Shares of major U.S. video game publishers were in focus after Piper Jaffray published its latest "TwitchAdviser" note, which analyzes video game view data on Amazon's (AMZN) Twitch platform. According to the firm, the most recent quarterly data from Twitch is positive for Electronic Arts (EA) and "essentially in-line" for Activision Blizzard (ATVI) and Take-Two (TTWO). The firm noted that it believes Twitch viewership is a viable way to track publisher revenue segments, albeit not equally valuable across all publishers.
WHAT'S NEW: Piper Jaffray analyst Michael Olson said that his firm's TwitchAdviser data for the fourth quarter shows that Twitch minutes for major video games were up 491% quarter-over-quarter for EA, up 30% for Take-Two and down 11% for Activision. The analyst noted that EA's increase in viewership was due to the latest edition of "FIFA." The data also indicated that EA and Take-Two's share of top 25 viewership increased quarter-over-quarter at 3.5% and 3.6%, respectively, from 0.6% and 2.8%, respectively. Meanwhile, the analyst noted that Activision's share dropped to 18.4% from 20.5%.
Olson said he believes that the increase in EA's viewership offers upside potential versus his expectation for a 118% quarter-over-quarter jump in Live Services revenue. However, while Take-Two's viewership also jumped, the viewership hike was due to "Red Dead Redemption 2," which presently does not monetize engagement, the analyst noted. In addition, Olson said that Activision's decline in Twitch viewing minutes compares to his estimate for flat ex-King revenue and noted that Activision had an especially difficult quarter-over-quarter comp in Q4 due to the launch of expansions for both "Destiny 2" and "World of Warcraft" in Q3.
'FORTNITE' VIEWERSHIP DOWN: Piper's Olson also said that Epic Games' "Fortnite" continues to "dominate" Twitch viewership, though his firm's analysis indicates a 13% quarter-over-quarter decrease for Q4. The decline is the second consecutive dip for the game following a "meteoric" rise to the top that included a 74% quarter-over-quarter increased in Q2 and a 218% quarter-over-quarter spike in Q1, the analyst said. The change could simply be a result of the timing of new "content drops," but could also indicate that interest for the battle royale title has peaked, Olson said. Investors in Epic Games include Tencent (TCEHY), KKR (KKR), and Disney (DIS).
BUNGIE: After the market close yesterday, Activision disclosed that Bungie, the developer of the "Destiny" franchise, will assume full publishing rights and responsibilities for the "Destiny" games. As a result, Activision does not expect to recognize material revenue, operating income or operating loss from the "Destiny" franchise in 2019. Of note, Piper Jaffray's Michael Olson said in his TwitchAdviser note that viewership for "Destiny 2" fell 35% quarter-over-quarter for Q4, following a spike in September with the launch of the "Forsaken" expansion.
PRICE ACTION: In early afternoon trading, Activision Blizzard shares are down 9.6%, while shares EA and Take-Two are trading marginally lower.
