GAMES: VIDEO GAME SURGE

VIDEO GAMES SURGE IN LOCKDOWN BOOM

By CHRIS McGOWAN

TOP AND BOTTOM: Nintendo’s Animal Crossing: New Horizons, playable on the Switch, is full of lovable characters and sold 13.4 million units in the six weeks following its March release. (Image courtesy of Nintendo) During the COVID lockdown, many people have passed a good portion of their free time playing video games, resulting in a spike for one of the rare industries that thrived when the pandemic took hold in the spring. Many already growing segments – such as mobile games, multiplayer games, the free-to-play model and the “battle royale” category – received an even bigger boost. The handheld Nintendo Switch enjoyed record sales. And employees across the video game industry worked remotely from home to keep development on track.

“During a lockdown,” says Michael Pachter, Managing Director of Equity Research for Wedbush Securities, “people are home all the time, so they find themselves with less commute time, less preparation (grooming) and less time spent going to movies, the gym, the beach, restaurants, etc. That frees up at least two hours per day per person, and yes, they are entertaining themselves. The pickup in each entertainment medium is probably correlated to time spent there already, so TV probably [picked up] the biggest portion and games the second biggest.”

April’s video game revenues illustrated that Americans were indeed busy at home with games on their PCs, cell phones and consoles. In terms of the latter, U.S. consumers spent $420 million on hardware like Sony’s PlayStation 4, Microsoft’s Xbox One and the Nintendo Switch, a staggering increase of 163% over the same month a year earlier, according to The NPD Group, a market research company. The Switch was the leader and its year-to-date dollar sales for the first four months of 2020 were the highest of any platform in U.S. history, according to NPD, breaking a record set by the Nintendo Wii in April 2009. “I’ve been working with video game sales data for over 15 years now and April is by far the wildest month I think I’ve ever seen,” NPD analyst Mat Piscatella commented on Twitter on May 22.

The research firm also reported that total video game sales in the U.S. (hardware, software, accessories and game cards) reached nearly $1.5 billion in April, up 73% as compared to the same month the previous year. The gains for May, which had shorter lockdowns for many states, were not as high but still impressive: total U.S. sales reached $977 million, which was 52% higher than the same month in 2019. Square Enix’s Final Fantasy VII Remake (a PS4 exclusive until March 2021), Activision’s Call of Duty: Modern Warfare and Nintendo’s Animal Crossing: New Horizons (available only for Switch), were the top three titles in April, according to The NPD Group. 2K Sports’ NBA 2K20, Rockstar Games’ Grand Theft Auto V, Capcom’s Resident Evil 3 and Sony Interactive Entertainment’s MLB: The Show 20 were among other games at the top of the sales charts.

“Games that allow players to interact with other players and help replace missing social interactions are absolutely booming. Live service games are all pushing for more content to keep up with the increased demand of their players,” comments Keith Guerrette, Founder and Studio Director at Beyond-FX. Guerrette is a visual effects artist who worked with developer Santa Monica Studio on Sony Interactive Entertainment’s God of War franchise and with developer Naughty Dog on Sony’s Uncharted series and The Last of Us franchise.

“We’re definitely seeing a surge in incoming work. We just had to turn down a project today because every one of our artists is booked. We’re looking at hiring to set ourselves up for more capacity to meet the demand. COVID turned on the floodgates to remote work because nearly every games company just went full remote. There are a lot of great tools to make this viable. Companies like Undertone FX were already set up to thrive in remote, distributed teams, and now COVID is normalizing this.” —David Johnson, Founder, CEO and Creative Director, Undertone FX

For children, multiplayer video games are a great way to stay in touch with their friends when time, distance or a quarantine keep them apart. Kids’ consumer power could be felt in the big sales for Animal Crossing: New Horizons, which bowed on March 20, in the early days of the pandemic, and sold 13.4 million units in its first six weeks of release, according to Nintendo.

Kids also powered the popularity of Roblox Corporation’s Roblox, a free-to-play game creation system and MMO (Massively Multiplayer Online game) that has games in many genres and claims to have had 150 million monthly active users as of July. Roblox has grossed over $1 billion in revenue since its 2006 launch, according to research firm Sensor Tower. Roblox is partly a building game, like the extremely popular Minecraft.

The “sandbox game,” Minecraft from Microsoft/Mojang Studios, has sold over 200 million copies across all platforms, according to Mojang, which may take it past Tetris as the best-selling video game of all time, although sales estimates vary wildly for the latter. Minecraft had 126 million monthly active users as of May 2020, according to Microsoft, and had a spike of 40% in multiplayer sessions in April. Electronic Arts’ Sims franchise, another longstanding giant, is a series of “life simulation” video games and has sold nearly 200 million total copies of its different versions, according to EA.

The “free-to-play” category includes popular multiplayer “battle royale” titles like Epic Games’s Fortnite, Electronic Arts’

TOP AND BOTTOM: Activision’s Call of Duty: Modern Warfare featured superrealistic battle scenes and is one of the best-selling video games in 2020. (Image courtesy of Activision Blizzard)

TOP: There’s always plenty of action in the free-to-play battle royale game Fortnite. (Image courtesy of Epic Games)

MIDDLE: Travis Scott attracted millions of players to his April concert appearance in Fortnite. (Image courtesy of Epic Games)

BOTTOM: Create your own world in the immensely popular Minecraft. (Image courtesy of Mojang Studios/Microsoft) Apex Legends and Activision Blizzard’s Call of Duty: Warzone. The latter is a free version of the popular Call of Duty series. It debuted on March 11 and had more than 60 million downloads in less than two months, according to Activision Blizzard. “Free-to-play models continue to permeate the industry. Battle Royale genre games are the hot segment that everyone seems to be chasing,” notes David Johnson, who is Founder, CEO and Creative Director of Undertone FX, a studio specializing in real-time visual effects for video games and VR/AR. Prior to that, Johnson was the Lead Visual Effects Artist at Activision Blizzard’s Infinity Ward Studio and worked on the Call of Duty franchise, among other projects.

Other popular top free-to-play games include Nexon’s Dungeon Fighter Online, Tencent’s Honor of Kings, Niantic’s Pokemon GO, Smilegate’s Crossfire and Riot Games’ League of Legends. Free-to-play titles generate considerable income through sales of extras. Fortnite, which is a hybrid of a building game and shooter game, earned $1.8 billion in global digital sales in 2019, according to SuperData, a Nielsen-owned digital gaming research firm. It comes in three game mode versions: Fortnite Battle Royale, Fortnite: Save the World and Fortnite Creative. “Free-to-play games grow as their engagement grows. This means more players, more time spent, or more things to buy. All of the above is happening for free-to-play games, so, yes, they will keep growing,” says Pachter. “Fortnite is popular because it’s a good game and it’s approachable. It tells us that consumers like free-to-play and are willing to spend money on cosmetic items. Everyone else is emulating Fortnite’s success.”

Fortnite players use real-world money to purchase the in-game currency of V-Bucks, which allows them to buy items like gliders, pickaxes, outfits and “emotes” (dances). In-game events are part of the mix. An in-game Travis Scott virtual concert in April had 12.3 million concurrent views from players, breaking Marshmello’s record last year of 10.7 million virtual attendees. A Star Wars event took place in 2019; the Millennium Falcon soared across the sky and director J.J. Abrams presented an exclusive clip from Star Wars: The Rise of Skywalker. “In-game events drive engagement higher. More engagement equals more spending,” comments Pachter. As of May 4, Fortnite had 350 million registered players worldwide and, in April alone, its players racked up a combined 3.2 billion hours in-game, according to Epic Games.

Many gamers use subscription services. In late April, Microsoft revealed that Xbox Game Pass had surpassed 10 million members from 41 countries around the world, and that Xbox Live had almost 90 million active users. Game Pass members are interacting more now within the gaming community. In another example of the lockdown effect, Microsoft reported on May 30 that Game Pass subscribers had added over 23 million friends since March, a 70% increase in the “friendship rate.” Apple Arcade, PlayStation Now, EA Access, Google Stadia, Nintendo Switch Online and Ubisoft’s Uplay+ are other examples of video game subscription services, which seem to be multiplying at the rate of premium TV services.

“Free-to-play games grow as their engagement grows. This means more players, more time spent, or more things to buy. All of the above is happening for free-to-play games, so, yes, they will keep growing. Fortnite is popular because it’s a good game and it’s approachable. It tells us that consumers like free-to-play and are willing to spend money on cosmetic items. Everyone else is emulating Fortnite’s success.” —Michael Pachter, Managing Director of Equity Research, Wedbush Securities

According to SuperData, the video game industry is building on the already impressive results of 2019, in which video games had revenue of $120.1 billion worldwide, with a breakdown of $64.4 billion for mobile games, $29.6 billion for PC games, and $15.4 billion for consoles. In terms of the latter, the industry eagerly awaits the debuts of the next-generation PlayStation 5 and Xbox Series X consoles, both expected soon, even as the PS4 continues to do battle with the Xbox One and Switch (the three platforms’ estimated lifetime sales as of May 6 were 109.7 million units, 47.2 million, and 55.7 million, respectively, according to U.K. research firm VGChartz).

Extended reality (XR), which encompasses VR, AR and MR, is also growing steadily. SuperData reported $6.3 billion in XR sales in 2019, a 26% increase in revenue, thanks in part to new headsets like the standalone Oculus Quest. About VR, Guerrette says, “There are absolutely breathtaking productions that are seeing profits and rewards from consumers, which makes me believe that the market is sticking, and will continue to grow quickly as technology only allows us to create better and better experiences.”

The pandemic has delayed some software titles, but Pachter observes “no meaningful impact on games development or manufacture.” VFX and animation studios have been particularly well-suited to operating during a lockdown. “We’re definitely seeing a surge in incoming work,” says Johnson. “We just had to turn down a project today because every one of our artists is booked. We’re looking at hiring to set ourselves up for more capacity to meet the demand.” He adds, “COVID turned on the floodgates to remote work because nearly every games company just went full remote. There are a lot of great tools to make this viable. Companies like Undertone FX were already set up to thrive in remote, distributed teams, and now COVID is normalizing this.” “In many ways,” Guerrette comments, “this experience has pushed the video game industry [onto] a path that it was already moving towards – distributed development to allow talented team members to function as a part of the team from wherever they call home.”

TOP: Cloud Strife and Sephiroth are characters in Square Enix’s Final Fantasy VII: Remake. (Image courtesy of Square Enix)

MIDDLE: More wild driving and wild action in Grand Theft Auto V. (Image courtesy of Rockstar Games)

BOTTOM: The Sims 4 has carried on the best-selling life-simulation game franchise. (Image courtesy of Electronic Arts)