MKM Positive On Video Gaming Industry, But 'Same-Old' Games Not Good Enough Anymore

The video game industry is rewarding new and different ideas rather than copycats, and those companies that can hit on the next new thing – the next “Fortnite”, for example, but not another “Fortnite” – will be the winners as the next generation gets going, MKM Partners said in an industry look Tuesday.

MKM Partners’ Eric Handler remains positive on the video games industry, but “the rising tide is no longer raising all ships.”

“We are seeing a greater divergence among publishers in achieving consistent success with key game franchises and new IP development,” Handler wrote in a note timed to the beginning of the industry’s big E3 trade show this week. “Furthermore, we believe the tremendous success of “Fortnite” has shown us consumers are looking for new, fun and differentiated advancements in games, not copycat ideas.

“The ‘same old, same old’ is becoming tired and as a result keeping franchises fresh is one, if not the most important, variable for publishers, especially with a new console cycle at hand,” Handler wrote.

Other Thoughts from E3

Project Scarlett, the next generation gaming console from Microsoft Corp MSFT is coming out at the end of 2020.

“The key question from a publisher’s standpoint is how will the latest console cycle transition impact game development as we do not yet know how the development process will change and also the SKU count will increase,” Handler wrote.

"The Outer Worlds"

Take-Two Interactive Software, Inc. TTWO game "The Outer Worlds" comes out Oct. 25, in time for the holidays, which Handler said suggests confidence it can stand out among competitors. Handler wrote that may mean MKM’s 2 million unit sales forecast could be conservative.

"Star Wars: Jedi Fallen Order"

Handler was impressed with the look of the new Star Wars game from Electronic Arts Inc. EA to be released Nov. 15, and remains comfortable with a 7 million unit forecast for the third quarter of 2020.

Activision Restructuring

While not announced at E3, Handler also weighed in on the recent announcement by Activision Blizzard Inc. ATVI that it has canceled development of a new "StarCraft" first-person shooter game to focus on the "Diablo" and "Overwatch" franchises.

“What remains to be seen is how fast the larger teams can get new "Diablo" and "Overwatch" games to market,” Handler wrote. “In our view, a 2020 release of a new game for either franchise seems a bit optimistic and more likely a 2021 debut seems more realistic.”

Stock Prices

Microsoft was trading at around $132, while Take-Two shares were at about $112 on Tuesday, both mostly flat. EA was up slightly to $95.74, while Activision Blizzard stock was up 1.72 percent to $46.80.

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