In the free world, video game makers are “doubling down”

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In the midst of a pandemic, people staying indoors passed the time play tons of video games

Now that countries are slowly opening up, this behavior must change. And video game makers have warned that when people take to the streets again, their sales will drop and game spending could fall for the first time in at least a decade.

But companies don’t give up on expectations. Not at all.

Consider Riot Games, which produces League of Legends… “We’re doubling down,” said Nicolo Laurent, the company’s chief executive. “We are hiring like crazy.”

Then there’s Microsoft’s Xbox. “Our investment in games has never been greater than it is now,” said Phil Spencer, who leads the business.

Video game companies are among the winners of the pandemic, who say they still plan to go full steam ahead, even though the coronavirus restrictions that have guided their businesses over the past 15 months have been largely lifted. … Other tech companies that have thrived serving the remote community, including Zoom and Peloton – also said they expect continued spending, expansion of operations and recruitment.

This is an illogical bet. But some companies said they could use the money they accumulated over the year to get back on the growth trajectory they were on before the pandemic accelerated it.

“This is an amazing time for the industry,” said Strauss Zelnick, CEO of Take-Two Interactive, which makes NBA 2K and Grand Theft Auto video games. He said the pandemic has brought games to a wider audience, so instead of retreating, “we are investing in growth to meet this demand.”

When industries predicted slower growth in the past, companies often cut costs, but the ups and downs tended to be unpredictable, associated with plummeting stock markets and recessions, said Bill Pierce, associate dean of the Haas Business School at UCLA. , Berkeley.

As the pandemic eases, businesses have “more clarity and more confidence to invest” thanks to coronavirus vaccines and predictions of how people will react when the world opens, Pearce said. Some industries that have slowed down in line with conventional wisdom, such as car dealerships, are now berating themselves for failing to meet growing demand, he said.

But John Paul Rollert, a professor at the University of Chicago Booth School of Business, said moving forward in the face of volatile behavior is a high-risk, high-reward approach.

“You play really high stakes poker,” said Mr Rollert. However, he added, as the economy recovers and money is flowing around, “you can see why these companies might be thinking to themselves, ‘Covid was good for us, but maybe post-Covid will be great for us.’

Newzoo, a gaming analyst firm, predicts that people will spend $ 175.8 billion on games this year, down 1 percent from 2020. This will be the first cut since Newzoo began tracking spending in 2012.

Take-Two said this month that it expects sales to fall 30 percent in the next quarter from a year earlier and 8 percent in the fiscal year. Activision Blizzard, which publishes the war game Call of Duty, predicted an 11% decline in sales for the next quarter from a year earlier.

“It’s hard to imagine that, at least in the near future, there will be as many costs or playing time or as many players as the industry received last year,” said Matthew Ball, managing partner of Epyllion Industries, which operates the venture. a capital fund investing in gambling.

Other problems are looming, such as a global shortage of microcircuits. limitation of availability new game consoles from Microsoft and Sony, and a shortage of blockbusters after a year of remote work have made game development even more difficult than usual.

However, game developers have said they are not worried, especially after the pandemic has risen so rapidly.

In January, Microsoft announced $ 5 billion in quarterly gaming revenue for the first time, partly due to the next 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 is now looking to expand in countries like Africa by promoting its cloud gaming service xCloud, Spencer said. IN cloud games, games are hosted in the company’s data centers and streamed to consumers’ devices, so they don’t need to install games or use expensive hardware.

“If you look at the last decade, the growth of the gaming industry has been in double digits,” Spencer said. “The pandemic has undoubtedly had an accelerated impact.”

New York-based Take-Two’s profit jumped 46 percent from last year. Over the past 12 months, the company has hired about 700 game developers, increasing its staff by 10 percent and investing heavily in technology and marketing, Zelnik said.

“In many ways, this is an investment year as we build the future,” he said.

Niantic, the San Francisco-based company that released a mobile game Pokemon go, plans to increase its staff by about 25 percent this year to nearly 900, said John Hanke, chief executive. The company was preparing to release two new games, one based on the Settlers of Catan board game and one based on the Pikmin franchise, with eight more in development.

At Riot, based in Los Angeles, the post-pandemic recession “was not even discussed,” Mr. Laurent said. Private company revenues rose 20 percent last year.

(Mr Laurent is fighting employee lawsuits and claims that Riot is sexist workplace; is he sued in January for sexual harassment and retaliation. He denied the charges.)

Riot plans to hire 1,000 people this year, an increase of 33 percent, according to Mr Laurent. In addition to expanding its flagship League of Legends title, he said, Riot is investing in esports leagues for its first-person shooter game Valorant and Wild Rift, a modified version of League of Legends that can be played on mobile phones. The company is also building two new studios in Shanghai and Seattle this year and plans to open five more locations over the next three years, he said.

“In the 21st century, games will become a center of influence,” said Mr. Laurent. “The pandemic only gave us a little push.”

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