How COVID-19 impacted firms in the Gaming industry.
The gaming industry has benefited from the pandemic where there have been millions of sales this year. When lockdown struck, many people flocked to games to cope overtime when all outdoor entertainment was banned by the UK government.
Why is gaming suddenly so popular now?
What caused the surge in popularity for gaming during this crisis was the fact that people could still hang out whilst abiding social distancing rules and some even found peace whilst the world seemed to be on the brink of collapse. Whilst other industries struggled heavily during the pandemic, the video games sector was one of the few sectors that were doing well. Moreover, Newzoo recently revised its 2020 market estimate to $174.9bn after adjusting the projections twice, showing the potential of the gaming industry in the future. To add to this, people are still gaming regardless of the lockdowns being lifted where statistics haven't reduced and it is even estimated that the UK gaming population has grown 63% at the time of October 2020.
This may suggest that the demand for video games and consoles has risen significantly over lockdown in order to entertain themselves and keep people busy. Along with the rise in demand, the supply of gaming consoles has fallen due to coronavirus restrictions and the limited supplies the firms have. One notable example of this is the new release of the PS5 and XBOX Series X, which has been hyped up and sold out within 12 hours. Growing demand but falling supply resulted in the console selling out significantly quicker to its predecessors.
Nintendo and it’s success this year
During this year, Nintendo reported that there was a 541% surge in net profits during August and that their profits have tripled in November, despite the fall in supply for Nintendo Switch Consoles. Joseph Evans, head of technology at Enders Analysis stated that the global industry sales have reached around £7.6bn every month since lockdown (March) and that sales have been growing since.
Sales were driven by the new game called Animal Crossing: New Horizons, a game that allows people to hang out in a virtual world, where people can socialise with each other within the boundaries of their living room. Both the Nintendo Switch Console and Switch Games such as Animal Crossing are Complementary Goods, where if the demand of the game increases, consumers will buy the console along with the game in order to play it, increasing the demand of both goods. According to Nintendo, this has helped “significantly to the overall growth in software sales and drove hardware sales”
They also manage to retain the lead for selling the most consoles in November 2020, beating the newly released and popular PS5 and XBOX Series X. The company now predicts that 24 million Switch consoles will be sold by the end of the March, which is 26% higher than its previous forecast of 19 million units. Along with Nintendo’s profit before tax is now approximately ¥300bn from March to September, which is an increase from ¥85bn yen at the same time in 2019. However, analysts believe Nintendo are being conservative, believing that Nintendo will reach a profit of ¥345bn, stated by S&P Global Market Intelligence. Lastly, the company has lifted and raised its annual profit guidance by 50% and its revenue guidence to ¥1.4tn, up by 16%.
This exemplifies how Nintendo is maintaining its competition and dominating in a heavily congested market for gaming consoles against rivals such as Sony. However, the Covid-19 gaming boom may be slowing where Sony reported a 15% decline in quarter to quarter operating profit, where Nintendo may follow suit. But for now as it seems, sales will continue for both software and hardware which will boost Nintendo’s profit till the end of their fiscal year.
