Game On

Orange County-based video gaming and esports companies are counting on keeping their legions of new players once the coronavirus crisis winds down.

“There’s been an astronomical increase in people playing games, watching games, using gaming platforms to just communicate on. It’s really cementing gaming as much more of a mainstream sports environment,” said Mark Thimmig, founder and chief executive of Esportz Entertainment Corp. in Irvine.  

Thimmig, whose Esportz Network acts as an ESPN of sorts for the gaming world, sees a “substantial number” of new players staying even after the crisis passes. 

“Our podcasting numbers are just exploding,” Thimmig told the Business Journal.

“Our downloads and our listening have just gone skyrocketing.”

Gaming Epicenter

There are over 400 esports and video gaming-related companies within a 65-mile radius of Irvine, according to Esportz’s estimates, making the local area an epicenter for the gaming market.

Activision Blizzard Inc., the parent company of Blizzard Entertainment Inc. in Irvine, said in an earnings report last month it foresees “the potential for continued heightened engagement in our content well beyond the second quarter.”

“We’re really thankful that our games are able to play a part in helping to bring people together during what’s really an unprecedented and challenging time for us all,” Blizzard Entertainment President J. Allen Brack told financial analysts.

Activision posted better-than-expected first-quarter results, aided by more people gaming at home during the pandemic.

Net income rose to $505 million in the three months ended March 31, up 13% from $447 million a year ago. Activision shares (Nasdaq: ATVI) are up about 25% this year to $76 apiece as of the start of June.

The $58 billion-valued company also raised its full-year outlook as it foresees more playing beyond the second quarter that ends June 30.

American consumers’ spending on video games rose to a record-high of $10.9 billion in the first three months of the year, and the current quarter’s spending may be “just as high, if not higher,” according to the technology news website The Verge.

Amazon Game Studios

Another sign of the local boom: hiring is up. Blizzard lists about 200 open positions in Irvine, while Amazon Game Studios in Irvine is developing a “Lord of the Rings” game here was advertising for almost 50 local positions as of last week on its website.

Nick Licouris of Gerber Kawasaki Wealth & Investment Management sees both technology advances for games helping in the growth of the industry, as well as behavioral changes as more people are “building communities” on live streaming platforms for gamers such as Twitch and Mixer.

“The combination of the behavioral and technological will fuel this trend that we’re seeing definitely in the future,” the investment advisor representative said.

“There is a lot of social that goes on, especially in the younger generation through gaming. I think that the new form of social media is the gaming space.”

HyperX

Dan Kelley, the director of corporate marketing for gaming products equipment maker HyperX in Fountain Valley, sees a “significant uptick in online sales of our products across the board.”

Kelley, whose company’s gaming products include headsets, keyboards and mouse units, said he has “lots of reasons to believe” that the newfound gamers will stay on once the pandemic eases.

“There’s a lot of negatives, but there’s also on the business side from the HyperX point of view some upsides—in terms of an increase in sales due to the demand for gaming products during this time.”

He points out that the company’s headsets are a “great work-from-home solution as well for Zoom meetings, Microsoft Teams and Google Meets.”

In-Person Challenges

Not all elements of the gaming sector have been thriving; those that cater to in-person events have been largely on pause, as has been the case for much of the larger business community.  

HyperX, the gaming unit of Fountain Valley-based Kingston Technology Corp., OC’s largest private company, is the naming rights partner for the pyramid-shaped HyperX Esports Arena in Las Vegas.

The arena, the global flagship property of Irvine-based Allied Esports Entertainment Inc., (Nasdaq: AESE) has been closed due to the pandemic.

In a positive development, the company said the Las Vegas arena will reopen on Thursday, June 25.

Frank Ng, Allied Esports Entertainment chief executive, said the temporary shutdown of the $20 million arena and the company’s other venues around the world has “had a significant impact on the first pillar of our business.”

The temporary shutdown of the arena and other in-person events put a crimp in first-quarter revenue, which was $6 million, down 3% from the same three-month period a year earlier.

“Fortunately, our esports unit was able to quickly pivot to hosting online tournaments from a remote location and we’ve had success in providing a new experience for our communities,” he told the Business Journal in late May by email.

Esports involves multiplayer video games played competitively for spectators, often by professional gamers.

Players Staying

Ng said he also believes the new gamers will stay.

“Fifty percent of our online tournament participants have been from outside of Las Vegas, which shows that our brand is reaching a new audience,” according to Ng.

“It is our hope that the online experience will drive them to Las Vegas for in-person events as well,” he said.

Allied Esports has been pursuing a strategy of moving its events into shopping malls, a process that for obvious reasons has been slowed during the pandemic (see story this page, below).

Razer Gains

Gaming products maker Razer Inc., whose lineup includes laptops, keyboards, earbuds and mouse units for gamers, as well as software for gamers and esports fans has also seen a jump in demand.

“For the month of April and about halfway through March gaming headsets have more than doubled,” Razer Americas Chief Bob Ohlweiler said.

He said sales of webcams and microphones are up five to 10 times their normal volumes.

“Pretty much across the board the rest of our products have all seen something that’s between a normal run rate and holiday sales,” he said.

Razer recently moved from San Francisco to Irvine, to set up one side of its “dual headquarters” here along with Singapore.

“We’re thrilled that things are progressing as they have been,” Ohlweiler said of the shift to OC.

Allied Esports Venture Into Malls Delayed

Allied Esports Entertainment Inc. of Irvine developed a strategy over the past year to move some of its live events, normally held in stand-alone venues, into shopping malls owned by Brookfield Property Partners LP and Simon Property Group Inc.

Plans to create a 21st-century version of the old-school video arcade, with an emphasis on audience participation, have received a temporary setback due to the coronavirus crisis, which temporarily shuttered most malls across the country.

Allied Esports Entertainment Chief Executive Frank Ng, whose company operates the venues and live events for video gaming enthusiasts, told the Business Journal by email that “our short-term plans with Simon and Brookfield are delayed.”

“We continue to have constructive discussions with both partners and hope to continue as intended as soon as possible,” according to Ng.

He added: “Our mall partners’ portfolios include more than 400 locations across the country, giving us the ability to strategically scale our network.

“We are certain esports will play a major role in the ongoing development of their entertainment-based offerings.”

Malls Drop

Shopping malls themselves have hit hard times nationwide in part due to the massive pandemic shutdowns. The New York Times reported on May 26 that the value of malls dropped 25% over the previous three months, citing Green Street Advisors, a commercial real estate research and advisory firm in Newport Beach.

Allied Esports in July 2019 signed a $5 million deal with Indianapolis-based Simon Property (NYSE: SPG), and in January the mall owners said that Mall of Georgia in the suburbs of Atlanta would be the site of the first Allied Esports venue in a shopping mall anywhere.

On May 26, Simon said it was reopening its three area malls, Brea Mall, The Outlets at Orange and The Shops at Mission Viejo. None of the local properties have Allied hubs.

Bermuda-based real estate firm Brookfield Property Partners LP (Nasdaq: BPY), whose holdings include a portfolio of retail centers such as Las Vegas’ Grand Canal Shoppes and Hawaii’s Ala Moana Center, in January said it would invest $5 million in Allied (Nasdaq: AESE).

Brookfield also said it would help Allied Esports build esports venues in its retail destinations. The two agreed to jointly develop venues that will house amateur and professional play, with broadcast and streaming production facilities on-site.

Allied Esports Entertainment also owns the popular World Poker Tour as a separate business unit that contributes to overall corporate revenue.