As we get close to Thanksgiving and the official start of the Christmas shopping season, one of the beneficiaries of the annual gift giving season is the video game industry. With Sony, Microsoft and Nintendo all releasing next-generation video game consoles in the coming weeks, the industry is poised to see a better than seasonal revenue bump. According to research firm Gartner, the worldwide video game marketplace, which includes video game console hardware and software, online, mobile and PC games, will reach $93 billion in 2013, up from $79 billion in 2012.
While Sony Sony, Microsoft Microsoft and Nintendo Nintendo will be beneficiaries, video game manufacturers such as Activision Blizzard Activision Blizzard (ATVI), Electronic Arts (EA), Take-Two Interactive (TTWO), Zynga (ZNGA) will also benefit. Video game sales in September spiked due to Take-Two’s Grand Theft Auto V. The game, which hit the $1 billion mark in just three days, making it the highest-selling title launched in any September since market research firm NPD began tracking the industry in 1995. Today, Activision will release Call of Duty: Ghosts for PlayStation 3, Xbox 360, Wii U and PCs. Alongside the new game launch is a new mobile Call of Duty app for Android, iOS and Windows 8 devices that lets players customize characters and track progress in a Call of Duty Clan Wars metagame.
Although mobile games are the fastest-growing segment of the market, with revenue set to nearly double between 2013 and 2015 from $13.2 billion to $22 billion, Gartner sees the video game consoles still accounting for nearly half of industry sales even as industry revenues climb to $111 billion in 2015. Embedded in that outlook is the continued deterioration of the PC market, which is being replaced by tablets. Given the success of Apple Apple’s iPad and efforts by Samsung, Nokia Nokia, Blackberry (BBRY) and others in the tablet market that shift comes as a surprise to no one, except maybe Dell Dell.
Yes, the outlook is better than it has been in some time for the video game industry, yet this sector does have some caution flags. One is the state of the consumer and his or her ability to spend. We’ll get ample data on that from the likes of Gallup and others in the coming weeks.
Another is Congress. Following recent tragedies, some politicians have called for censorship of media, including video games that depict violence. While you may think the politicians in Washington should have a full plate getting ready to tackle the federal budget, the debt ceiling and entitlement reform in early 2014, there are several pieces of potential legislation winding their way through the House of Representatives and the state of New York. In Washington, HR231 “Video Games Rating Enforcement Act”, which has been House Committee on Energy and Commerce, would require warning labels on video games “that are given certain ratings due to violent content.” In New York, there are three bills pending that would restrict the sales of video games to persons under the age of 18.
While these bills may seem innocuous enough in and of themselves, the fact that they are being moved through legislative bodies based not on scientific evidence, but rather media myths or some politician’s desire to seem responsive is most alarming. There is no independent research that shows a connection between video games and violence. In fact, while video games have exploded in popularity over the last decade, violence has declined according to FBI crime studies. That makes these attempts at regulating video games politically driven objectives, which also makes them volatile, unpredictable and a challenge for investors to assess.
Source: FBI
In the near term, assuming strong consumer buying power and pent up demand for new video game consoles and the latest games, the video game sector is looking strong. Investors would be wise to keep an eye on Congress, however, and any changes in the regulatory environment be it for video games, the Internet, the entertainment industry, trucking or any other industry. Sometimes, the outcome can spur business, but more often than not it weighs on it instead. As we have seen before and will likely see again, the facts and science matter little when political points can be scored.
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Article source: http://www.forbes.com/sites/chrisversace/2013/11/06/will-washington-weigh-on-video-game-growth-prospects/