Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

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Thematic (Sector/Industry)

Colombia Software / Thematic (Sector/Industry)

Since their birth over 50 years ago, video games have continued to evolve from the arcade to home consoles to more recently the small screen. The games have shifted from having a largely participatory user base to one that is increasingly split between players and watchers over the last 10 years. This shift has a number of perceived and actual effects on game publishers as the popularity of new over-the-top channels like YouTube and Twitch has soared and eSports continues its rise toward mainstream acceptance. Over the same period, the business model for games has been altered from receiving a single upfront payment to collecting a recurring stream of payments.Although watching video games takes time away from those playing video games, we project that the shift is still a net positive to specific genres as well as video game publishers like <a href="https://www.smartkarma.com/entities/4269" target="_blank" data-smartkarma-citation="entities:4269:1">Activision Blizzard Inc (ATVI US)</a>, <a href="https://www.smartkarma.com/entities/1179" target="_blank" data-smartkarma-citation="entities:1179:1">Electronic Arts Inc (EA US)</a>, <a href="https://www.smartkarma.com/entities/21564" target="_blank" data-smartkarma-citation="entities:21564:1">UBISOFT Entertainment (UBI FP)</a>, and <a href="https://www.smartkarma.com/entities/14948" target="_blank" data-smartkarma-citation="entities:14948:1">Take Two Interactive Software, Inc. (TTWO US)</a>. Despite a recent backlash from gamers against microtransactions, we expect all four publishers to continue to reap the rewards of this higher margin revenue.We believe these four publishers benefit from narrow moats derived from intangible assets, specifically brands and a combination of patents and proprietary technology. Due to these moat sources, all four have and will continue to benefit from Twitch's and YouTube's steaming of video games. Of the four firms, Activision Blizzard is best positioned to benefit from the growth in eSports with EA also positioned to gain, albeit at a lower level.We see the video game industry changing in several ways, including virtual and augmented reality video games, franchise fatigue, and the possible end of the console cycle. Yet we think the trends toward microtransactions, eSports, and watching video games are three of the most important within the industry, and we continue to view industry leaders under our coverage as net winners from these trends.Analysts: Neil Macker and Seth Sherwood

Since their birth over 50 years ago, video games have continued to evolve from the arcade to home consoles to more recently the small screen. The games have shifted from having a largely participatory user base to one that is increasingly split between players and watchers over the last 10 years. This shift has a number of perceived and actual effects on game publishers as the popularity of new over-the-top channels like YouTube and Twitch has soared and eSports continues its rise toward mainstream acceptance. Over the same period, the business model for games has been altered from receiving a single upfront payment to collecting a recurring stream of payments.Although watching video games takes time away from those playing video games, we project that the shift is still a net positive to specific genres as well as video game publishers like Activision Blizzard Inc (ATVI US), Electronic Arts Inc (EA US), UBISOFT Entertainment (UBI FP), and Take Two Interactive Software, Inc. (TTWO US). Despite a recent backlash from gamers against microtransactions, we expect all four publishers to continue to reap the rewards of this higher margin revenue.We believe these four publishers benefit from narrow moats derived from intangible assets, specifically brands and a combination of patents and proprietary technology. Due to these moat sources, all four have and will continue to benefit from Twitch's and YouTube's steaming of video games. Of the four firms, Activision Blizzard is best positioned to benefit from the growth in eSports with EA also positioned to gain, albeit at a lower level.We see the video game industry changing in several ways, including virtual and augmented reality video games, franchise fatigue, and the possible end of the console cycle. Yet we think the trends toward microtransactions, eSports, and watching video games are three of the most important within the industry, and we continue to view industry leaders under our coverage as net winners from these trends.Analysts: Neil Macker and Seth Sherwood

Take Two Interactive Software, Inc (TTWO US)

How the Growth of Watching Games and Microtransactions Reinforces Moats