Video Game Industry Stalls, Stocks Plunge. What’s Going On?

Probably because just a couple games are sucking up the entire market. PLUS, there is nothing new. Just rehashes of the same old stuff.

[link to wolfstreet.com (secure)]



Video games have become the largest entertainment industry worldwide by revenue: $138 billion in 2018 – beating TV ($105 billion), film box office ($41 billion), and digital music ($17 billion). But in 2019, after two decades of incessant growth, something unthinkable is lining up to happen: Sales are projected to decline, according to analysts at Pelham Smithers, cited by Bloomberg:

Good chart at link

A lack of big hits, expensive flops, consumer frustration, and a slowdown in China all are to blame, according to the analysis. While true in general, it does not tell the whole story: A gamer-revolt against practices, deeper trouble in China, a decline in mobile gaming, and changing spending patterns have stalled growth and are beginning to cause serious waves.

With easy Fed policy, money flooded into Tech, and beneficiaries cashing out turned around and invested heavily into video games. But to their detriment: In the last year or so, many of the major game corporations have suffered extreme losses to their share prices. These are major multinationals that include the Chinese giant Tencent.

For example, the chart below shows the combined market capitalizations of Activision/Blizzard, Electronic Arts (EA), Ubisoft, and Take Two Interactive. Since their peak in July 2018, their combined market cap has plunged by 40%, a drop of $55 billion. These are not all the impacted companies, just some of the biggest that are traded in the US (data via YCharts):