Share Prices & Company Research


20 November 2020

Virtual Reality: Escapism in a Pandemic

Since the release of the Atari 2600 in the late 1970s, games consoles have been a part of the furniture in family living rooms around the world. However, the concept of video games has been around since the 1950’s. Over 60 years on, they have evolved significantly, becoming more realistic than ever and with technology improving and consumer expectations soaring, so do their price tags.

In today’s world, the gaming industry now dwarfs the film and music sectors combined with over two billion gamers across the world (26% of the world’s population). Analysts predict that, by 2022, the gaming industry will generate up to US$200bn in revenue, enticing established tech giants such as Google, Facebook, and Apple to enter the market.

Microsoft, which remains a stalwart of the gaming industry through its popular Xbox console, recently launched Project xCloud; a streaming service that allows users to stream Microsoft’s Xbox games to PCs and other devices. Elsewhere, in 2016 Facebook began to develop a gaming platform with Unity Technologies, providing a game development framework for people to make their own video games. Google, meanwhile, launched its Stadia program, allowing users to play high quality video games via internet streaming, without the need for a disc, or download the game.

As the world moves more towards a life centred around mobile phones, the main goal for these companies is to allow players to stream video games without the need of a computer or console. Subscription streaming services are likely to be the future and will benefit video game companies as manufacturing and shipping costs will essentially vanish. With the introduction of virtual reality (VR), video games can now offer a fully immersive experience. Oculus VR, a subsidiary of Facebook, launched an improved version of its initial virtual reality headset in October 2020. Apple is also set to release a headset in 2021 or 2022.

As people across the world continue to shelter at home from Coronavirus, game sales have experienced a global surge. In the UK, digital downloads jumped 67% week-on-week during March and, just before the first national lockdown was enforced, physical sales rose by 218%. Research suggests that in order to battle the isolation caused by the pandemic, more and more people are turning to video games as a means of escapism during the pandemic and playing games online was seen a way for people to socialise with their family and friends. Within the first four weeks of lockdown, the number of users logging into Twitch, an online video gaming streaming platform, rose by 50%, while demand for the Nintendo Switch reached a record high; profits surged by more than 400% in its first quarter ended 30th June. Furthermore, with the absence of traditional live sports, the pandemic has accelerated the growth of e-sports (competitive video gaming), which since, has seen a rise in both participant and audience figures.

With further forms of lockdown now in place across the UK and beyond, the gaming industry is likely to see another spike in demand, particularly throughout the winter months where people are less likely to venture out. As it did in the previous lockdown, the industry may see many new first-time players as people at home search for new forms of entertainment. In this otherwise torrid time for many industries, gaming is certain to be a huge beneficiary of social and economic restrictions, carving out a new, hungry and addressable market.
Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
Virtual Reality: Escapism in a Pandemic

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