Gaming is waning after the pandemic as players return to the real world

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Gaming is waning after the pandemic as players return to the real world

Gambling companies have been hit by slacking sales and engagement in recent months as players returned to real-world employment in the wake of the pandemic and began to cut spending amid a cost-of-living crisis.

Console makers, video game publishers, and gaming chip makers across the industry have reported a drop in demand last quarter, challenging the belief that gaming is one of the most recession-proof forms of entertainment.

The slowdown comes after the sector saw demand surge and record profits during the pandemic, as global lockdowns sharply increased consumer appetite for virtual entertainment, which in turn led to a surge in deals within the industry.

Console makers Sony and Microsoft were the harbingers of a downturn in gaming, with sales falling at their gaming businesses. Last month, Sony reported a 15 percent year-over-year decline in PlayStation engagement.

On Monday, Nvidia, a heavyweight maker of gaming chips, reported lower second-quarter earnings due to weakness in its gaming business. Gaming revenue in the second quarter fell 44 percent sequentially and 33 percent year-on-year to $2.04 billion.

Strauss Zelnick, CEO of Take-Two Interactive, the company behind it Grand Theft Auto, told investors this week that he doesn’t think “the entertainment business is recession-proof or even necessarily recession-resistant.” On Monday, it released forecast sales for the second quarter and full year, which fell short of analysts’ estimates, causing its share price to fall 5 percent.

“If you’re feeling inflation, especially around non-discretionary spending like fuel and groceries, you can imagine spending a little less or spending a little less frequently when you’re gaming,” Zelnick said.

This month, Activision Blizzard, which Microsoft is currently buying for $69 billion, saw its second-quarter adjusted revenue decline 15 percent from the same period last year, due in large part to weaker demand in the console and PC markets is due and a bad reaction to the latest version of his icon call of Duty shooter game.

Meanwhile, Electronic Arts is famous for its FIFA franchises as well simsissued a sales forecast for the second quarter last week that missed analysts’ estimates.

With the easing of restrictions, the pandemic-driven gaming boom has subsided. But it comes against a difficult economic backdrop as consumers around the world seek to scale back their discretionary spending amid rising inflation.

The biggest impact seems to be in the mobile segment of the gaming market, which has been the focus of deals in recent years. Take-Two completed a $13 billion acquisition of Zynga earlier this year, while EA bought a 3D mobile gaming company called Glu for $2 billion last year.

EA said mobile bookings were down 2.5 percent sequentially, excluding older titles Fifa mobile – quite poor performance.

Andrew Wilson, chief executive at EA, told analysts there was an “open question” facing the industry: “In a world where you can engage deeply without spending, how are we going to keep spending in this time?”

Chart showing global consumer spending on mobile games has fallen this year.  Estimated spending (billion euros) for Google Play and the App Store for the first quarters of 2021 and 2022. The figures show a decrease in spending for Google Play by -14.8 percent and for the App Store by -0.81 percent .

The game-making platform Roblox will follow on Wednesday escape from prison and MeepCity, saw its shares fall more than 12 percent after reporting a 4 percent drop in net bookings and a slowdown in daily user growth. The company has lost more than 50 percent of its value since the beginning of the year.

However, Roblox CEO David Baszucki dismissed the impact of a gaming downturn on the company’s results, claiming it is more of a “future human experience platform” than a gaming company, adding, “We’ve been through these cycles before , and we “were relatively immune to them.”

Games development platform Unity, which is the engine behind over 70 percent of mobile games globally, on Wednesday lowered its full-year guidance on revenue growth that was slower than previously modeled, attributing the revision in part to “the recent negative macroeconomic factors.” “.

Groups have also been disappointed by weak game releases — usually the catalyst for stellar growth numbers — in part because the pandemic has disrupted pipelines. EA is still suffering from a weak release of its highly anticipated Battlefield 2042 game in November while Take-Two pushed back one of its most significant title releases.

Activision Blizzard has struggled even after its flagship title call of Duty received a lackluster reception late last year, which was attributed to the choice of a World War II location that did not resonate with its audience.

“To accelerate growth in the industry you need compelling games,” said Neil Campling, analyst at Mirabaud Equity Research, noting that audiences have now become more selective as they have a more diverse range of pastimes to choose from. “In reality, we’re still waiting for the next must-have blockbuster game.”

Patrick O’Luanaigh, managing director of NDreams, a virtual reality publisher, agreed that there has been a “distinct slowdown in large releases,” adding, “It’s relatively sparse, which is frustrating for some people.”

Chart showing that the global gaming market will continue to grow.  The figures show the forecast of the global gaming market (Billions US$) and the forecast of global players (Billions) for 2020-2022 and 2025.

Nonetheless, executives have kept a positive tone on its medium to long-term prospects, pointing to a steady growth in the number of players worldwide.

EA’s Wilson emphasized that expanding into mobile gaming, whether or not they’re going for free games, “is a way for us to access players in markets that our traditional business doesn’t have,” and pointed out to an estimated 3.5 billion players worldwide.

Zelnick agreed, noting that evidence points to the next generation of gamers “being more engaged and playing more.”

“So I have to assume that interactive entertainment will continue to grow disproportionately to the rest of the audiovisual entertainment industry,” he added.

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