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The Gaming Market Gets a Big Boost From The Pandemic

Written by Monica Savaglia
Posted March 9, 2021

It’s been about a year since the U.S. went into lockdown to prevent the spread of COVID-19. While we may no longer be in lockdown, our lives have continued to be disrupted as this way of life has slowly shifted toward a new “normal.” It is now ingrained in my brain that anywhere I go I must take a mask and wear it the entire time I’m in public. I have bottles of hand sanitizers at my disposal. I can’t go to a restaurant to enjoy a meal or drink with a friend unless we jump through a bunch of hoops, like making reservations or sitting outside in the cold. 

Things are different now, and we’ve all adjusted to life in this pandemic world. But that could soon be coming to an end. With the number of vaccinated Americans rising, many are feeling increased optimism as health officials say that we could hit herd immunity sooner than expected. While all of that is great news, there’s still a part of me that’s a little pessimistic. This past year has brought on many uncertainties, and there’s a part of me that feels like it will take some time for things to be similar to what they were pre-COVID-19. 

A lot of people have been isolated in their homes and have grown accustomed to their indoor lifestyles. The coronavirus pandemic has led to the development of new skills and hobbies for many. For some, it’s a welcome distraction from the realities of the world. That’s why I have a hard time believing that everything is going to snap back to being “normal” again. I think a lot of people have realized they might enjoy their new lifestyles — that they’ve discovered things about themselves and activities that they might even prefer to whatever they were doing before the pandemic. 

Some people turned to video games or gaming. The gaming industry had been a growing one, but the pandemic gave it a big push. The stigma associated with gaming appears to be shifting. In the past, some believed spending hours playing video games made one a loser, but now, you’re just a person who's trying to socialize. It's a new way of hanging out with your friends. Gaming involves mental and physical stimulation that can be both entertaining and relaxing to players... and spectators. People spend hours watching YouTube and Twitch users play video games. 

There are several social benefits — you get to know the person playing the game and meet other people who are interested in the same game, forming a sense of community. Not only have you found other people who like the same game, but they may have interests similar to your own. The pandemic has made gaming an effective way for people to socialize without being in the same location. 

According to a market research study by Statista, video game revenue is expected to grow at an annual rate of 9.28% from 2021 to 2025. That is a lot of growth in just under four years. Statista estimates the U.S. video games market is worth $60.4 billion. Gaming has been huge and it’s only getting bigger, especially with the help of an entire year of people spending more time at home because of COVID-19 restrictions. 

Emarketer reports that the live-streaming video platform Twitch saw its user base growth accelerate by 26.2% to 41.5 million users in 2020. The year also saw the overall number of U.S. gamers jump by 5%, the highest growth since 2015. A recent report from Mordor Intelligence indicated that in 2019, the global gaming market was valued at $151.5 billion. It expects gamer spending to surpass $200 billion by 2023.

The opportunities within this market are massive, which is why the California-based video game company Robox is set to go public through a direct listing this week. Roblox provides a popular online platform for creating and sharing video games. When a game is created, it can be shared and monetized using Robux for in-game features. The company has been anticipating a public offering since December 2020, but it had a few details to iron out before going public. 

According to the company’s S-1 filing, Roblox has over 32 million daily active users and an engagement time of more than 22.2 billion hours. Its revenue increased 56%, from $312.8 million in 2018 to $488.2 million, in 2019. It surpassed its 2019 total in the first nine months of 2020, generating $588.7 million. For all of 2020, Roblox brought in $924 million in sales. 

Roblox’s platform has attracted about 8 million developers, and it needs that attraction to keep thriving so that the platform can offer great games to maintain and grow its daily active users. 

The company’s S-1also reported losses of around $253 million in 2020 — mainly attributed to higher costs for infrastructure, research and development, and marketing:

We do not expect these activity levels to be sustained, and in future periods we expect growth rates for our revenue to decline, and we may not experience any growth in books or our user base during periods where we are comparing against COVID-19 impacted periods. 

Roblox is benefiting from the pandemic because people who normally wouldn't have the time for games now do. When the pandemic subsides and people slowly return to pre-pandemic activities, we could see a slowdown for Roblox and the gaming industry, but I don’t think those numbers are going to drop drastically.

For over a year, playing video games has become a new routine for many. They’ve committed themselves to games and enjoy playing these games with friends. The boost the pandemic gave to Roblox and other gaming companies may not be totally sustainable, but I believe people will most likely continue this new hobby even when there isn't a pandemic to worry about.

Roblox is set to go public through a direct listing on NYSE under the ticker symbol “RBLX” on Wednesday, March 10. 

For more information on Roblox and its direct listing, other upcoming IPOs, and news on the IPO market, click here

Until next time,

Monica Savaglia Signature Park Avenue Digest

Monica Savaglia

Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.

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