Gaming Rides a Lockdown-Induced Financial High

Gaming Rides a Lockdown-Induced Financial High

THIS WEEK IN BUSINESS | Quarterly financials clash with GDC Summer, interspersed by insular policies from the U.S. government and Apple.

This Week in Business is a collection of stats and quotes from our sister site GamesIndustry.biz that sheds light on console sales, new trends, and more. Check back every Friday for a new entry!

Three months ago, when publicly traded gaming companies posted their quarterly financials results, we were already beginning to see the impacts of lockdown on their revenues. Though everyone was still tentative about potential unforeseen costs related to work-from-home situations and supply chains, the consensus seemed to be: staying home means more engagement with games, and not spending money on movies and entertainment outside the home means more to spend on microtransactions.

This past week brought the second round of financial results from The Time Of COVID-19, and the immediate impacts on gaming companies are far more clear. Initial predictions of revenue and profit rising as players increase engagement and spending have been accurate, with many companies reporting soaring revenues and especially spikes in digital spending. The only companies that seem to be hurting right now are the publishers that also dabble in arcades and other location-based entertainment ventures, mainly in Japan. And even for them, gaming is buoying them above anything resembling catastrophic loss.

There is, nonetheless, concern for the future. For one, all of these high numbers this quarter will potentially make next year's numbers look rather pathetic at a time where, for some companies, having nice fat next-generation sales increases would be in their best PR interest. For another, as our columnist Rob Fahey points out, the games industry probably isn't "recession-proof" in the way many tout it to be. The world is likely well on its way to a deep pandemic-induced recession that will last we-know-not-how-long, with job losses, spending cuts, evictions, medical expenses, and everything else that could potentially come along with a global pandemic of unknown duration.

All of that is, of course, far more important and pressing and worrisome than the question of whether or not people will continue to spend money on video games or not. But this is a video game column, so here we are. Thus, my apologies to you all, as I'm about to take you on a trip through a quarterly delight known as the latest financial reports:

STAT | 32% - The amount Sony's revenue for the most recent quarter rose year-over-year, per its earnings posting this week.

STAT | 32% - The exact same, but for Capcom, attributed entirely to the publisher's games business as its arcade and amusement hall businesses were closed due to COVID-19.

STAT | 47% - The same figure again, but for Zynga, though its actual profit on paper is in the toilet thanks to two of its acquisitions from last year doing very well, resulting in Zynga having to make high payouts to the former owners.

STAT | 37% - And again, for Activision-Blizzard, driven mostly by Call of Duty: Warzone.

STAT | 54% - The same figure one more time, but for Take-Two, which saw a whopping 92% of its total net bookings come from digital purchases.

QUOTE | "Over time, I think if you look at every other entertainment medium, it's a matter of time before the business is entirely digital." - Take-Two CEO Strauss Zelnick tells us that while the high percentage of digital net bookings was skewed due to COVID-19 last quarter and he doesn't think physical is going away any time soon, ultimately, gaming "is a digitally-delivered business."

QUOTE | "Obviously, we don't speak for the industry and the industry naturally does not coordinate on these matters, to say the very least. The pricing has to reflect the quality of the experience, and we aim to provide the best experiences in the business. And from our point of view, it's an extremely modest price change given that prices haven't changed for a very long time." - Zelnick again, this time answering a question about whether he felt it was necessary for other publishers such as Ubisoft to get on board a next-gen software price hike for customers to accept it.

STAT | 541% - Back to financials, this is the percentage that Nintendo's net profit was up year-over-year in its latest quarterly financials, mostly thanks to Animal Crossing: New Horizons. [Note that net profit is different from net revenue which we used for the other financials in this piece, mostly because 541% is a truly standout figure.]

The Nintendo Switch has been selling especially well as of late. | Nintendo

STAT | 61.4 million - The total amount of Nintendo Switch consoles that have been sold since the system launched in March of 2017. Over half of the Switches sold last quarter were used to play, you guessed it, Animal Crossing: New Horizons.

STAT | 34% - Looking at revenue again for Sega, but this time it's the amount revenue decreased year-over-year. Sega was the only major gaming company that posted revenue drops compared to last year for its most recent quarter, and that's largely because so much of its business is in arcades and slot machines, which aren't seeing much use right now.

QUOTE | "This quarter's financial results are certainly sweet, but they're a sugar rush; it would be foolish to assume that the crash from this high isn't coming, or that the booming revenues we saw as the pandemic's effects started to be felt indicate that the games business is going to walk away from this unscathed." - Our own Rob Fahey, discussing why the 'sugar rush' of financial boosts prompted by the pandemic might not stick around, and might even prove detrimental in the long haul.

In a world where a global pandemic hasn't shut down all in-person events, there are normally a few major industry moments each year (E3, GDC, PAX East and West) where gaming companies tend to consolidate their announcements at and everyone not attending tends to steer clear of for fear of being overshadowed. But because they've all been moved to digital spaces this year (or canceled outright), it might shock you to learn that this week was actually GDC week, featuring three days of digital talks from a number of industry figures and companies.

That was never going to stop every gaming company from dropping their financials on schedule, but it also wasn't going to stop both political figures and major tech companies from making decisions with powerful ripple effects. It was enough of a roller coaster this week that I gave up on trying to pin down a single "most important" topic to focus on in favor of throwing the whole mess out here for your consideration:

QUOTE | "The following actions shall be prohibited beginning 45 days after the date of this order...any transaction that is related to WeChat by any person...subject to the jurisdiction of the United States, with Tencent Holdings Ltd...or any subsidiary of that entity." - A portion of the text of an absolutely bizarre executive order signed this week by U.S. President Donald Trump that seemed to ban any transaction with Tencent—initially appearing to even impact wholly partly owned subsidiaries like Riot, Epic, Supercell, or Activision-Blizzard.

QUOTE | "A White House official confirmed to The LA Times that the EO only blocks transactions related to WeChat." - A tweet from LA Times reporter Sam Dean cleared that concern up somewhat, though there are still concerns that the language is broad enough and the current political administration inconsistent enough that it could still be used to that effect in the future.

QUOTE | "The team is reviewing and clarifying its policies and procedures for the stream and will provide all who have been banned the opportunity to participate in the space as long as they follow the team's guidelines." - The U.S. Army in a statement to Motherboard Vice says it's unbanning everyone it banned from its Twitch channel for asking about war crimes, and will return to streaming in the near future.

Apple says it needs the ability to review every game on Xbox Game Pass for Project xCloud to be available on the App Store. | 343/Microsoft

QUOTE | "Gaming services can absolutely launch on the App Store as long as they follow the same set of guidelines applicable to all developers, including submitting games individually for review, and appearing in charts and search." - Apple, explaining that it will absolutely allow Project xCloud and Facebook Gaming to launch their own in-app game libraries on its App Store... if Apple is allowed to review every game available first to ensure it meets their standards.

QUOTE | "Apple stands alone as the only general purpose platform to deny consumers from cloud gaming and game subscription services like Xbox Game Pass. And it consistently treats gaming apps differently, applying more lenient rules to non-gaming apps even when they include interactive content." - Microsoft's response to this decision, which also included a firm commitment to eventually finding a way to get xCloud onto iOS.

STAT | $17.3 billion - The amount that Epic Games is now worth following a new $1.78 billion investment round that included a number of different companies, such as Sony Corporation.

QUOTE | "There are not a lot of places for folks to go to deal with online harassment, to talk to someone who understands and can be there for them. It's still stuck in whisper networks. We really need somewhere people can go that's not contingent on who you know." - Anita Sarkeesian of Feminist Frequency, speaking about the launch this week of the Games and Online Harassment Hotline.

QUOTE | "One of the planned announcements [at State of Play] is 'Aeon Must Die!' (AMD), a game created by people who in June of 2020 were forced to leave their former studio Limestone Games along with its founder/creative director. Their reasons were unbearable work conditions with endless crunch, harassment, abuse, corruption, and manipulation."- The opening of a Dropbox full of accusations against Limestone Games, publicized by a number of former team members who accuse the company and CEO of, additionally, taking the IP covertly from the company's founder and sending threatening letters to former employees.

QUOTE | "Some companies manage to be more diligent than others at doing their best to identify where these minerals originate and ensuring their supply chain is free of abuses. But ultimately, not a single company in this article is able to guarantee that its products are conflict-free." - Us, opening our annual report on conflict minerals in the games industry that investigates which hardware manufacturers may have inadvertently funded human rights abuses in 2019.

And finally, a few highlights from GDC itself (with more to come next week):

QUOTE | "There's this common perception that the publisher is someone who is adverse in interest to the developer. I think part of that comes from just a lack of information on the developer side as to how these agreements work and what's standard and what's not standard." - Lawyer Kellen Voyer gives an overview at GDC Summer of the average indie publishing agreement in 2020, and how to know which terms are standard (and which are not).

QUOTE | "It was formally offered in October 2019, and it was pretty huge. It's still the biggest financial deal I've ever gotten, to the point where I had to ask them to repeat the numbers on the phone call." - She Dreams Elsewhere developer Davionne Gooden shares why Xbox Game Pass could prove a major boon for small, independent developers in a talk at GDC Summer.

QUOTE | "Comic Sans tends to get a bad reputation but really it's a very, very good font. Particularly for dyslexia. Those with dyslexia have trouble distinguishing different characters and the way Comic Sans is is much easier for them—more so than most actual fonts made for dyslexia." - In her talk at GDC Summer, EA Sports's Karen Stevens shares the importance of legible fonts, and what recommended sizes should be used for accessibility.

Header graphic by Mike Williams, via official Nintendo assets.

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Rebekah Valentine

Senior Staff Writer

Rebekah arrived at GamesIndustry in 2018 after four years of freelance writing and editing across multiple gaming and tech sites. When she's not recreating video game foods in a real life kitchen, she's happily imagining herself as an Animal Crossing character.

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