The gaming and esports industries encountered difficulties in 2023 in anticipation of an upcoming recession. Gaming companies had to adjust their business models and delve into emerging technologies like AI and the metaverse to meet investors’ expectations.
This year was anticipated to be significant for the gaming and esports industries, especially in the public market. It was noted that publicly traded gaming companies have become more valuable than ever after a series of COVID-induced public offerings and M&A activities. As games continue to gain prominence in modern entertainment, gaming executives expressed hope for the continued growth and success of the industry.
However, the gaming industry faced challenges in the first quarter of 2023 due to reduced spending by brands and consumers in anticipation of an impending recession. Following earlier layoffs, gaming companies had to adapt to new business models and explore broader cultural trends such as AI (Artificial Intelligence) and the metaverse to satisfy investors during the first quarter of the fiscal year.
CEO Bobby Kotick referred to Call of Duty as a “key driver of growth” and attributed the 11 percent year-over-year increase in in-game net bookings to King, the developer of “Candy Crush,” in a company announcement on April 26. Kotick expressed confidence that the proposed $69 billion merger with Microsoft would benefit competition, consumers, and job creation in markets worldwide, especially in the U.K. However, the earnings press release coincided with the U.K.’s Competition and Markets Authority blocking the merger. In the release, Kotick stated that the company would work aggressively with Microsoft to appeal.
Capcom CEO Kenzo Tsujimoto discussed the impact of digital sales on his company’s performance in Q1 2023, noting that over 40 percent of Capcom’s sales in the past year were digital. As game developers increasingly adopt live service as a business model, these figures are expected to grow further in 2023. On May 10, Tsujimoto stated that they had expanded their sales regions in recent years, attributing it to the growing popularity of digital sales on PC. According to Tsujimoto, this expansion allowed them to sell games even in countries and regions where dedicated game consoles were unavailable. Tsujimoto further mentioned that in the previous year, they had sold 307 different products in 230 countries and regions, with over 40 percent of the volume being sold on the PC.
During Corsair’s earnings call on May 10, CEO Andy Paul provided interesting information regarding the company’s decision to withdraw from certain markets, specifically the “casual entry-level” devices priced between $50 and $100. Corsair’s focus on the higher-priced enthusiast market demonstrates how peripheral companies are adapting to changing spending habits of gamers in anticipation of a potential recession. Paul explained that price points in the range of $100 to $250 were typically favoured by prosumers or enthusiasts, and he added that this aspect did not pose much of a problem.
EA’s emphasis on building community within its games highlighted the importance of titles like “FIFA” and “The Sims” as consumers increasingly spend their time socializing and spending money within social gaming platforms. CEO Andrew P. Wilson outlined EA’s plans to investors on May 9, including developing games tailored to massive online communities, creating creator tools to enhance these communities, and producing high-quality games and stories to keep players engaged. Wilson stated that games were the social networks of the future. He mentioned that their strategy involved innovating across various social and creator tools within and around their games to enhance the power of the community. The goal was to assist players in making new friends, expanding their social network, and fostering a sense of community.
Enthusiasts and other gaming and esports holding companies are still working to establish a cohesive identity. Enthusiast, like many gaming companies, aims to generate investor interest by leveraging the latest buzzword: artificial intelligence. CEO Nick Brien expressed enthusiasm about their position as the largest independent player in the gaming media and entertainment industry, not owned by a tech giant operating a walled garden. He emphasized the use of AI to benefit their enthusiast communities and marketing partners in terms of brand activations, ad campaigns, and improving sales metrics and user acquisition. Brien explained that they were extremely excited about their position as the largest independent player in the gaming media and entertainment industry, emphasizing that they were not owned by a tech giant operating a walled garden. This unique position allowed them to concentrate on harnessing the power of AI to benefit their enthusiast communities and the marketers collaborating with them to create successful brand activations and engaging ad campaigns. Brien mentioned their intention to extensively test all relevant AI tools available to them in order to enhance their sales, ROI metrics, and user acquisition.
During Logitech’s earnings call on May 18, CEO Bracken P. Darrell candidly acknowledged the broader challenges faced by the industry. However, he emphasized that his company’s outlook for the financial year had not undergone significant changes. Darrell stated that the majority of the macroeconomic and geopolitical issues that affected their fiscal year 2023 results were ongoing. He mentioned that central banks were increasing rates in response to inflation, consumer confidence remained low, and overall demand from enterprises was lacklustre.
NVIDIA stands to benefit greatly from the recent surge of interest in artificial intelligence. CFO Colette Kress emphasized this during the company’s earnings call on May 24, which caused a spike in AI stock prices. Kress highlighted that generative AI was leading to a substantial increase in compute requirements and a swift shift toward NVIDIA Accelerated Computing. According to Kress, this computing approach offered the most versatility, energy efficiency, and lowest total cost of ownership for training and deploying AI. The adoption of generative AI had notably contributed to the surge in demand for their products, presenting opportunities and driving global growth across their markets.
During Roblox’s earnings call on May 10, CEO David Baszucki discussed the upcoming rollout of the platform’s new ad format called Portals. He mentioned how this immersive and native ad format had proven successful, citing the NFL’s positive experience with it. Baszucki shared that they would generate a modest amount of advertising revenue in the second quarter of that year. He mentioned that the NFL had provided feedback on their advertising system, expressing that Portals had greatly assisted the NFL in attracting and converting a significant number of new users. Baszucki expressed their enthusiasm for this new ad format, highlighting its ability to complement images and videos while offering an immersive and native experience within the Roblox platform.
Around a year after Take-Two Interactive’s acquisition of the mobile gaming giant Zynga, CEO Strauss Zelnick commented during the company’s May 17 earnings call that the deal had been beneficial. Zelnick credited the merger with Zynga for contributing to Take-Two’s net bookings total of $5.3 billion for the quarter. Zelnick stated that they had made significant strides in integrating Zynga, resulting in a substantial improvement in their business. He mentioned that they had pursued new revenue-driven opportunities, surpassed their expected cost synergies for the first year, and bolstered their mobile platform through strategic acquisitions.
Tencent CEO Ma Huateng reported “solid revenue growth” for Q1 2023 on May 17, emphasizing the rapid growth of the company’s advertising revenue. Similar to other gaming CEOs, Huateng acknowledged the importance of AI in Tencent’s earnings report. Huateng stated that they were currently investing in their AI capabilities and cloud infrastructure to embrace the opportunities presented by foundation models. He expressed the expectation that AI would serve as a growth multiplier, allowing them to enhance their services for users, customers, and society as a whole.
During Ubisoft’s May 16 earnings call, CFO Frederick Duguet acknowledged the challenging economic conditions currently affecting the gaming industry. He assured that any future layoffs at the game developer would not significantly impact their ongoing projects. Duguet explained that their approach would entail implementing rigorous recruitment control to ensure the ongoing fulfillment of critical positions and the adequate staffing of their productions. He added that they would also persist in hiring top talents and pursuing targeted restructuring, which they had initiated a few months prior.
Unity CEO John S. Riccitiello frequently mentioned AI in the company’s earnings report released on May 10. He emphasized the sustainable competitive advantages of Unity’s platform in relation to AI. Riccitiello stated that Unity possessed sustainable competitive advantages in the realm of AI due to the inherent nature of its platform. He explained that their platform’s characteristics enabled them to leverage AI tools and facilitate content creation, empowering creators to breathe life into worlds and digital twins in unprecedented ways.