Shares of Activision Blizzard (NASDAQ: ATVI), Electronic Arts (NASDAQ: EA), and Take-Two Interactive Software (NASDAQ: TTWO) are each up at least 24% this year. And if history really does repeat itself, there are plenty more gains to come.
In the technology world, there are few trends that have endured like the videogame console cycle. Every six or so years, brand new inovative machines are unveiled, ushering in a new wave of customers and of course sales. This cycle has repeated for almost three straight decades, with vidoegame publishers reaping much of the reward.
Since Microsoft launched the modern videogame cycle with the first Xbox in 2001, an equal-weighted basket of Activision Blizzard, Electronic Arts, and Take-Two stocks have returned more than 1,700%, versus 330% for the S&P 500.
When the new consoles are released, the publishers are also benefitting from a more fundamental shift: Now more than ever videogames are more central to the living room.
“This has become an ongoing entertainment business. It is no longer a seasonal business, really,” Take-Two CEO Strauss Zelnick says. “You shouldn’t look at it any differently than you would look at television or motion-picture distribution, except that our economics are much better.”