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COVID-19: E-Sports on pause but the video games industry hits new high scores

Since being declared a global pandemic by the World Health Organisation on 12 March, COVID-19 continues to wreak havoc on the global economy. Several countries have implemented mass quarantines on a hitherto unprecedented scale, including India, China, France, Italy, New Zealand, Poland, and the UK. Business Insider reports that more than a third of the world’s population is currently under some form of restriction. Global stocks are headed for their worst quarter since the 2008 financial crisis as a result of the pandemic. US stocks were down over 20% in the first quarter of 2020, with the Dow Jones down 23%, its worst first quarter ever. The FTSE 100 also suffered a 25% fall during the first quarter, its worst result since 1987.

Since then, hundreds of major sporting events around the world have been suspended or cancelled, including the UK Premier League, the Tokyo 2020 Olympic Games, and all four major US sporting leagues. The esports industry, which has enjoyed meteoric growth in recent years since hitting the mainstream, has been no exception.

Esports are now big business – the global esports audience grew by 12.3% to 443 million in 2019 and has more than tripled since 2012. To put this into perspective, esports now have more viewers than American football and rugby combined. Tournament prize pools have increased at an average rate of 42% per year to around $170 million in 2019. The $3 million prize for winning the Fortnite World Cup is larger than the $2.3 million Wimbledon winner’s prize.

The esports industry has had to grapple with several major issues which have been exacerbated by its meteoric rise. Esports differ from most other sports in that the copyright in the underlying game is usually owned by the developer or publisher, granting with it the exclusive right to prevent copying, distribution, public performance and any other exploitation of the work (and therefore complete control over how the game is exploited). The developer/publisher then licenses these rights to broadcasters, platforms and tournament operators for a fee. By holding the balance of power, developers/publishers are able to impose restrictive terms on licensees to maximise revenue generation while maintaining control over their intellectual property. Downstream, this has led to lawsuits resulting from restrictive terms in player contracts, and a rise in “edoping”, where players have turned to concentration-enhancing drugs to improve their performance at tournaments, leading to calls for esports athletes to be subjected to random drugs tests. These issues are compounded by the fact that there is no central esports governing body and therefore no consistent governance or regulatory framework.

Despite their digital nature, esports draw huge live audiences like other major sports, and the spread of COVID-19 has led to many upcoming esports tournaments being postponed or cancelled, including the Overwatch League, the Pokémon Championship Series and the Dota 2 ESL. Esports revenues, which had been forecast to increase by 15.7% $1.1 billion in 2020, are likely to drop significantly this year as a result.

By contrast, following the imposition of mass quarantines and school closures, the wider video games industry is booming as consumers look for new ways to entertain themselves from within their own homes.

Console sales have soared in recent weeks. In week 12 (16 – 22 March), video game console sales increased by 155% compared to the previous week, according to Videogamesindustry.biz. The Nintendo Switch has emerged as the runaway winner, selling more units in week 12 than in any other week since its release in 2017, despite Nintendo issuing a warning that the pandemic would affect hardware production and shipments. The Nintendo Switch was bestselling console worldwide during week 12, according to VGChartz, selling over 840,000 units in part due to the release of the Animal Crossing-branded Switch and the coral Switch Lite, compared to 170,000 combined unit sales of Sony’s PlayStation 4 and Microsoft’s Xbox One.

The demand for Switch consoles has eclipsed supply in several markets since the start of the pandemic. Reports have emerged of price gouging of Switch consoles on Amazon US since 13 March, where the console has been consistently sold out, with prices set by third party sellers reaching as much as 62% over retail price.

Video game sales have also increased dramatically since the start of the pandemic. Videogamesindustry.biz reports that, across all tracked markets, 4.3 million games were sold during week 12, a 63% increase on the previous week. Even when excluding new releases, like-for-like sales were up 44% on the previous week.

Animal Crossing: New Horizons, released on 20 March, is on track to become one of the best-selling video games of all time in Japan, having sold 1.88 million copies in the first three days following its release, smashing the previous three day record of 1.36 million combined sales of Pokemon Sword and Shield. In the UK, the game sold three and a half times more copies than the previous entry in the series.

Valve’s long awaited return to the Half Life series with arguably the first triple A, made for VR title, Half Life: Alyx, has led to VR headsets such as the Oculus Rift S and the Valve Index selling out worldwide.

More people are also playing and watching video games since the start of the pandemic. Steam, the video game distribution service released by Valve in 2003, set a new all-time record of just under 20.5 million concurrent users on March 16, and has gone on to beat that record several times, including recently recording 24.5 million concurrent users. Some Steam games are also breaking player records – Counter Strike: Global Offensive, released in 2012, also set its all-time concurrent player record. Global viewership of video game streaming sites Twitch.TV and YouTube Gaming have also increased – by 10% and 15% respectively.

Other unusual sales trends have emerged since the start of the pandemic. Doom Eternal sold an estimated 700,000 copies in its first week on Steam, considerably more than the number of console copies sold. This is a reversal of the usual trend of console game sales outnumbering those for PC, which is usually attributed to the higher cost of entry to PC gaming.

With no end in sight for most countries currently in quarantine, the contrasting effects of the COVID-19 pandemic on esports and the video games industry look set to continue for some time yet. It remains to be seen whether and to what extent the positive effects on the video games industry will last beyond the end of the global lockdown. However, given that increased console sales during this period will have led to a sustained increase in the number of potential consumers of video game-related content, the growth of the video games market looks set to continue.