Gaming ‘somewhat resilient’ to weak economy

owned by Microsoft Gaming chiefs said Wednesday that video games can weather economic weakness, even as the software maker expects slower participation in other areas of its consumer-focused business.

Rising inflation and interest rates have prompted investors to hurry and look for pockets of the stock market that could remain in the recession. Games remain a top priority for Microsoft, with the company working to close a $68.7 billion publisher acquisition. Activision Blizzard.

Other areas of technology may be at risk of recession. alphabet SY Meta Platforms still derive most of their revenue from advertising, with the former still relying on internet search and the latter on social media. Patrick Lo, CEO of the network equipment manufacturer Netgearwhich reported a 14% year-over-year revenue decline on Wednesday, said in a statement that there is a “difficult macroeconomic environment for most customers.”

Microsoft is more diverse than those companies, though earlier this week executives said their spread to consumers would hurt sales of a quarter of Windows licenses, Surface PC and advertising on properties like Bing and LinkedIn.

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During the quarter, the company expects to sign up more customers to its Xbox Game Pass service, which provides unlimited access to hundreds of video games, Amy Hood, chief financial officer, told analysts on a call on Tuesday. Game revenue is expected to decline by a small to moderate percentage point due to strong growth in last year’s quarter that included first-party game introductions. , said Hood.

Phil Spencer, CEO of Microsoft Gaming, expressed optimism about the group’s prospects.

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

Not everyone agrees with Spencer.

“The video game industry is not yet ‘recession proof,’ but that line comes up every time the r-word is mentioned,” said Mat Piscatella, executive director and video game industry consultant at ‘the market researcher NPD Group, wrote in July. tweet.

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

“After two years of great expansion, the gaming market is poised to reverse some of that growth in 2022 as a number of factors come together to undermine performance,” he told CNBC in July.

But Spencer can point to Microsoft’s experience with recessions as proof of his claim.

In 2008, during the global financial crisis, Microsoft cut the price of Xbox consoles in various markets because people became interested in the market. Nintendo Wii. It turned out to be “console-wise, the best holiday and the best calendar year in Xbox history,” said Robbie Bach, president of Microsoft’s entertainment and hardware group at the time.

In 2020, there was a short recession that coincided with the onset of the coronavirus, but it led people to stay at home and play more games, including Xbox consoles and PCs. “People everywhere are turning to games to support human connection during social exercise,” CEO Satya Nadella said in April 2020.

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Today, Spencer said, Microsoft gives people a choice in how much money they want to spend if they want comfort. The company offers the $499 Xbox Series X and the less powerful $299 Xbox Series S. Microsoft is pricing it at $100 to $200 per console, with the hope that it will recoup the money from accessory sales and retail purchases, he said. said. It’s up to players whether they want to pay $10 or $15 a month for a Game Pass subscription. They can also buy games directly, or play some games for free.

Spencer said he doesn’t think Microsoft will be able to keep game prices constant forever. But they can provide amazing entertainment compared to anything else. “People can play video games for hundreds of hours,” he said.

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