Microsoft The games chief said Wednesday that video games can weather economic weakness, although the software maker expects a slower recovery in other parts of its consumer-targeted business.
Rising prices and interest rates have prompted investors to hurry and find pockets of financial markets that can withstand a downturn. Gaming remains a top priority for Microsoft as the company strives to complete its $68.7 billion acquisition of the publisher. ActivisionBlizzard.
Other parts of the technology could be at risk in the event of a recession. Alphabet and Metaplatforms 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 a network hardware manufacturer Net Gearwhich reported a 14% annualized revenue decline on Wednesday, said in a statement that there was a “challenging macroeconomic environment for most consumers.”
Microsoft is more diverse than these companies, although earlier this week executives said its exposure to consumers would hurt current-quarter sales of Windows operating system licenses, Surface PCs and advertising on properties such as than Bing and LinkedIn.
During the quarter, the company plans to recruit more subscribers to its Xbox Game Pass service, which offers unlimited access to hundreds of video games, Amy Hood, its chief financial officer, told analysts at a conference. telephone on Tuesday. Gaming revenue is expected to decline in the low-to-mid-teens percentage range due to strong growth in the last year quarter that saw the introduction of first-party games, Hood said.
Microsoft Gaming CEO Phil Spencer was optimistic about the unit’s prospects.
“It’s been proven over the years, in times of economic uncertainty for families, that gambling is somewhat resilient to these issues,” he told 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 this line is highlighted every time the r-word is mentioned,” wrote Mat Piscatella, executive director and advisor. of the video game industry at NPD Group. Tweeter.
Piers Harding-Rolls, research director at Ampere Analysis, made similar comments.
“After two years of huge expansion, the games market is poised to return some of that growth in 2022 as multiple factors combine to undermine performance,” he told CNBC in July.
But Spencer can cite Microsoft’s own experience with recessions as evidence for his assertion.
In 2008, during the global financial crisis, Microsoft slashed Xbox console prices in various markets as the public became interested in the nintendo Wii. It turned out to be “digitally on the console side, our best holiday and our best calendar year in Xbox history,” said Robbie Bach, president of Microsoft’s entertainment and devices unit at the time.
In 2020, a brief recession coincided with the outbreak of the coronavirus, but that led to people staying home and playing more games, including on 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.
Today, Spencer said, Microsoft is giving people a choice of how much they’d like to spend if they want consoles. The company offers the $499 Xbox Series X and the less powerful $299 Xbox Series S. Microsoft is subsidizing the cost to the tune of $100 to $200 per console, hoping it will recoup the money from accessory sales and storefront purchases, he said. It’s up to players whether they want to pay $10 or $15 a month for Game Pass subscriptions. 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 impressive amounts of entertainment compared to other activities. “People can play video games for hundreds of hours,” he said.
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