The year 2024 was a time of significant change for the gaming industry. Halfway through the year, both publishers and tech giants are still struggling to adapt to gamers’ changing consumption habits.
Although the layoffs that plagued gaming companies in the first half of the year have slowed somewhat, staff cuts continue – most recently at Bungie, where the company laid off over 200 employees at the end of July.
The fundamental uncertainties that have led to the recent wave of layoffs in the gaming industry were clearly on display during this quarter’s earnings calls, both among established gaming companies and among the technology and entertainment giants hoping for further expansion in the space.
Here are some of the key takeaways from this quarter’s gaming industry conference calls.
Investors are cautious about gambling
Even when the numbers are good, investors seem uncertain about the future prospects of the gaming industry. This was evident in the reaction to Roblox’s second-quarter 2024 earnings call on August 1. Despite the company showing impressive growth in almost every respect, including increased cash flow and time spent on the platform, Roblox’s share price fell more than five percent after the call.
One reason for this decline could be investor uncertainty surrounding the departure of Roblox CFO Mike Guthrie, who announced his resignation during the earnings call. Another reason is that while Roblox and other gaming companies continue to grow, their growth has not matched the high expectations investors created during the industry’s rapid expansion in 2021 and 2022.
Despite investor caution, companies in the Roblox ecosystem say they are encouraged by this quarter’s earnings report, regardless of the stock price.
“There are many huge platform companies that have sacrificed profitability for years to focus on growth, and I don’t see that as a problem,” said Joe Ferencz, CEO of leading Roblox studio Gamefam. “We are not concerned about Roblox’s liquidity and solvency as a critical business risk. Here at Gamefam, we have zero percent concern about their financial stability.”
The console market is over (for everyone except Nintendo)
While rumors of the Switch 2 are circulating, Nintendo has already established dominance in the gaming console market, as this quarter’s earnings calls make clear. During its Q1 2024 earnings call, Sony announced that PlayStation 5 sales fell below 1 million units per month, a nearly 50 percent drop from Q1 2023 and much lower than Nintendo’s monthly sales of 2.1 million units for the quarter. Similarly, Microsoft reported a 42 percent drop in Xbox hardware sales.
The decline of Microsoft and Sony’s hardware businesses has sparked speculation about the end of console exclusivity on both platforms. In fact, Microsoft has already become more open to ending exclusivity for Xbox titles, as hinted at by CEO Satya Nadella, who said during the company’s July 30 second-quarter 2024 earnings call that live service and software revenue are “really our long-term KPI.”
“We believe we now have both the content and the ability to access all of the traditional high-scale platforms that people play games on, so console, PC and mobile,” Nadella said. “But we’re also excited about these new sockets.”
The premium publishing model is a mixed picture
Despite the rise of live service gaming as a long-term business model, publishers have by no means abandoned the premium gaming model that encourages players to spend more than $70 on a one-time purchase of high-quality console or PC games.
Electronic Arts, for example, spent much of its quarterly earnings call discussing the enormous success of EA Sports College Football 25, whose sales reportedly brought the publisher over $500 million in revenue within two weeks of the game’s release.
“We’ve seen an incredible launch for EA Sports College Football 25, with record first-week engagement for our sports franchises in North America and positive momentum for Ultimate Team,” EA CFO Stuart Canfield said during the company’s first-quarter 2025 earnings call on July 30. “We’re only 11 days into launch, but we’re excited about the opportunity to significantly grow our American football community.”
The success of College Football 25 shows that the premium business model can still make publishers profits, even as Electronic Arts and its competitors look to expand into other revenue streams such as advertising.
However, the premium model forces publishers to rely on sales of individual hit titles to stay afloat. Take-Two Interactive, for example, has posted nine consecutive quarters without a profit – but during the company’s first-quarter 2025 earnings call on August 8, executives remained confident, with “Grand Theft Auto VI” set to launch next year.
This quarter’s positive news for the premium business model must be viewed with a caveat. A fundamental concern is that there are fewer and fewer game franchises that can still convince millions of gamers to spend $70.
Both “College Football” and the upcoming “GTA” title have benefited from being released many years after their last predecessor, with pent-up demand driving massive sales. Other popular series, like the annual “Madden NFL,” are likely to be less successful despite their premium status. If EA wants to continue to make money from the premium model, it will need to find a way to carry the excitement of “College Football” into its other top titles.
“We’ve noticed the success of ‘College Football’ and it’s exciting to be on stream,” Take-Two CEO Strauss Zelnick said during the call. “We’ve taken note of that and we obviously have a history with college basketball, with college ‘2K,’ and we’re always listening to our community and their interest to see if there’s anything we could do in the future.”
