The potential impact of the coronavirus outbreak on the videogame industry may be more nuanced than believed, says Jefferies: good in the short-term, but very bad if the health crisis doesn’t subside over the long-term.
Earlier this week, an analyst said online gaming companies may benefit as more consumers spend time at home as people shift from outdoor activities. Many companies also have extended the holiday breaks as the government has restricted travel due to the virus.
But Jefferies analyst Ken Rumph on Tuesday said if the outbreak lasts longer than a few weeks, it will be a significant negative for the industry overall.
“A short-term impact in China is more playing time,” he wrote. “If shutdowns exceed a month or so, game schedules will be delayed. New consoles may likewise suffer supply issues from a prolonged disruption, ahead of their Fall 2020 planned launches.”
The analyst estimates that 30% to 50% of all art for Western-developed games are created in China. He noted the big game publishers such as
Electronic Arts (EA),
(TTWO) all have operations in the country.
Rumph said if the disruption is just a few weeks, that would be manageable. However, if it extends into months, it could lead to game delays as security requirements and software tools make remote-access unworkable, he added.
“Given marketing, competition and synchronised game release all scheduled for the next console generations, this bears watching,” he wrote.
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