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When a global hit is born, the stock price reacts immediately, and if you have a strong IP, you can expect sustainable growth.
The game market continues to expand its users worldwide. Nowadays, games can be enjoyed not only on home game consoles, but also on smartphones, PCs, and tablets, and game centers are also popular as amusement facilities for enjoying the extraordinary. Game-related stocks are attracting attention as this market grows.
The size of the home game market in store sales and mail order in 2022 is approximately 209.7 billion yen, 103.4% of the same period last year, for hardware, approximately 165 billion yen, 104.1% of the same period last year, and a total of over 374.8 billion yen, 103.7% of the same period last year. Despite the backlash from the stay-at-home consumption of the previous year, the size of the domestic game market has become positive as powerful new software and shortages of game consoles have been resolved.
On the other hand, the market for smartphone games in Japan is approximately 1.9 trillion yen (2022), tripling in 10 years. Looking at the bigger picture, the global game market is expected to grow to $184.4 billion (approximately 24 trillion yen) in 2022.
At home, Nintendo's Switch, Sony's PlayStation 5, and Microsoft's Xbox are driving the market, and as smartphones have become more widespread around the world, the smartphone game market is also expanding. The game market is entering a period of further growth.
The boom continues this year. For example, Nintendo's "The Legend of Zelda: Tears of the Kingdom (Tiakin)" was a huge hit, selling 10 million copies worldwide within three days of its release on May 12, and 1 million copies in Japan in the first week.
The movie "The Super Mario Bros. Movie," released in late April, also grossed approximately $1.3 billion (approximately 180 billion yen) worldwide and over 12 billion yen in Japan as of late June. It has surpassed "Frozen" to become the second-largest animated film in the world.
Nintendo is not alone. Square Enix released "Final Fantasy XVI" on June 22nd, and the first week sales were 3 million worldwide, of which about 330,000 were sold in Japan.
By the way, the number one game in the first half of this year's sales ranking was the aforementioned "Tearkin", and of the top 10, 8 were for the Switch and 6 were Nintendo's own titles. The only third-party title was "Minecraft" in 8th place.
The remaining two were "FF16" for PS5 (4th place) and "Hogwarts Legacy" by Warner Bros. Games (10th place). However, Hogwarts has sold more than 15 million copies worldwide, so it can be said to have been a huge hit globally.
So, with all the big titles out there, how did they affect stock prices?
In the case of Nintendo, the stock price has been hitting new highs every day since the start of the year since its release, reaching 6,000 yen on May 18th. Needless to say, the main reason for this is that the number of units sold worldwide exceeded 10 million in three days. It has continued to perform well since then, temporarily exceeding 6,500 yen in late June.
On the other hand, Square Enix is in stark contrast. The company's stock price rose in June toward the release date, from 6,250 yen on the 1st to 7,540 yen on the 20th. However, after this peak, the stock price plummeted, settling at the 7,400 yen range as of early July. This is because FF16 sold 3 million copies worldwide in the first week after its release, while the previous game sold about 5 million copies on the first day of its release alone. Domestic sales in the second week were also poor, at just under 40,000 copies, which is reflected in the sluggish stock price.
What we can see from this is that game-related stocks are sensitive to hits.
Capcom, which has powerful IPs (intellectual properties) such as "Resident Evil" and "Monster Hunter," and has "Street Fighter 6," which sold over 2 million copies worldwide as soon as it was released on June 3, is doing well, with its stock price approaching 5,600 yen in early July, up from 4,250 yen at the beginning of the year. As with Nintendo, game companies with popular IPs may tend to see steady performance and stock prices as long as they don't miss the mark.
Alternatively, Mixi, which made the hit smartphone game "Monster Strike," Colopl, known for "Wizard and the Black Cat," and GungHo Online Entertainment, which has released super-hit titles such as "Puzzle & Dragons," have seen their stock prices rise 10 to 100 times. One of the characteristics of game stocks is that they can show this kind of explosiveness.
Currently, the three companies mentioned above are leading the home video game market. The total number of downloads sold worldwide is said to be 125.62 million for the Nintendo Switch series, 32 million for the PlayStation 5, and 18.5 million for the Xbox Series X/S. Incidentally, the number one position in history is the PlayStation 2 (155 million), followed by the Nintendo DS series (154.02 million), followed by the Switch. In other words, Japanese companies have a monopoly on game hardware.
When a popular hardware is created, a cycle is created in which software manufacturers adopt it, so it is easy to imagine that the three giants will continue to lead the market. In particular, Nintendo is overwhelmingly good at developing its own games with innovative UIs while taking advantage of its strong IP. In fact, following the hit of "Tearkin," Nintendo's domestic sales of the Switch in June increased 68% year-on-year to 380,000 units, the highest number ever for that month.
On the other hand, there is concern about the shift to next-generation consoles. Nintendo has seen success and failure, with the Wii being a hit while the Wii U struggles. The company has begun to talk about the next generation of consoles, but it is unclear whether it will be able to continue in its current position depending on whether it succeeds or fails. Software makers should just ride the winning horse.
The Electronic Entertainment Expo (E3) in the United States (canceled after 2022), the Tokyo Game Show in Japan, and gamescom in Germany are counted among the world's three biggest game shows, with many game makers exhibiting their latest content.
The impact on stock prices before and after an event is related to the excitement. For example, if there is no game console with a strong presence, the excitement will be lacking, and if a new hit title is unveiled, the stock price may rise due to expectations before the event, and sell off in disappointment after the announcement.
The global game market is expanding, and it is an undeniable fact that trade fairs affect stock prices. There is a way to ride momentary fluctuations. Of course, this is not limited to game shows, but also applies to company-specific presentations such as Nintendo Direct. We want to keep track of information that moves stock prices, such as the announcement of next-generation consoles.
When it comes to game-related stocks that own popular IP both domestically and internationally, the first one to come to mind is Nintendo (7974). There are countless examples, such as Mario Brothers, which is popular not only for Mario and Luigi, but also for all kinds of characters such as Bowser and Princess Peach, and The Legend of Zelda, which includes Link. The new Zelda game sold 10 million copies in three days after its release. It seems that they will focus on IP business in the future, and the impact on their performance and stock price will become even stronger.
Bandai Namco Holdings (7832) and Capcom (9697) cannot be ignored. The former has the Gundam series and the Idolmaster series, and is developing a multi-faceted business not only in games but also in goods and videos. The latter also has the Resident Evil and Monster Hunter series, and the overseas sales ratio is about 50%. The impact of popular IP on performance is too large.
Of the top 10 domestic software sales rankings, 9 titles in 2022 and 8 titles in the first half of 2023 are Switch titles. And most of them are Nintendo's own content. They boast overwhelming strength in both hardware and software.
The company treats its IP with care, and has added value by having them appear in various content, developing them into globally popular characters. The success of "Super Smash Bros." and "The Super Mario Bros. Movie" proves this.
They are always proposing new ways to play games, such as visual effects and UI, and are good at making things that don't get boring. As a result, their strength is that they are not only popular with game enthusiasts, but also with the general public.
Although the company saw a decrease in revenue and profits in the fiscal year ending March 2023 compared to the previous fiscal year, it remains strong. Unless there is a major change in the game, Nintendo's dominance will continue in the future.
Global expansion is now the mainstream, and gold mines are lurking in overseas game stocks.
In the past, home video games were a specialty of Japan, and most of the titles distributed were from domestic manufacturers. However, now the presence of overseas manufacturers is overwhelmingly increasing.
For example, looking at the ranking of the number of games sold worldwide, Nintendo's Wii Sports is in first place, but in second place is Grand Theft Auto V by Rockstar Games in the United States, and in sixth place is Sweden's first Minecraft, and other overseas games are also on the list.
There are countless other companies, such as Activision Blizzard (USA), known for Overwatch, Electronic Arts (USA), popular for sports games such as FIFA and NBA, Infinity Ward (USA), popular for Cold of Duty, UBIsoft, which develops Assassin's Creed, and NCSoft (Korea), which has had hits with Lineage.
If you add smartphone game makers to this, there are many manufacturers that are expanding globally in various countries around the world. When you think of game-related stocks, you think of Japanese companies, but there are also many promising companies overseas.
Nowadays, it is easy to access overseas stocks from Japanese securities companies, so it may be worth considering them. You may be able to enjoy investment benefits from manufacturers that are expanding globally rather than in the domestic market. Chinese manufacturers that are actually mass-producing high-quality games and are worth watching
When it comes to game manufacturers, Japan, Europe, the US, and Korea are the strongest, but the world's top is China's Tencent. It grew with instant messengers and SNS apps, but it also boasts the largest social games in China, such as "Clash Royale".
In 2016, it acquired Sweden's Supercell, and has invested in the aforementioned Activision Blizzard, UBIsoft, and Epic Games, famous for "Fortnite".
Other familiar game companies in Japan include NetEase, which developed "Knives Out," which was popular in Japan, 37GAMES, whose representative works include "The Dawn of the Three Kingdoms Heroes" and "The Devil and the 100 Princesses," and Mihoyo, whose "Genshin Impact" was a huge hit.
Some of these Chinese game companies are listed companies, and some are listed not only in their own country but also in the US market. China has a large population, so it has domestic demand, but it is also active in global expansion, so we can expect foreign demand. Why not consider them as promising stocks?
As mentioned above, the smartphone game market is growing in Japan as well. There is no need for a dedicated game console, and there is a lot of content that can be started for free. There were manufacturers such as COLOPL and GREE that made a big splash. There are also many companies that make high-quality games, such as CyberAgent and DeNA, which have hits such as "Uma Musume".
Because the market is large, you should also check out smartphone game-related stocks. In addition, gumi, which has worked on "Phantom of the Kill", is also proactive in creating new businesses, such as actively working on VR (virtual reality), AR (augmented reality), and blockchain businesses.
In the area of VR related to games, various products are being released, such as Sony's "PlayStation VR2" and Meta's "Meta Quest2". The birth of hit games will expand the market, and this will be reflected in the stock prices of affiliated companies.
If you hold game stocks, you should also pay attention to shareholder benefits. There are various benefits, such as electronic coupons from Sony, tickets that can be used at game centers from Sega Sammy Holdings, and 40% off new and previously released products from Koei Tecmo HD. If you want to make capital gains and get something extra, pay attention to shareholder benefits when choosing stocks.
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