During the height of the pandemic, people trapped inside spent their time playing tons of video games.
Now that countries are slowly reopening, this behavior is set to change. And video game makers have warned that as people move outdoors again, their sales will drop and spending on games may fall for the first time in at least a decade.
But companies don’t cut in anticipation. Far from there.
Consider Riot Games, which produces League of Legends. “We are doubling,” said Nicolo Laurent, CEO of the company. “We are hiring like crazy.”
Then there is Microsoft’s Xbox. “Our investment in gaming has never been greater than it is today,” said Phil Spencer, who heads the company.
Video game companies are among the winners of the pandemic who say they still plan to move forward, even as the coronavirus lockdowns that have fueled their businesses for the past 15 months have largely been lifted . Other tech companies that have thrived while reaching out to a distant company – including Zoom and Peloton – have also said they plan to keep spending, growing and hiring.
It’s a counter-intuitive bet. But some companies have said they could deploy the money they had amassed from the year’s windfall to get back to the growth trajectory they were on before the pandemic accelerated it.
“It’s a great time for the industry,” said Strauss Zelnick, managing director of Take-Two Interactive, which makes the NBA 2K and Grand Theft Auto video games. He said the pandemic has brought gaming to a wider audience, so rather than backing down, “we’re investing to grow to meet this demand.”
When industries predicted slower growth in the past, companies often cut costs, but those downturns and recoveries were usually unpredictable, linked to the stock market crash and recessions, said Bill Pearce, associate dean of the Haas School of Business at the University of California. , Berkeley.
With the pandemic ebbing, businesses have ‘more clarity and more confidence to invest’ because of coronavirus vaccines and predictions of how people will react when the world opens up, Pearce said . Some industries that have followed conventional wisdom in slowing down, like auto dealerships, are now kicking themselves because they can’t meet growing demand, he said.
But John Paul Rollert, a professor at the Booth School of Business at the University of Chicago, said engaging forward in behavior change is a high-risk and high-reward approach.
“You play very high stakes poker,” Mr. Rollert said. Yet, he added, with the economy rebounding and the money lying around, “you can see why these companies might be like, ‘Covid has been good for us, but maybe the after -Covid will be good for us. ‘”
Newzoo, a game analytics company, forecast that people will spend $ 175.8 billion on games this year, down 1% from 2020. That would be the first drop since Newzoo started tracking games. spending in 2012.
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Take-Two said this month that it expected sales to fall 30% in the next quarter, compared to a year earlier, and 8% for the fiscal year. Activision Blizzard, which makes the Call of Duty war game, predicted an 11% drop in sales from a year earlier in the next quarter.
“It’s hard to imagine how at least the immediate future is going to have as much spending, as much playing time or as many players as the industry benefited from last year,” said Matthew Ball, Managing Partner of ‘Epyllion Industries, which operates a business. capital fund that invests in games.
Other challenges loom, such as a global chip shortage that limits the availability of new video game consoles from Microsoft and Sony, and a shortage of blockbuster games after a year of working remotely has made game development even greater. delicate than normal.
Still, game makers have said they weren’t worried, especially after such a pandemic growth spurt.
In January, Microsoft first reported quarterly revenue of $ 5 billion from games, in part thanks to a new generation of Xbox consoles. The company also bought ZeniMax Media, which publishes games like Skyrim and Fallout, for $ 7.5 billion in September.
Microsoft’s gaming business now aims to expand in countries like Africa by promoting its cloud gaming service, xCloud, Spencer said. In cloud gaming, games are hosted in a company’s data centers and streamed to consumers’ devices so they don’t need to install the games or use expensive hardware.
“If you look at the last decade the game has seen double-digit growth,” Mr. Spencer said. “There is no doubt that the pandemic has had an accelerated impact.”
At New York-based Take-Two, profits jumped 46% from a year ago. The company has recruited around 700 game developers in the past 12 months, increasing its workforce by 10%, and is spending heavily on technology and marketing, Zelnick said.
“In many ways this is a year of investing as we build for the future,” he said.
Niantic, the San Francisco-based company that produced the Pokemon Go mobile game, plans to increase its workforce by about 25% this year to nearly 900 people, said John Hanke, its chief executive. The company was preparing to introduce two new games, one based on the board game Settlers of Catan and one based on the Pikmin franchise, with eight more in development.
At Los Angeles-based Riot, a post-pandemic slowdown was “not even a topic of discussion,” Laurent said. The income of the company, which is a private company, increased by 20% last year.
(Mr. Laurent has been grappling with employee claims and lawsuits that Riot is a sexist workplace; he was prosecuted in January for sexual harassment and reprisals. He denied the charges.)
Riot aims to hire 1,000 people this year, increasing its workforce by 33%, Laurent said. In addition to expanding its flagship title, League of Legends, he said, Riot is investing in esports leagues for its first-person shooter Valorant and for Wild Rift, a modified version of League of Legends. played on mobile phones. The company is also building two new studios this year in Shanghai and Seattle, he said, and plans to open five more locations over the next three years.
“Gaming is going to be the center of influence” in the 21st century, said Laurent. “The pandemic is only giving us a little boost.”