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The growth of the gaming industry

Yahoo Finance’s Dan Howley joins the Yahoo Finance live panel to discuss the growth of the gaming industry and what to expect for Holiday 2020.

Video Transcript

ZACK GUZMAN: New data shows the gaming industry was already seeing a strong year, even before those came out. And joining us now for more on that is Yahoo Finance's Dan Howley, who has the details on that. Dan.

DAN HOWLEY: That's right, Zack. Basically, the gaming industry is seeing kind of this massive explosion in growth for 2020. And that's a result of the gaming industry just continuing to grow naturally as more people get into gaming but also the fact that the pandemic has forced people to find new ways to entertain themselves. And so, without something like movies to go to, there's only so much Netflix you can watch. Gaming has really taken off.

And so some of the numbers, according to NPD Group-- again, this is before the new console launch-- is, year to date, the gaming industry has pulled in $37.5 billion. That's 20% more than in 2019. And a lot of that is going towards hardware, video games, content themselves.

In October, spending was at $3.8 billion. And then, as far as hardware goes, which is really interesting, you would expect that hardware sales, as we got closer to November, where Microsoft and Sony were going to launch the Xbox Series X and the PlayStation 5, that you would see kind of console sales peter off. But, as a result of the pandemic, that did not happen.

And so, in October, spending was up 41% to $249 million on hardware itself. And that's-- year to date is at $2.4 billion, 23% higher than last year. So people are continuing to spend on these despite the fact that those new consoles were coming.

And then, of course, the big seller here has been the Nintendo Switch. It's a cheaper console, $299. It can be used on a TV, or you can use it handhold mode. If you can get your hands on it, it offers a lot of great gameplay opportunities.

And then one of the big games for that was Animal Crossing. And part of the reason for that was it was a good escape. But, you know, for Nintendo, they've seen the best-- the previous best high set for console sales in October. They beat that.

That was originally set by the Nintendo Wii. So it looks like that company is kind of on the upswing again after their Wii U debacle. The Nintendo Switch has been doing incredibly well. But, you know, just to see these kinds of numbers out of the gaming industry, you can expect this to continue. It's like I said, the new consoles came out earlier this month. And we're going to continue to see this as the winter goes on and people begin to lock down again.

AKIKO FUJITA: So, Dan, when you talk about a company like Nintendo, as somebody who actually went out and looked for a Switch early on in the pandemic, you couldn't find them anywhere. In many ways, a lot of investors are frustrated that the company wasn't positioned well enough for the big uptick. What are we hearing from these individual companies about inventory, how they've actually shifted up production in anticipation of a huge surge, especially during the holiday season?

DAN HOWLEY: Yeah, Nintendo has been pushing out more and more consoles. And they've been raising their estimates for their fiscal year every quarter just because of how much kind of anticipation there has been for this and the need for people to be entertained. I mean, look, you can't go anywhere anymore now, especially with the winter.

Nobody wants to eat outside when it's 30 degrees out. So what you're going to have is more people playing games. So they have boosted the production of those. But, look, Microsoft and Sony-- botched is too nice of a word in describing the rollouts of their consoles earlier this month.

If you try to get your hands on a PlayStation, good luck. They're going for three times the value that they really go for on Amazon because scalpers are on there. Ditto the Xbox. When they originally rolled out preorders, that was a huge failure. People said that they had them in their cart ready to go, and then their pages would time out.

So they need to get on it and step up. I imagine that, as we get closer to Black Friday next week, that we'll see more and more of those consoles hit the market. But, you know, yeah, as investors look at this and say, aren't these supposed to be big moneymakers-- especially for Sony, which the PlayStation is a big part of its annual revenue.

Microsoft, obviously, has a little thing called Azure and Windows, so they're not as heavily dependent. But, you know, if these companies want to see these consoles do well, you have to and make them available. And they're really kind of falling on their faces when it comes to that.

AKIKO FUJITA: Yeah, there--

ZACK GUZMAN: [INAUDIBLE]

AKIKO FUJITA: A lot of money being left on the table there.

ZACK GUZMAN: Well, as we were discussing before, Dan, I know you were mad about the fact that, you know, there wasn't a waiting list for these preorders. It was just straight up, yeah, you can't order it right now. And a lot of people were confused about that. But Dan Howley, always impassioned on the gaming front for us. Appreciate you joining us.