AYESHA RASCOE, HOST:
Video games allow people to live lives otherwise out of reach. You can be a god of war, for instance.
(SOUNDBITE OF VIDEO GAME, "GOD OF WAR")
TERRENCE T C CARSON: (As Kratos) I bring the destruction of Olympus.
RASCOE: You can punch fascists like Indiana Jones.
(SOUNDBITE OF VIDEO GAME, "INDIANA JONES AND THE GREAT CIRCLE")
UNIDENTIFIED ACTOR: (Speaking Italian).
(SOUNDBITE OF PUNCHING)
RASCOE: Or make your coziest dreams come true at a fireside concert in Animal Crossing.
(SOUNDBITE OF K.K. SLIDER'S "BUBBLEGUM K.K.")
RASCOE: And those dreams take software, hardware and hard work to make come true. But lately, players have been a bit disenchanted. Growing price tags and seemingly stale gameplay are driving down sales. Once-titanic developers like Ubisoft are struggling and workers are even threatening strikes. To help us understand, we called a veteran games journalist for Bloomberg and co-host of the Triple Click podcast, Jason Schreier. Thank you so much for being with us.
JASON SCHREIER: Hi, Ayesha. Thanks so much for having me. I'm glad you shouted out Animal Crossing 'cause I just introduced my kids to that game last weekend, and they're obsessed.
RASCOE: Yeah. My kids were obsessed with that too. Yes. So let's start with Ubisoft. What's going on with this company, this game developer?
SCHREIER: Yeah. Ubisoft is in an interesting place right now. They are a long-running game developer. They're best known for franchises like Assassin's Creed and Far Cry. And for a long time, they were growing. In fact, they were really peaking around 2017, 2018, and they were seen as one of the biggest video game publishers in the world.
But over the last few years, they've been on a decline. It started in 2020. They were embroiled in a sexual discrimination and misconduct scandal that led to a lot of executives over there resigning. And since then, they've been on the back foot. They've released more than a few games that have flopped, and they've found themselves cash-strapped having to put together all sorts of financial mechanisms to get investments.
And what's unique about Ubisoft, and I think important, is that they are a family business. They are run by the same family that founded them, the Guillemot family, and Yves Guillaumont is still the CEO 35 years later after founding the company. In recent months, Ubisoft has been laying people off, cutting projects, keeping people in a very low state of morale.
RASCOE: During the pandemic, people were really kind of gobbling up consoles and games. I remember getting the Switch then and playing Animal Crossing. But the demand actually outpaced the supply chain that was affected by COVID. What does that demand look like now?
SCHREIER: Yeah. A couple of interesting things happened during COVID. One is that people like yourself were buying video games, and there was a humongous amount of growth across all game companies in 2020, and a lot of those game companies expanded, kind of assuming that that growth would continue. And of course, it did not because when people could go back outside again, you had fewer people buying games. So we saw growth flatten, and a lot of these companies had to cut costs accordingly because they had gotten too big. At the same time, interest rates also had a huge impact on the economic landscape of the video game industry. During that period, 2020, 2021, you could essentially borrow for 0% interest rates. Free money was everywhere, and so a lot of companies made investments into video game projects that then looked far less appetizing.
RASCOE: And what about the hardware companies?
SCHREIER: Yeah. It's an interesting time for the hardware business too because a few things are happening. One is hardware's getting more expensive thanks to tariffs and thanks to the AI gold rush sucking up all the graphics cards and RAM and memory chips. So we're seeing something unusual happen, which is that consoles now, like, five, six years after they launched are going up in price, when usually it's the other way around. Usually, when a console has been on sale for a while, you'll see discounts, right?
RASCOE: Yeah.
SCHREIER: At the same time, partially as a result of the pandemic affecting some of these game productions, we are seeing a console generation of games that really haven't made the same sort of advancements that maybe previous iterations of the console world have. So for example, when we went from the PlayStation 3 to the PlayStation 4 generation in 2013, there's a pretty big leap in graphical capability. But more recently, that hasn't really happened.
RASCOE: Well, what are you going to be looking for in the coming year or so as an indication of the health of the video game industry?
SCHREIER: Yeah. It's interesting. It feels like we're in this correction period, and a lot of smart analysts and pundits have pointed out that the video game industry has really moved from a growth market into a mature market and that the double-digit percentage increases that the gaming business has seen in, I don't know, for over 30 years or so, have really stopped and probably aren't coming back. And so I think we're going to start to see that correction continuing. There have been a lot of layoffs, tens of thousands of layoffs in the games industry over the last couple of years. It still can be a healthy business for a lot of companies. A lot of companies are making plenty of money selling games to people. It's just - it's going to look very different.
RASCOE: That's Bloomberg's Jason Schreier. Thank you for talking with me.
SCHREIER: Yeah. Thanks so much, Ayesha. Transcript provided by NPR, Copyright NPR.
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