Breakingviews – Corona Capital: Gaming, Hong Kong, Airline cuts

Reuters
Reuters

LONDON/HONG KONG (Reuters Breakingviews) – Corona Capital is a daily column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.

LATEST

– Ubisoft

– Hong Kong

– IAG/Air France-KLM

SNAKES AND LADDERS. Covid-19’s combination of disposable income cuts and extensive time indoors has been great for free-to-play video games. U.S. group Activision Blizzard on Thursday trumpeted https://investor.activision.com/static-files/2d66791b-ca74-439a-87e8-7cd443b44c9a the success of its title “Call of Duty: Warzone”, a free-to-play shoot-’em-up that launched in March. President Daniel Alegre said there was “substantial” growth in sales as enthusiasts upgrade to the game’s $60 premium version.

Still, the virus has also disrupted production lines. France’s Ubisoft Entertainment saw shares drop 8% on Friday after it delayed two new games. That’s not great ahead of a potentially ruthless holiday season, with various developers scheduled for blockbuster releases. Still, Ubisoft also disclosed an almost 40% increase https://ubistatic19-a.akamaihd.net/comsite_common/en-US/images/10ubisoft%20fy21%20h1%20earnings%20pr%20english%20final_tcm99-363531_tcm99-196733-32.pdf in sales from “back-catalogue” titles – those already owned pre-Covid-19. “Assassin’s Creed Odyssey” saw a 400% jump in gamers buying add-ons like new clothes for their characters, relative to those recorded by its predecessor. “Angry Birds” maker Rovio Entertainment on Friday reported https://www.globenewswire.com/news-release/2020/10/30/2117548/0/en/Rovio-Entertainment-Corp-Q3-interim-report-Adjusted-operating-profit-margin-18-9-games-gross-bookings-at-last-year-s-level-with-lower-user-acquisition.html a 138% jump in operating profit as game revenue held steady despite lower marketing costs. That suggests Covid-19 remains a net positive. (By Oliver Taslic)

BOTTOMING OUT. Hong Kong is ending the week on a rare high. Its economy grew by 3% in the third quarter compared to the previous three months, according to advanced government forecasts released https://gia.info.gov.hk/general/202010/30/P2020103000338_353109_1_1604043168850.pdf on Friday, the first such positive reading since anti-government protests kicked off last year. The GDP estimate, though, is flattered by a low base, and unemployment in the Chinese territory is at a near 16-year high. Analysts at Fitch forecast real GDP to shrink by 7.5% this year.

Even so, the Chinese territory may be turning a corner. Falling Covid-19 cases have helped: residents are flocking back to restaurants, shops, and reopened beaches, while authorities are readying to ease travel restrictions with Singapore and mainland China. What’s more, deals like Ant’s, record $34 billion listing underscore the city is roaring back to business. (By Katrina Hamlin)

CABIN FEVER. European airline staff are bearing the brunt of the sector’s pain. Air France-KLM slashed https://www.airfranceklm.com/en/system/files/q3_2020_press_release_en_final.pdf employee costs by over a third in the three months ending Sept. 30. Similarly, International Airline Group cut https://www.iairgroup.com/~/media/Files/I/IAG/documents/interim-management-statement-for-the-nine-months-to-september-30-2020.pdf its operating costs by 54% partly via a reduction in British Airways and Aer Lingus headcount by 10,000. Even so, IAG reported a 1.3 billion euro operating loss before exceptional items in the third quarter, while Air France-KLM booked a 1.6 billion euro loss in the same period.

Heavy axe-wielding is likely to continue. In the coming three months, Air France is only expecting to operate less than 35% of the flights it did this time last year. Meanwhile, IAG’s new CEO Luis Gallego warned that passenger demand is unlikely to recover to 2019 levels until 2023 at the earliest. In the meantime, airline job security will be on hold. (By Aimee Donnellan)

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