Microsoft exec says games are ‘somewhat resilient’ to economic weakness

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by microsoft The games chief said on Wednesday that video games can weather the economic weakness, even as the software maker expects a slower rebound in other parts of its consumer-facing business.

Rising prices and interest rates have inspired investors to hurry up and find financial markets that can withstand a downturn. Gaming remains a high priority for Microsoft, and the company is working to close its $68.7 billion acquisition of the publisher. Activision Blizzard.

Other parts of the technology could be at risk in a recession. Alphabet Y Metaplatforms they still get most of their revenue from advertising, as the former still rely on internet search and the latter on social media. Patrick Lo, CEO of networking hardware manufacturer netgearwhich 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 diversified than those companies, though executives earlier this week said its exposure to consumers would hurt sales in the current quarter of Windows operating system licenses, Surface PCs and advertising on properties like Bing and LinkedIn.

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 Tuesday. Gaming revenue should decline in the low to mid-teens percentage 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, was upbeat about the unit’s prospects.

“It’s been shown over the years, in times of economic uncertainty for families, gaming is somewhat resilient to those problems,” 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 that line appears every time the r-word is mentioned,” Mat Piscatella, chief executive officer and video game industry adviser at market researcher NPD, wrote in July. Group. cheep.

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

“After two years of massive expansion, the gaming 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 point to Microsoft’s own experience with recessions as evidence for his claim.

In 2008, during the global financial crisis, Microsoft lowered the prices of Xbox consoles in several markets as the public became interested in the Nintendo Wii. It turned out to be “numerically on the console side, our best holiday and our best calendar year in Xbox history,” said Robbie Bach, president of Microsoft’s device and entertainment unit at the time.

In 2020, a brief recession coincided with the appearance 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 gives people the ability to choose 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 subsidizes the cost to the tune of $100 to $200 per console, with the expectation that it will recoup the money in accessory sales and shopping in stores, he said. It is up to players whether they want to pay $10 or $15 per month for Game Pass subscriptions. They can also buy games directly or play certain games for free.

Spencer said he doesn’t think Microsoft can 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,” she said.

CLOCK: Hill: Weakness in Microsoft and Alphabet is making us rethink expectations for earnings estimates across the board


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