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May 15, 2020

Big Tech companies cash in on video gaming demand during lockdown

By MarketLine

Demand for video gaming has grown since governments imposed lockdown restrictions, Big Tech companies have been quick to capitalize on consumer trends.

Popular games such as Activision Blizard’s Call of Duty and Electronic Arts’ FIFA, have increased in popularity as consumers find themselves confined to their homes during the course of the pandemic.

During Q1 2020, Activision exceeded its first quarter outlook generating of $184m of operating income, with an operating margin up 12 percentage points to 35%. Sales were driven by Call of Duty: Modern Warfare and Warzone in-game revenues.

Big Tech increase activity in gaming markets

In anticipation of increased gaming activity during lockdown, large tech companies including Google and Facebook are increasing their presence in the gaming world.

Facebook announced its plans to introduce a gaming application to rival video live streaming service, Twitch and YouTube. The social media giant accelerated the launch of its app during 20 April, a direct response to the Covid-19 lockdown.

Google also responded to the pandemic by releasing a free tier of its cloud gaming platform, Stadia, which launched in November 2019. Google is offering Stadia Pro free for 2 months. Previously a $130 entry fee was required to use the network. Removing this fee gives millions access to the platforms featured video games.

The decision was motivated by the opportunity presented by the increase in gaming during lockdown. Google has seized the market opportunity and could gain a lead ahead of rival cloud gaming platforms such as from rivals: Nvidia, Microsoft, Apple and Amazon.

Game streaming becomes increasingly competitive for Big Tech

Big Tech companies are betting on cloud gaming becoming the next big trend in the entertainment market. The ability to play games on demand across multiple devices using remote servers creates a more accessible and fluid gaming experience. This could see the platforms gain a large share in the gaming market. By 2025 the video gaming industry is expected to reach a value of $300bn

In 2019, the likes of Apple, Microsoft, Sony and Google all announced their plans to enter the cloud gaming market space; using a subscription based business model to attract customers.

Microsoft recently announced that its pay monthly service, Xbox Game Pass, had surpassed 10 million subscribers. Google promised stadia would provide 120 new games in 2020 as it hopes to take a leading position in the cloud gaming market.