Gaming ‘somewhat resilient’ to weak economy

at Microsoft The gaming chief said Wednesday that video games will withstand economic weakness, although the software maker expects a slower pickup in other parts of its consumer-oriented business.

Rising prices and interest rates have encouraged investors to rush and find pockets of financial markets that can prevent a decline. Gaming remains a high priority for Microsoft, with the company working to close a $68.7 billion takeover of the publisher. Activision Blizzard.

Some areas of technology may be at risk in a recession. Alphabet and Meta Platform Most of their income is still derived from advertising, with the former still relying on internet search and the latter on social media. Patrick Lo, CEO of the networking hardware maker Netgearwhich reported a 14% annual decline in revenue on Wednesday, said in a statement that there is a “challenging macroeconomic environment for most consumers.”

Microsoft is more diverse than the companies, though earlier this week executives said its exposure to consumers hurt sales in the current quarter of Windows operating-system 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 subscribers to the Xbox Game Pass service, which provides unlimited access to hundreds of video games, Amy Hood, its chief financial officer, told the analysts in a conference call on Tuesday. Game revenue should decline in the low to mid-teens percent range due to strong growth in the prior year quarter that saw the introduction of first-party games, Hood said.

Phil Spencer, CEO of Microsoft Gaming, seems optimistic about the unit’s prospects.

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

Not everything is like Spencer’s view.

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

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

“After two years of massive expansion, the games market is poised to return to modest growth in 2022 as a number of factors converge 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 prices of Xbox consoles in various markets as the public became interested in Nintendo Wii. It turned out to be “numerically on the console side, our best holiday and our best calendar year in the history of Xbox,” said Robbie Bach, president of Microsoft’s entertainment and devices unit at the time.

In 2020, a short recession accompanied the onset of the coronavirus, but that caused people to stay at home and play more games, including Xbox consoles and PCs. “People everywhere are turning to gaming to maintain human connection while practicing social distancing,” CEO Satya Nadella said in April 2020.

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Now, Spencer said, Microsoft is giving people the choice of how much they want to spend when they want consoles. The company offers the $499 Xbox Series X and the less powerful $299 Xbox Series S. Microsoft subsidizes the cost by $100 to $200 per console, with the expectation that it will recoup the money in sales of accessories and purchases in the store, he said. It’s up to players whether they want to pay $10 or $15 per month for Game Pass subscriptions. They can also buy games, or play some 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 amazing amount of fun compared to other pursuits. “People can play video games for hundreds of hours,” he said.

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