Video Games: Developers need to step up
#Video #Games #Developers #step Welcome to InNewCL, here is the new story we have for you today:
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Like their customers, video game makers want to get stronger.
After two years of growth fueled by the coronavirus pandemic, the industry experienced a slowdown last year as people returned to work or school. According to gaming data company Newzoo, total video game spending fell 4.3 percent in 2022 to $184.4 billion. Earnings from large, established video game companies have fueled fears that the downturn could continue this year.
Both Electronic Arts and Take-Two Interactive Software reported results that were below Wall Street expectations. At the call-of-duty game maker Activision Blizzard, sales and profits fell for the full year. Microsoft, which is seeking regulatory approval to buy Activision, said revenue from its Xbox content and services division fell 12 percent last quarter.
The ratings have fallen accordingly. Price-to-forward earnings multiples for EA, Take-Two, and Activision are all below their five-year averages. Even Roblox, the company behind the hugely popular gaming platform that allows kids to build their own games and virtual worlds, is trading at just 12x sales, compared to 50x 20 months ago.
A string of high-profile releases this year could help the industry unlock new levels of growth. Still, not everyone will be able to win. Take-Two, for example, is behind the hugely successful Grand Theft Auto franchise. However, there is still no official release date for the next installment in the series. Meanwhile, the acquisition of Zynga, the mobile games company that was behind FarmVille last year, seems increasingly inopportune.
Mobile gaming depends on the advertising industry. Apple’s privacy changes have made it harder for advertisers to gauge the effectiveness of their campaigns, resulting in spend cuts.
For investors, game publishers focused on community-building remain better choices than those whose fortunes are tied to one or two blockbuster titles. Roblox, whose game engine also functions as a social network, fits into the picture.
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