-approval
  5. Ricker, T., “Microsoft’s Activision Blizzard deal gets preliminary approval from UK regulator,” The Verge, September 22, 2023; https://www.theverge.com/2023/9/22/23885176/microsofts-activision-blizzard-uk-cma-preliminary-approval
  6. Elliott, R., “Starfield attracted 6 million players in two days, Sea of Stars is an indie hit, and more from the games industry,” Newzoo, September 14, 2023; https://newzoo.com/resources/blog/gaming-industry-trends-roundup-september-14
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