Gaming ‘somewhat resilient’ to weak economy

The Microsoft The head of gaming said Wednesday that video games can withstand economic weakness, even as the software maker expects to slow down in other parts of its consumer-focused business.

Rising prices and interest rates have inspired investors to rush and find pockets of financial markets that can hold up in a downturn. Gaming remains a high priority for Microsoft, and the company is working to close its $68.7 billion acquisition of publishers. Online game Activision Blizzard.

Other parts of technology could be at risk of a recession. Alphabet and Meta Platform still derive most of their income from advertising, and the former still rely on internet search and the latter on social media. Patrick Lo, CEO of network hardware maker Netgearwhich reported an annualized revenue decline of 14% on Wednesday, said in a statement there was a “challenging macroeconomic environment for most consumers.”

Microsoft is more diversified than these companies, although earlier this week executives said its exposure to consumers would hurt sales in the current season of Windows operating system license, PC surface and advertising on properties such as Bing and LinkedIn.

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During the quarter, the company expects to sign up more subscribers to its Xbox Game Pass service, which provides unlimited access to hundreds of video games, Amy Hood, its chief financial officer, told analysts on a conference call on Tuesday. Gaming revenue should decline in the low to mid-teens due to strong growth in the quarter a year ago that saw the introduction of first-party games, Hood said.

Phil Spencer, CEO of Microsoft Gaming, sounds optimistic about the prospects of the unit.

“It’s proven over the years, in times of economic uncertainty for families, that gambling is somewhat resilient to these issues,” he said at the Wall Street Journal’s WSJ Tech Live conference in Laguna Beach, California.

Not everyone shares Spencer’s opinion.

“The video game industry has never been ‘recession-proof,’ but that line comes up every time the r-word is mentioned,” Mat Piscatella, executive director and video game industry advisor at market researcher NPD Group, wrote in a july tweet.

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Piers Harding-Rolls, director of research at researcher Ampere Analysis, made similar comments.

“After two years of strong expansion, the gaming market is poised to give back some of that growth in 2022 as several factors combine to undermine performance,” he told CNBC in July.

But Spencer can point to Microsoft’s own experience with recessions as evidence for his claim.

In 2008, during the Global Financial Crisis, Microsoft cut the price of Xbox consoles in several markets as the public became interested in Nintendo Wii. Robbie Bach, president of Microsoft’s entertainment and devices unit at the time, said it was “numerically on the console side, our best holiday and our best calendar year in Xbox history”.

In 2020, a brief recession coincided with the outbreak of the coronavirus, but this led people to stay at home and play more games, such as on Xbox consoles and computers. “People everywhere are turning to games to maintain human connection while practicing social distancing,” CEO Satya Nadella said in April 2020.

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Today, Spencer said, Microsoft gives people the choice of how much they want to spend on consoles. The company offers the $499 Xbox Series X and the less powerful $299 Xbox Series S. Microsoft subsidizes the price of the tune of $ 100 to $ 200 per console, with the expectation that it will make the money back on sales of accessories and storefront purchases, it. said. It’s up to gamers whether they’d like to pay $10 or $15 a month for a Game Pass subscription. They can also buy games outright, or play certain games for free.

Spencer said he doesn’t think Microsoft will be able to keep the prices of games constant forever. But they can provide an impressive amount of entertainment compared to other activities. “People can play video games for hundreds of hours,” he said.

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