Show Transcript
Video games have become a major source of entertainment for millions, even more so as the coronavirus pandemic keeps people confined to their homes. Anthony Okolie speaks to Andriy Yastreb, Telecom and Media Analyst, TD Asset Management, about how new gaming platforms and services could change the power dynamics within the gaming ecosystem.
Print Transcript
[MUSIC PLAYING]
- Video games have become a major source of entertainment for millions, even more so as the coronavirus pandemic has kept people confined to their homes. Take a look at this chart. It compares the performance of gaming stocks to the S&P 500 Index. Andriy, can you walk us through this chart and tell us exactly what we're seeing?
- Hi, Tony. So as you mentioned, this chart compares the performance of the gaming are called interactive media to the S&P 500 since about 2013. As you can see on the chart, the gaming stocks outperformed the broad index by a lot, by 27% since that time. And if you look more closely, there were two periods of out-performance related to two drivers last year. One in March and April of last year when initial COVID lockdown happened. We had a lot of kids at home, studying from home. And that was obviously beneficial for gaming. And then later in November, December, the new gaming consoles came out and demand was basically through the roof. And that was also positive for gaming.
- And what are some of the key trends you'll be watching in the video gaming industry going forward?
- Well, there are three key trends to watch in the future. One is game streaming, because a lot of large tech companies like Google, Amazon, Nvidia, and Sony even, they're move to gaming through establishing platforms to play high-end games in the cloud. And there are two implications from that. On one hand, it allows you to expand the addressable market and allows customers to play games without owning consoles or high-end PCs. But on the other hand, it also changes the economics potentially in the long term. And these companies might take some of the profits from gaming companies.
Second trend to watch is demand post-COVID. Obviously, 2020 was a very unique year. We have COVID lockdown, we had new console cycle. And those factors will not repeat again.
And third trend to watch is just competition. Because we had a lot of new companies in gaming come every year, but 2020 was quite interesting as well because of the most anticipated game release was coming from a small Polish company called CD Projekt. And at the same time, a new online competition was gaining traction with companies like Roblox.
- Now, one video game stock that's been in the news a lot this year's GameStop. What's your take on that?
- Well, I think the recent moves were very technical in nature and not really related to fundamentals. It was more of a classic short squeeze. And related to that is that game sales migrate online. And that's been a trend for a long time.
And the reasons for those moves are that it's more convenient for customers, and it's also more profitable for gaming companies. And GameStop has some exposure to online sales. But at the end of the day, it's still a retailer that-- that is still being disrupted in this industry.
- Andriy, thank you very much for your time.
- Thank you, Tony.
[MUSIC PLAYING]
- Video games have become a major source of entertainment for millions, even more so as the coronavirus pandemic has kept people confined to their homes. Take a look at this chart. It compares the performance of gaming stocks to the S&P 500 Index. Andriy, can you walk us through this chart and tell us exactly what we're seeing?
- Hi, Tony. So as you mentioned, this chart compares the performance of the gaming are called interactive media to the S&P 500 since about 2013. As you can see on the chart, the gaming stocks outperformed the broad index by a lot, by 27% since that time. And if you look more closely, there were two periods of out-performance related to two drivers last year. One in March and April of last year when initial COVID lockdown happened. We had a lot of kids at home, studying from home. And that was obviously beneficial for gaming. And then later in November, December, the new gaming consoles came out and demand was basically through the roof. And that was also positive for gaming.
- And what are some of the key trends you'll be watching in the video gaming industry going forward?
- Well, there are three key trends to watch in the future. One is game streaming, because a lot of large tech companies like Google, Amazon, Nvidia, and Sony even, they're move to gaming through establishing platforms to play high-end games in the cloud. And there are two implications from that. On one hand, it allows you to expand the addressable market and allows customers to play games without owning consoles or high-end PCs. But on the other hand, it also changes the economics potentially in the long term. And these companies might take some of the profits from gaming companies.
Second trend to watch is demand post-COVID. Obviously, 2020 was a very unique year. We have COVID lockdown, we had new console cycle. And those factors will not repeat again.
And third trend to watch is just competition. Because we had a lot of new companies in gaming come every year, but 2020 was quite interesting as well because of the most anticipated game release was coming from a small Polish company called CD Projekt. And at the same time, a new online competition was gaining traction with companies like Roblox.
- Now, one video game stock that's been in the news a lot this year's GameStop. What's your take on that?
- Well, I think the recent moves were very technical in nature and not really related to fundamentals. It was more of a classic short squeeze. And related to that is that game sales migrate online. And that's been a trend for a long time.
And the reasons for those moves are that it's more convenient for customers, and it's also more profitable for gaming companies. And GameStop has some exposure to online sales. But at the end of the day, it's still a retailer that-- that is still being disrupted in this industry.
- Andriy, thank you very much for your time.
- Thank you, Tony.
[MUSIC PLAYING]
