| Hi everyone, it's Cecilia. Today, we're talking about how hard video games are. Not the boxes--you'll see what I mean. But first…. This week's top gaming news -
Grand Theft Auto maker Rockstar Games is cleaning up its act. GTA VI will probably look different as a result. -
Sony cut its profit outlook after its PlayStation division faltered and game sales slumped. - The CEO of crypto darling Axie Infinity developer Sky Mavis moved $3 million in the game's crypto token— hours before disclosing a major hack.
The dark thundercloud of a recession is moving closer, according to some forecasters, or is already here, according to others. So, who's going to get wet? There's a common narrative that the video game industry is recession-proof. So if there is an economic downturn, the companies that make video game software and hardware should weather the storm and maybe even continue to grow. Serkan Toto, chief executive officer of Tokyo-based games consultancy Kantan Games Inc., says he can't remember a recession in the last four decades that had a significant impact on the games industry. In fact, during the Great Recession of 2007-2009, Activision merged with Vivendi Games as part of a $18.9 billion deal–and picked up World of Warcraft publisher Blizzard in the process. What makes games so special? "Gaming is a comparatively inexpensive hobby," says Toto, adding that a lot of AAA games today are playable for free. Also, it's generally acknowledged that people who lose their jobs still consume plenty of entertainment products. Toto says he is "in the camp that the industry is recession-proof indeed, at least to some extent." We're in a very different time now compared with 2008, though. If a recession hits, it will be amid a strong labor market. "We don't have high unemployment right now, so it's not clear that games will benefit from a decline in economic activity," says Michael Pachter, an analyst at Wedbush Securities. "This recession isn't normal."  A Microsoft's Xbox One video game controller Photographer: Bloomberg/Bloomberg The games industry is a totally new beast, too. It's now almost a $200 billion-behemoth, according to analytics firm NewZoo–exponentially bigger than it was even in 2019. And it's become less independent and more enmeshed with big tech and advertising. Microsoft Corp., Apple Inc., Google and other big tech firms are now stewards of their own gaming empires. Microsoft's $69 billion pending acquisition of Activision Blizzard only tightens the links. The industry's success now hinges on much more than the latest $60 blockbuster title or $400 console--it relies on how these larger companies are performing in their other businesses. Nothing shows that more clearly than the rise of mobile gaming. Alphabet Inc.'s Google and Apple govern the digital storefronts selling a huge portion of games. And the commissions they take from developers has a big impact on the industry as a whole, says Mandeep Singh, an analyst at Bloomberg Intelligence. Mobile games publishers, he says, are "dependent on what Apple decides in terms of its own services." On top of that, mobile games have introduced a business model that is rapidly becoming standard: free-to-play. While games are cheaper than ever to buy into, they are more reliant than ever on advertising to make money. See Roblox Corp.'s entanglement with ads and gaming software company Unity Software Inc.'s recent $4.4 billion purchase of mobile ad company IronSource. That's where things could get risky. If big tech or advertising stumble, the games industry might too. Microsoft, Apple, Amazon.com Inc. and Alphabet seemed to breeze through their earnings this week, showing the group is navigating the tough economic environment better than most. Next week gaming companies will have their turn, so stay tuned. Everyone is obsessed with Stray, a new game developed by BlueTwelve Studio, a small team from the south of France, and published by Annapurna Interactive. It's about being a cat, obviously, in a cyberpunk dystopia. Even cats are obsessed: A new Twitter account is collecting pictures of gamers' cats reacting to Stray. In other news - Texas-based Aspyr Media is delaying the highly anticipated remake of Star Wars Knights of the Old Republic. My colleague Jason reported the game is in serious trouble.
- Sony has entered the competitive PC gaming hardware industry in earnest.
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