Investing In The Video Game Sector In 2013

by: Chris Katje

The end of June marked the half way point of the year, and just like a car dealership CNBC is looking ahead to 2013. The financial news network released a list of ten highly anticipated video games for 2013. The CNBC article made me dive in to the 2013 video game industry to explore what is coming to the market.

The List of Games:

  • Grand Theft Auto V - Take Two (TTWO)
  • Gears of War: Judgment - Microsoft (MSFT)
  • Bioshock Infinite - Take Two
  • Bungie's Destiny - Activision Blizzard (ATVI)
  • Watch Dogs - Ubisoft
  • Tomb Raider - Square Enix
  • God of War: Ascension - Sony (SNE)
  • The Last of Us - Sony
  • South Park: The Stick of Us - THQ (THQI)
  • Sim City - Electronic Arts (EA)

Take Two Interactive

Take Two leads the way with highly anticipated games from its two largest franchises Grand Theft Auto and Bioshock. In fact, I wrote recently that the "Decline in Take Two Shares is a Buying Opportunity Before Blockbuster 2013." Bioshock Infinite has close to 200,000 pre-orders already sold, according to VG Chartz. In that article, shares traded at $12.61 and have now dropped below $10 making it even cheaper to acquire this company set for a breakout 2013.

Aside from the two games coming in 2013, Take Two is racking up sales from the Max Payne 3 game and continues to see the NBA 2K12 game sell well. Max Payne 3 has 1.67 million games sold to date, while the NBA 2K 12 has sold 4.69 million copies across several platforms. The NBA game also launched as a free to play game in China recently with a partnership with Tencent. The company also has new franchises started with Spec Ops: The Line and XCOM. Take Two also will be releasing Insane in 2013. Insane is the newest in a video game trilogy from director Guillermo del Toro (Hellboy, Pan's Labyrinth).

Borderlands 2 is being released towards the holiday season for 2012. The original game sold close to 4.5 million copies and strong sales for the sequel could push the stock up before its 2013 releases. I think investors would be wise to get in on this play this summer before the stock is inflated.

Recommendation: Buy


Microsoft makes the list for its Gears of War sequel game coming in 2013. Beyond the game, Microsoft will also likely be releasing the newest XBOX gaming platform. Currently known as 720, the new gaming platform is set for a release around the holiday season in 2013.

Each of the three Gears of War games have sold over 5 million copies. The numbers are pretty impressive considering the game is made exclusively for the XBOX gaming platform.

Microsoft has the highly anticipated Halo 4 game being released later this year. The game will be a blockbuster for sure and is already racking up presale orders.

Recommendation: Buy


It appears that 2012 will be a blockbuster year for Activision Blizzard with the release of Diablo III, a WOW expansion, Starcraft expansion, Skylanders sequel, and Call of Duty sequel. The company will release Destiny, the latest title from Bungie called Destiny will see its release. Activision signed the Bungie team that is most famous for making the Halo video games. The game could also be set for a release around the same time as the new XBOX video game system. The Destiny game is set for a 2013 release on the XBOX platform, but will not be released for Playstation until 2014.

The Destiny game could start a huge new franchise for the company. An announcement on Titan, the company's newest MMORPG, could come anytime in 2012 or 2013 and should be a great positive sign going forward. Call of Duty Elite continues to perform well for Activision as well.

Activision Blizzard remains one of my favorite stocks, as it is one of my personal holdings and also a top ten stock pick for 2012. The company has huge blockbuster franchises with Call of Duty, World of Warcraft, Diablo, and Skylanders. Investors would be wise to wait until all the Vivendi drama works itself out before buying shares.

Recommendation: Buy


Sony makes CNBC's list with two titles. God of War: Ascension will be released in 2013 and will be the first game in the popular series to feature multiplayer capabilities. Ascension marks the seventh game in the popular God of War franchise. The plot line of the game will take place before the entire series, setting up the potential for one of the best selling prequel games of all time. This game will definitely make my 2013 bestsellers preview list.

Naughty Dog, a subsidiary of Sony, is creating The Last of Us. Naughty Dog is the studio behind hits like Crash Bandicoot and the Uncharted trilogy. The game is similar to other survival games but has received positive response from the gaming community. The Last of Us was also awarded Best of E3, and Best of Show awards from the likes of IGN, Game Critics Award, Electronic Gaming Monthly, among others. The high praise from gaming publications and positive response from fans sets up well for a blockbuster in 2013.

One of the upcoming trends for Sony could be its shift to the cloud. An article I read on Game Thirst discusses Sony's acquisition of Gaikai and possibilities that exist. With a new gaming console and two anticipated games, Sony could have a turnaround in its entertainment division.

Recommendation: Buy


It's weird to see a South Park game on the most anticipated video games list. The original South Park game that came out in 1998 sold around 2 million copies between the Nintendo 64 and Sony Playstation. Sequels like Chef's Luv Shack and Rally did not have amazing sales numbers. The previous South Park games were made by Acclaim Entertainment, which has since become a bankrupt gaming company.

Apart from South Park, a strong 2013 is shaping up for this small video game maker. New games in 2013 include:

· inSane

· Warhammer 40,000: Dark Millenium

· Metro: Last Light

· Turtle Rock Game

· Homefront 2

· Company of Heroes 2

This doesn't seem like a large number of games, but from a company struggling for profitability it could be the saving grace.

I bought shares of THQ last year after seeing a potential to turn around this penny stock. A new reverse split could be the death of the company, or the start of a new turnaround. I wrote about THQ on my stock blog, since it is too small for a focus article on Seeking Alpha. In that article I discussed the company's future and its divesture of the UFC brand.

Recommendation: Buy

Electronic Arts

Fans of the SimCity series have been calling for a new release of the game. The gaming franchise is one of the bestselling simulation PC games of all time. The newest game will sync with EA's Origin online gaming platform.

Time will tell if the game can compete with Zynga's (ZNGA) CityVille. CityVille is offered for free and counts on users to spend money on in game purchases. CityVille should appeal to hard core gamers.

In 2013, EA will also release Crysis 3, Dead Space 3, and a new Command and Conquer game. The company's sports segment should be especially strong in 2013. The company's FIFA franchise is growing in world popularity and increasing its online presence. The Madden franchise should return with strong sales in 2012 as part of a full preseason and no lockout. EA Sports also strengthened its brands with the UFC rights (see article here).

While there are other video game stocks I prefer, I think EA could have a great next two years in the video game market.

Recommendation: Hold


It appears Ubisoft will have a new hit franchise on its hands when it releases Watch Dogs in 2013. The highly anticipated game was showcased at the E3 Conference, where it took home awards for "Best Surprise", "Best PC Game of E3", and "Best New Franchise" by IGN. The game is developed by Ubisoft creators behind franchises like Tom Clancy and Assassin's Creed.

Ubisoft is the third largest video game company in the United States market. The company has a huge 2012 lineup with Assassin's Creed III, Just dance 4, and Just Dance Disney Party. Two new games in the Tom Clancy franchise will also be released in 2012. Apart from Assassin's Creed, Ubisoft's most anticipated game may be ZombiU. ZombiU is the newest game from Ubisoft, created specifically for the new Nintendo WiiU gaming console. America has been caught in zombie fever and this game could be a huge new franchise for Ubisoft. Ubisoft's Assassin's Creed lineup has sold well with over 4 million copies for the previous games per platform.

The company trades on the Euronext trading platform under symbol "UBI". I don't trade stocks on other exchanges so I have to give it a N/A rating here. I do think that the company has a blockbuster 2012 and 2013 in front of it. The Watch Dogs game may be a big seller for gamers looking for something new and exciting apart from the yearly sequels and spinoffs.

Recommendation: N/A

Square Enix

Square Enix, the game maker from Japan, makes its way onto CNBC's list thanks to the Tomb Raider title coming out in March of 2013. The Tomb Raider franchise became part of Square Enix in 2009 through the acquisition of Eidos for 84 million pounds. The acquisition gave Square Enix franchise titles like Deus Ex, Hitman, and Tomb Raider.

Square Enix is the studio behind Final Fantasy, Dragon Quest, and Kingdom Hearts. The company will test the Eidos acquisition with the 2012 release of Hitman: Absolution (November 20th, 2012). There has not been a new Hitman game released in North America since 2007.

Along with Tomb Raider, Square Enix will release a Final Fantasy title in 2013 (Final Fantasy XIV). The Final Fantasy series has sold extremely well in Japan and North America, but the newer titles seem to decline in sales. With a great showing from Final Fantasy and Tomb Raider, Square Enix could be in for a huge blockbuster year.

For more information or to invest in Square Enix, the company is traded on the Tokyo Stock Exchange under "9684".

Recommendation: N/A

Other games to Watch

  • Metal Gear Rising: Revengeance - Konami (KNM)
  • Lost Planet 3 - Capcom (Tokyo "9697")
  • The Elder Scrolls Online MMORPG - Bethesda
  • Doom 4 - Bethesda


Last December, I predicted the top selling video games for 2012 in an article here. I will have an article up around November with my predictions for 2012. CNBC got the early jump on 2013 predicted best sellers and this is an early look at what video game companies could see positive swings before 2013 is over. The year 2013 will also likely see new gaming consoles from Sony Playstation and Microsoft XBOX. Both systems could come as early as the 2013 holiday season. While that would only give several months for new consoles sales, it would make the 2013 holiday season one of the strongest games have ever seen. I think Sony and Microsoft are both buys this year heading into new exciting platform releases.

With the ever growing shift to social, mobile, and digital gaming, video game companies continue to face more pressure from investors. Several large video game companies have spent millions of dollars to buy small mobile or social gaming companies. Companies have also recognized the need to increase research and development spending in the new gaming areas. Video game companies have typically cut back on the number of games produced each year, making the importance of releasing a few blockbusters a year the new priority. Other companies, like Take Two, are willing to take losses and investor backlash by delaying games to make hardcore gamers happy in the end. With the release of new gaming consoles, the video game market could jump back into overdrive in 2013 and 2014. Both Sony and Microsoft have also recognized the need to shift its focus into the cloud and online gaming. With millions being spent on development and acquisitions, both companies seem to be headed there sooner than later. This bodes well for video gamers around the world, but possibly bad for retailers like Gamestop (GME) and Amazon (AMZN).

Disclosure: I am long THQI, ATVI.