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May 7, 2021, 6:19 p.m. EDT

Gamers spent billions more on videogames during the pandemic, but what happens now?

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By Wallace Witkowski

The COVID-19 pandemic, coinciding with a new generation of gaming consoles, has vaulted the videogames industry into a new stratosphere, and the first crop of earnings results indicate publishers are leveling up on their forecasts.

The pandemic sent gamers scrambling for new gear and games to pass the time spent sheltering in place, while more consumers with ample time on their hands joined their ranks. Meanwhile, a new crop of gaming-related companies entered the market with initial public offerings and direct listings.

In 2020, global videogame sales surged 25% to $191.12 billion, according to Lewis Ward, gaming research director at IDC. Those figures include PC games, console hardware and software, and direct mobile-game spending, while excluding in-game ad revenue and aftermarket gaming accessories. Underscoring the COVID-19 effect in that figure, Ward expects sales to grow modestly to $195.29 billion in 2021 and to $195.8 billion in 2022.

In the U.S. alone, consumers spent $59.6 billion on gaming in the 12 months ended March 31, a 32% jump from the year-ago period, according to NPD Group analyst Mat Piscatella,

For more: Videogames are a bigger industry than movies and North American sports combined, thanks to the pandemic

Activision Blizzard Inc. /zigman2/quotes/200717283/composite ATVI -2.43% shares rallied after the company’s results and outlook topped Wall Street expectations, driven by a 72% surge in Activision segment from the “Call of Duty” franchise. Similarly, Zynga Inc. showed more people are playing mobile games even as the pandemic subsides and hiked its forecast for the year while announcing a $250 million acquisition of mobile ad and monetization platform Chartboost.

Analysts expect a strong showing across the industry in the final quarter that compares to pre-pandemic results. From there on, publishers encounter increasingly more difficult comparisons to past quarters, as videogames flourished under stay-at-home orders that started en masse in March 2020, and Microsoft Corp. /zigman2/quotes/207732364/composite MSFT -2.36% and Sony Corp. /zigman2/quotes/208567357/composite SONY -0.71% released long-awaited next-generation gaming consoles at the end of the year.

That puts company outlooks under even more under scrutiny as investors determine whether COVID-19 was the prime driver of results or whether the pandemic just revved up longer-term momentum for the industry.

See also: What to expect from Apple v. Epic, a trial that could change antitrust law and the mobile-app ecosystem

12 months % gain % off 52-wk high Earnings report date
Activision 29 10 May 4
Zynga 44 11 May 5
Electronic Arts 22 5 May 11
Take-Two 32 21 May 18
iShares Software ETF /zigman2/quotes/201870252/composite IGV 37 10.8
Nasdaq Composite /zigman2/quotes/210598365/realtime COMP 53 4.1
S&P 500 index /zigman2/quotes/210599714/realtime SPX 47 1.3

Electronic Arts

The second of the Big 3 U.S. videogame publishers to report is Electronic Arts Inc. /zigman2/quotes/206954087/composite EA -1.78% on May 11. EA, known for sports games such as “FIFA 21” and “Madden NFL 21” as well as action titles like “Apex Legends,” just closed on its $2.4 billion acquisition of Glu Mobile Inc., after finishing off its $1.2 billion acquisition of Codemasters Group Holdings PLC in February.

Analysts expect adjusted earnings of $1.05 a share on revenue of $1.39 billion, based on EA’s forecast of an an unadjusted loss of about 7 cents a share, which includes a 52-cents-a-share tax-accounting charge, on revenue of $1.17 billion.

MKM Partners analyst Eric Handler, who has a buy rating on EA, said the company’s acquisitions have already boosted expectations going into 2022.

“We see EA as the most attractive name in our videogames coverage universe over the next 12 months,” Handler said, taking into account both acquisitions.

J.P. Morgan analyst Alexia Quadrani cautioned that social-media activity — a closely watched metric by analysts to gauge player engagement — has slowed down for “FIFA,” but that “Apex Legends” “continues to trend well.” Quadrani has a neutral rating on EA.

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