Houlihan Lokey is pleased to present an assessment of the video game industry for summer 2020.

The global games market, which is on pace to be a $200 billion market by 2022 (growing at a healthy 9% CAGR), has proven to not only be resilient during COVID-19 but is also in many respects a beneficiary of “shelter in place” orders. The popularization of diverse revenue models, including free-to-play, subscription, and ad-driven models, are important factors in the continued, rapid increase of the games industry. Mobile, which has been a key driver of growth, as well, now makes up 45% of the global games market and is expected to represent ~50% by 2022. In many ways, COVID-19 has helped to accelerate several key trends that were already driving innovation and growth within the industry. Some key takeaways that we have seen from this environment are:

• The global games market has experienced a surge in users, engagement, and spending as a result of the COVID-19 pandemic.
• COVID-19 has pushed gaming further into the mainstream, attracting a new and broader base of gamers.
• The importance of social and community-based games is heightened as users look to games as a way to connect with friends and families.
• In the absence of traditional live sports, esports is having its moment under COVID-19, with several games receiving their first appearance on linear U.S. networks.
• The games industry outlook is attractive, with growth driven by a combination of factors, including
  • Continued growth in mobile
  • The drive to cross-platform games and social/immersive game play
  • Advancements in next-gen technology, including 5G and cloud gaming
  • Robust outlook for esports
• M&A and financing activity remains robust despite the broader market volatility, highlighted by Zynga’s acquisition of Peak Games, AppLovin’s acquisition of Machine Zone, and Stillfront Group’s acquisition of Candywriter. We expect this active M&A and financing environment to continue.

We hope you find this update to be informative and that it serves as a valuable resource to you in staying abreast of the market in these turbulent times. Of course, in this fast-changing market environment, we would be happy to discuss these developments in real time and look forward to staying in touch with you.