Video games are flourishing in the pandemic and game creators are not afraid of the future

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Trade is closed in the real world, so money is circulating in virtual worlds.
The two largest publishers of public video games in the United States reported on Tuesday the results of the removal of millions of Americans from their homes during an on-site shelter: a booming profit from online activity. Electronic Arts Inc.
EA,
+ 2.38%

posted record revenue from live services and doubled profit, while Activision Blizzard Inc.
ATVI,
+ 2.74%

said it had reached “new heights” in sales that created its best profit in the first quarter of history.

Companies don’t expect much change in trajectory: EA predicts earnings this quarter will triple over the previous year to more than a quarter of a billion dollars, while Activision forecasts adjusted earnings of more than $ 500 million, an increase of 67%.
The results were not entirely surprising, given that the results include data from March when COVID-19 spread around the world and forced people inside their homes. Superdata reported that March was the first month of $ 10 billion in video game sales in history, and NPD Group said sales in the United States had reached their highest level in March since 2008.

This 2008 figure may not be a coincidence. Managers of the two companies have expressed confidence that any economic downturn will not massively change the trajectory of video games, citing periods of growth during this recession as well as a previous one. Dennis Durkin, chief financial officer of Activision Blizzard, noted that, against the background of the dot-com crisis and the 2008 financial crisis, gaming spending continued to increase in the low to medium numbers.
Complete results:Electronic Arts Exceeds Sales Expectations, Activision Blizzard Results Beat
“We think this is due to the lost cost of our games, which makes them great value compared to other forms of entertainment,” Durkin said on Tuesday’s conference call.
Durkin said the company would benefit from its digital distribution – players have chosen to download more games from online stores compared to buying physical copies at a stable price since 2009 – and games are considerably more socially connected than before. EA said that the closure of brick and mortar retail stores such as GameStop Corp.
GME,
-1.64%

hadn’t affected sales yet, as only 20% of EA’s bookings came from physical game purchases last year, up from 84% in 2009.
Electronic Arts CFO Blake Jorgensen echoed Activision’s view, saying the video game market has “proven historically resilient because gamers have viewed games as a form of entertainment relatively little expensive ”.
The main pandemic concern for video game publishers seems to be the new reality of working from home, which could hamper the development of new titles, as has been the case for cinema. For the rest of the year, EA and Activision said they plan to continue with a full list of versions, and executives did not mention specific title delays during the twin teleconferences on Tuesday evening.
“Developing a home game inevitably involves risks, and we haven’t solved all of these issues yet, but, for example, we just had a birthday event” FIFA Ultimate Team “very successful,” said Jorgensen during of the call for results. “Apex Legends Season 5 is about to start, and we expect to see the next expansion” Sims “and” Command and Conquer Remastered “both launched in June as planned. The lessons learned from this period will forever change the way we work at EA. “
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KeyBanc Capital Markets analyst Tyler Parker predicted in a note last week that EA would find it harder to achieve its exit goals, saying it was developing its next title “Battlefield”. The company said on Tuesday that development at all levels is on track.
Like EA, Activision Blizzard is also developing titles in studios around the world and has stated in its call for results that remote working adds “complexity and challenges” to aspects of game development. Specifically, Activision chief operating officer Daniel Alegre said it makes creative collaboration, motion capture and quality assurance, among other things, more difficult. He said the company has taken steps to minimize the impact and that the company is awaiting its list of titles this year, including a release of “Call of Duty” and an extension of “World of Warcraft”.
“But so far, based on what we can see, and with real ingenuity and creativity from the teams to best manage this, we just need to provide our community with the innovative content they love and that they wish to keep. play, “said Alegre. “We are currently on track to deliver our key content in the second half of this year, and my main goal is to ensure that we continue to deliver on these priorities.” “
Expectations from the gaming giants were high ahead of Tuesday’s earnings, with analysts’ average price targets being higher for the two companies as they slid elsewhere. JPMorgan analyst Alexia Quadrani wrote in an April note that she expected game giants to experience high levels of engagement and sales amid the coronavirus pandemic, the report said. Superdata.
Electronic Arts stocks fell 5% in extended session Tuesday, but stocks gained 29% in the past year, as the S&P 500 benchmark
SPX,
+ 0.90%

fell 3.5%. Activision shares have increased 45% in the past year and have increased 5.8% in after-hours trading.

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