MIZUHO SECURITIES USA INC. | US EQUITY RESEARCH
Gamers are Playing Across Many Platforms, Playing Longer, and Spending More Money
Summary
We conducted a survey of 800 console gamers in the U.S.and found the overall gaming market robust. Gamers are playing across multiple platforms, they are spending more time playing games, and they are spending the same if not more money on games than they were a year ago. Only 30% of gamers are downloading full games, which represents a big opportunity for publishers. We remain bullish on EA and ATVI based on these survey results, and believe that a strong pipeline of games and digital revenue will drive incremental earnings upside for both stocks.
Key Points
Gamers are spending more time playing games across multiple platforms. Over 50% of respondents play on either console, but we also found that nearly 67% also play on their smartphones, and 40% play games on tablets as well. Also, 75% said they are playing games the same amount of time or more than they were a year ago.
Gamers plan to spend more money than they did a year ago. About 68% of those surveyed said they plan to spend the same or more money on games over the next year. This is positive as it points to how publishers have implemented a successful strategy of selling games and additional content to keep people engaged (and spending money) on those properties.
Significant room for digital gaming growth. We found that only 30% of players currently download full games, and 32% do not buy any DLC or extra content. We view these as opportunities for the publishers to drive more digital sales with console owners. Finally, 48% said they are spending money on mobile games, which is another big opportunity. In our opinion, digital revenue will be paramount to driving higher gross margins and earnings upside for all four publishers, while ATVI and EA should garner out-sized share of mobile game revenue.
Call of Duty and Candy Crush Saga are top console and mobile games. We were surprised by this given concerns around CoD and Candy Crush. This is a clear positive for ATVI.
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