Taking Stocks

As gaming pundits, we often make claims that X change or Y addition are terrible design decisions that will cause companies to lose money, subscribers, etc. They are easy claims to make, when there is absolutely no sense of follow-up or acknowledgement that something like stock price is affected by many different factors.

Well, color me surprised when I stumbled across the actual stock prices of gaming companies the other day. That gaming stocks have been pummeled this year is putting it mildly.

ATVI is Activision Blizzard, currently trading at $46.52, and the stock is down -26.53% year-to-date (YTD). If you look at just the last six months, it is down -36%. EA is, well, EA, currently trading at $81.18 and down -22.73% YTD. Again, if you look just at the last six months, EA is down -40%.

It is incredibly easy to say “well of course.” Beta for Azeroth will probably go down as one of the worst expansions in WoW history – or at least give Cataclysm a run for its money – so of course the stock prices reflect that. Then with EA, you only have to look at all the “historical inaccuracies” they added to Battlefield V and the controversies that spawned. Get woke, go broke, right?

Well… hold up.

TTWO is Take Two Interactive, and is currently trading at $101.69. You might know this company as the one who released a little game called Red Dead Redemption 2. The YTD movement has been… -7.87%. That is certainly less of a drop than Blizzard and EA though right? Yeah, sorta. The three month decline has been -24% though, and that’s with a critically acclaimed (Metacritic: 97) title coming out a month ago.

This is not to suggest that what a company does, or any sort of controversies it generates, has no impact on their bottom line and thus stock price. But sometimes it’s good to acknowledge that there is a large gap between what we feel should be the natural consequence of a given design choice, and what actually happens in the real world. On occasion, things line up and we appear prescient. A lot of the time though, we rage in our little bubbles and the world moves on without us.

Posted on December 6, 2018, in Commentary and tagged , , , , . Bookmark the permalink. 5 Comments.

  1. Stock prices reflect the assumed future of the company, not it’s recent past. It drops because in the near future they will not release a big hit.

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    • Right, it’s based on projected revenue, investments, etc. But by most measures, something like Red Dead Redemption 2 could be another billion-dollar revenue stream, just as GTA5 was before it. So why did the stock go down?

      I don’t think anyone can ever know for sure, regardless. The point is that the sell-off in the gaming arena could be for completely unrelated reasons than quality or popularity of the games we play.

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      • It could be, or it could be a direct result of said games being poor or underperforming. RDR2 is critically acclaimed, but isn’t selling like GTA:V (the latest CoD that also just came out has so far sold better), which is perhaps reflected in the stock price.

        EA/ATVI are down in part because of loot-box worries. Both companies are heavily propped up on the success of a few franchises that are heavy on lootbox income (FIFA, Madden, OW), and if major markets like the US decide to change laws in that area, it will hurt them greatly (or that is the expectation, reality is they will simply pivot to something close-enough to a lootbox to keep going).

        Recently all stocks are trending down because the Trump bubble is bursting.

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  2. Stock price is not just the performance of the company.

    Stock price = performance of economy + performance of sector + performance of company

    For example, if an airline crashes, all airline stocks will go down, even if they had nothing to with the plane that crashed. This was the central insight of the Alfred Winslow Jones, who invented the concept of “hedging’, essentially pairing two stocks in the same sector (buy one, short the other), turning an absolute result into a relative result.

    By that measure, Take Two is doing much better than the others, perhaps precisely because it is avoiding controversies.

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  3. Fascinating to think and speculate about. Thank you for the info put together :)

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