Don’t Short the Back Bench When It Comes to Entertainment Content
Although more controversial game titles usually make the headlines, the sales and revenue stalwarts for many video game companies are established sports titles. Electronic Arts [NASDAQ: EA], for example, has the year’s 8th-best-selling title in a decades-old franchise: “Madden NFL 20”; sports titles represent 60% of the company’s revenue. Another video game leader, Take-Two Interactive [NASDAQ: TTWO], recently sold a record 12 million units of its “NBA 2K19” game – a twenty-year old franchise.
One of the keys for these old but evergreen content franchises is the way companies have leveraged technology to keep games fresh. The rise of broadband internet and connected gaming consoles has meant that companies can now update games in real-time, facilitating a more intense sense of engagement between fans and the video-game avatars of their favorite players. This increased engagement means that companies can more efficiently “farm” existing content franchises, reducing the need for high-risk development and launch of entirely new franchises.
We note that this theme goes beyond video games. We have observed Disney’s [NYSE: DIS] success in revitalizing old content franchises after its acquisition of the Marvel universe of superheroes – turning fifty-year old pop mythology that was once thought moribund, into new blockbuster revenue generators.
Investment implications: Valuable entertainment content franchises don’t need to be created from scratch. Savvy marketing and technological innovation can keep old content fresh and exciting in consumers’ minds – the key is management’s ability to execute on the potential.
