Believe it or not, there has been an upside to 2020. Less than willingly, we were given the opportunity to re-assess what matters most.
What we did with our sudden windfall of spare time has revealed much of who we are as individuals – and as a society.
A return to nesting
After the initial shock of the pandemic, we quickly settled into lockdown mode. For some of us, it wasn’t that bad. We helped the kids stay on top of their schoolwork while learning new things on our own. We gardened, made minor home repairs, and baked banana bread.
Gradually, we discovered our latent culinary talents. Who needs restaurants? We could whip up a chopped mesclun salad with homemade vinaigrette, grilled branzino over saffron rice with a seasonal berry sorbet for dessert at one-third the price. Not only did we have the time, but we were also borderline desperate for something to do.
Of course, when you’re looking to pass time, you soon find out there are only so many arguments you can get into on social media, not every Netflix series is as binge-able as Ozark and your kids will eventually reach their saturation point for re-watching Frozen.
This past year has been a godsend for the video game industry. Barely a month into the pandemic, trade journal GameDaily reported a 35% year-over-year increase in revenue. Software, hardware, and peripherals – headsets, controllers, and so on – all gained ground. This market expansion is more or less in tandem with the growth in e-commerce as a whole.
Just this past month, Wolf Street followed up on that report, and it doesn’t appear that the industry’s growth has slowed at all. Nintendo Switch has become a serious rival to PlayStation 4, as its native Super Smash Bros. outsold all other titles, according to Hooked on Tech, supplemented by Mario Kart 8 Deluxe and Super Mario Party. Animal Crossing: New Horizons came out on Switch just as the coronavirus hit so it, more than any other game, caught the wave. PS4, meantime, is the console to have for shoot-‘em-ups like Red Dead Redemption 2 and Call of Duty: Black Ops III.
“The global console games market for the entire year is expected to grow by 41%, from $41 billion in 2019 to about $58 billion in 2020,” Adam Williams writes for Wolf Street. “Growth in console games has also been driven by an increase of ‘gamers’ worldwide: In 2017, there were an estimated 2.21 billion gamers; in 2021, 2.73 billion people fall under that bracket, with at least 63% of the people in the US being gamers.”
That’s a startling statistic, which tends to make non-gamers feel a little like a dinosaur. And not a cute one like Yoshi.
But then we run into the distinction between “gamers” and “e-sports athletes.”
How deep is this rabbit hole?
For many, it’s a bridge too far to call video games – as ferociously competitive as they might be – sports, but that thinking might already be outmoded. There are professional teams around the world as well as an online platform, Twitch, which functions as the industry’s ESPN. Some colleges are offering athletic scholarships to e-sports players. The U.S. State Department already issues P-1A visas for “Internationally Recognized Athletes” to e-sports professionals and has been doing so for seven years. The 2024 Summer Olympics in Paris might feature e-sports, albeit not as medal events.
While the Olympic competitions would be focused on such games as NBA 2K or FIFA that simulate “real” sports, these are side dishes on the e-sports training table.
By far the most-watched e-sport is League of Legends. Its 2019 world championship series drew, at the peak, 4 million viewers to Twitch, according to Esporz Network. While that’s not quite half the audience drawn to the Daytona 500 or a March Madness Elite 8 quarterfinal, let’s also remember that major sporting events rarely exceed three hours in length, but an e-sports championship can go on for well over a hundred hours. In that way, it’s more like an entire post-season. That League of Legends tournament went on for 131 hours, attracting 125 million viewer-hours. That’s the rough equivalent of keeping 42 million people glued for three hours, which puts it on par with an NFL conference championship.
There’s gaming, then there’s the gaming
The word “gambling” is so fraught with a negative connotation that those engaged in that industry prefer to call it “gaming,” never mind that it’s worlds apart from anything like Super Smash Bros. Yet this sort of gaming has also been a source of distraction during These Uncertain Times. It’s a $50 billion-per-year industry compared to $17 billion for online multiplayer video games such as Halo or Fortnite.
The three largest segments are poker, casinos, and sports books, but the only limits are those of imagination and avarice. A growing trend is in-play gambling, through which you can bet on elements of a game even after it has already started. Which player in a soccer match will draw the next yellow card is a popular wager. Fantasy sports betting – a monetized version of the hypothetical matchup game that has long been popular around office break rooms – fueled the rise of DraftKings, which competes with more established players like British bookmaker William Hill. Another comparatively new entry, FanDuel, was recently purchased by Flutter Entertainment, the holding company for Paddy Power, Betfair, and other longtime sports books; all Flutter properties now do business under the widely recognized FanDuel brand.
While online gambling is widely legal or at least tolerated worldwide, its lawfulness within the U.S. is a state-by-state concern; New Jersey has taken the lead in liberalizing its statutes to accommodate the industry. While the U.S. Supreme Court has paved the way for states to set their online gambling policies, they have by and large been slow to take up the issue.
When to walk away
Only in 2020 could we discover a way to lose our house without even leaving it. But gambling is hardly the only way to put money on the line, online.
Brokerage apps had already been taking hold long before the pandemic. Such Web-native players as E-Trade and TradeStation had been competing for decades against the Web versions of brick-and-mortar players like Charles Schwab and Merrill Lynch. But there’s a new wave of online players using vastly different business models.
Robinhood is emblematic of that breed. The Silicon Valley company uses blockchain technology to reduce trading costs to a fraction of a penny, so it doesn’t have to charge its 13 million account holders any transaction fees – a move that some other discount brokers have since adopted. Instead, Robinhood makes its money primarily by earning interest – some of it on margin lending, some of it on reinvesting the $20 billion in cash floating around in its depositors’ accounts. In addition to dealing in stocks and exchange-traded funds, it also serves as a cryptocurrency trading platform and was recently granted a depository license. So Robinhood is not just a Securities and Exchange Commission-regulated bourse, it’s also an Office of the Comptroller of the Currency-regulated national bank.
So what’s not to love?
Well, plenty. First, it had to pay a $1.25 million fine last year for taking payments from a third party to route order flow through preferred market makers and intermediaries. While that investigation was going on, Robinhood admitted that it stored user passwords in an unencrypted text file.
In early March – though thinking that far back may be hard to remember because that was just a few weeks before the lockdown – the Dow Jones Industrial Average experienced its biggest point gain ever. And Robinhood couldn’t handle the trading volume. While the platform was frozen on March 3, the Dow rose 4.6%. And this occurred while the SEC was already investigating Robinhood for selling clients’ order data without their permission to high-frequency traders. Not a good look, to be sure.
So if you’ve been taking advantage of your 2020 downtime to focus more on your investment portfolio, good for you. But if you’ve been relying on “free” platforms to execute your trades, we hope you’re getting much more than your money’s worth. If you’re not sure that you are, then maybe you should have a conversation with an experienced financial advisor.
There’s a huge difference between gaming, gambling, and investing. A qualified advisor would be happy to explain it to you.