D.Nothing here Like captive spectators. When Japanese electronics company Sony announced its latest quarterly results on October 28th, Star Performance was the video-gaming division of the company, converting the PlayStation line to consoles. If it had been a normal year, revenue would have been down, because Sony’s current model – the PlayStation 4 is coming to its end of its life.
But in a year marked by locks and working from home, gaming revenue grew 11.5% year-on-year (and operating profit 61%). Sony is not alone. Microsoft, its gaming arch-rival, released its own results the previous day. Its Xbox One console was similarly improved, but revenue was up 30%. Good times have been repeated throughout the industry (see chart).
Most forecasters expect Covid-19 to boost the video-gaming business. From board games to video streaming to books to other types of indoor hobbies this epidemic has provided a flip. But the scale of the uprising has taken the industry audience by surprise. Tom Wizmann, a sports-industry analytics firm in New Zealand, said when the epidemic began, his company had projected a $ 2 billion increase in industry revenue over current estimates. According to the latest figures, the actual figure is very close to b 17 billion. Newsu now estimates that industrial revenue will reach $ 175 billion this year, up 20%. 2020 is a repository year, even for an industry that has grown by 9% annually.
Not over yet. Advertisements, trailers and P.R., Sony and Microsoft are preparing to replace their existing consoles with newer, more powerful engines. Microsoft will release the Xbox Series X on November 10th. Sony will respond with the PlayStation 5 in two days. Demand for this specialty has grown significantly as a result of recent corporate scandals. If the industry rumors about pre-orders are correct, some consumers will have to go without.
At the same time, both companies will notice many big new competitors. Amazon, Facebook and Google all think it’s time to try their luck in the gaming industry. Streaming has revolutionized music, television and movies over the past decade. Technology giants think of cloud computing, fast broadband and 5G. Mobile networks mean it’s time to try the same thing in video games.
Start with the consoles. Sony won console battles in the previous round, selling 100m PlayStation 4s and over 1 billion games. Microsoft did not provide official figures, but most analysts believe that sales of the Xbox One (confusingly, the Xbox’s third iteration) are only half as high. Most expect Sony to outperform its competitor this time around. Pierce Harding-Rolls at media analytics firm Amber Analysis predicts that 5m new PlayStations will be sold before Christmas, compared to the 3.9m Xbox.
Brand loyalty is one reason. “A cult is followed when it comes to consoles,” says Michael Butcher, a researcher at Wetbush Securities. “PlayStation owners will most likely buy another PlayStation, and Xbox owners will get a new Xbox.” The other is Sony’s strategy, which focuses on existing gamers. Analysts believe the company is selling the machines at a loss cons This is a common tactic for console makers. Sony’s marketing emphasizes exclusive, big-budget games that target targeted gamers and are not available elsewhere.
Sony executives will believe analysts’ predictions are correct because the PlayStation 5 is important for its future. The company’s gaming division is now its largest. Its latest success, in its imaging segment, has eased the impact of Chinese technology firm Hawaii, one of its biggest customers (see Schumpeter), on issues elsewhere affected by the crisis.
Microsoft, for its part, has no idea how many new Xbox it sells. It focuses on expanding the market as it tries to beat existing gamers. More than 3 billion people own smartphones, and smaller and more casual mobile games are more popular than console titles. Bill Spencer, who runs Microsoft’s Xbox division, estimates that only about 200m of households around the world are willing or able to get rid of expensive gaming hardware such as a console.
So Microsoft is trying to reduce the barriers to adoption. It will offer rental-purchase deals for its new Xbox. It greatly promotes “Game Pass”, a subscription service that provides access to the online library of hundreds of games for up to $ 15 per month (a quarter of the upfront cost of a typical high-end console game).
Central to this strategy is a service called xCloud, which aims to eliminate the need to own a dedicated console for playing games on remote data centers and streaming results on Internet-connected smartphones. TVS, or any screen that can connect to the Internet and the game controller.
In rich countries, streaming allows gamers to play games made for music and movies, not just at home, on SpotFi and Netflix. In poorer countries, smartphones are more common and data programs are cheaper, which may bring console gaming to reach millions of new players. “There are 1.2 billion people in Africa, with an average age of 20,” says Mr Spencer. “Many of them follow our games – they know the characters, the stories and even the release dates. They have no devices to run them.”
Game-streaming is not a new idea. Previous attempts have been hampered by technical issues (streaming a game requires immediate action on a player’s actions, much more difficult than streaming a movie or song to a passive viewer). Microsoft is not the only company that thinks time is ripe now. Sony offers its own version, whichB.S.Now ”(although it is limited to older games), like Nvidia, the gaming-centric chipmaker and many more. Other technology companies that do not have much experience in video gaming are also accumulating. Google launches Stadia in 2019 Amazon announced its “Luna” service in September. On October 26, Facebook threw its hat into the ring with its own “Facebook Gaming” service.
Game-streaming seems appealing on paper, but some expect it to change the industry overnight. “I would describe the market as a nucleus,” says Mr Harding-Rolls. However, there is great interest: Ampere tracks 60 companies whose offers are available for public testing or use. If the streaming starts, it will prove to be as disruptive as it was in other media. “If you can do streaming work, you can grow the gaming market tenfold,” Mr Thatcher thinks. Video streaming wars Deep pocket technology companies and media companies spend billions on content. Similar jogging may be going on in sports. On September 21, Microsoft acquired Genimax Media, which sold the best-selling “Fallout” and “Elder Scrolls” series games for $ 5.5 billion.
Picking winners and losers is quick, but most analysts think Microsoft is in good shape. Its Azure Cloud business is the second largest in the world, offering what many competitors do not have. Last year Sony said it was exploring the option of using Azure to run its own gaming services due to the lack of its own cloud infrastructure. Unlike Google or Amazon, its only real cloud competitor, Microsoft has decades of experience in the gaming business.
But it also has strong points for its competitors. Amazon has 150m subscribers to its Prime service, which includes already streamed video and music. Google can use YouTube to populate gaming videos. Facebook plans to offer its service to people who play simple, browser-based games on existing platforms, with more than 2 billion users a month. Sony’s success rate with the PlayStation has proven not everything. Everything is there to play. ■
Amendment (November 6, 2020): An earlier version of this article quoted Tony Hobbsmith in the news as more than Tom Wizmann. We apologize for the inconvenience.
This article appeared in the business section of the print edition entitled “Games Beginning”.