Axios Gaming

The video game industry’s biggest trade group is weathering a revenue shortfall, even as it continues to shape public policy around games.

Driving the news: Revenue for the Entertainment Software Association dropped more than $10 million, or 25%, in the 12 months ending March 31, 2021, due to the lack of its E3 trade show in recent years, according to an Axios review of its tax filings.

Why it matters: The ESA is one of the industry’s power players, but what it does tends to fly under the radar.

• The D.C.-based lobbying group's 30 corporate members include EA, Tencent, Sony, Nintendo and Microsoft.
• Among its most prominent duties: running E3 and the Entertainment Software Ratings Board, which applies ratings to games.

What they’re saying: The ESA serves as “the voice” of the industry, the group’s president, Stanley Pierre-Louis, told Axios in an interview. It strives to perpetually boost gaming’s reputation while lobbying D.C. and state lawmakers.

• In 2021, the ESA spent $2.5 million in lobbying and millions more in advocacy involving such issues as intellectual property, child safety, free speech and STEM education.
• Its approach has changed since its founding in 1994. At that time it had to focus on playing defense against U.S. politicians, largely Democrats, who blamed games for school shootings and other violence in America.
• These days, the ESA is staking policy positions on loot-boxes (not gambling; let the industry self-regulate), immigration (supportive of visas for high-tech workers and esports athletes and backed the Deferred Action for Childhood Arrivals, or DACA) and more.

Details: The ESA took in $30 million in the 2020-21 tax year, versus $40 million from the year before.

• It garnered funds through fees to rate games and rising dues for its member publishers. (The ESA doesn’t share what its members pay, but a recent Activision filing disclosed that its annual dues exceeded $680,000 in 2021.)
• But the lack of an E3 incurred a massive revenue hit, which may add a new perspective to how much the ESA and its members value the trade show.
• The last in-person iteration of the show, in 2019, generated $17 million for the ESA, compared to $12 million in full-year convention and meeting costs.

Between the lines: The group’s positions serve the industry powerhouses who fund it, if not always positions that’d necessarily be popular with players.

• For example, the ESA has issues with so-called Right to Repair legislation, which would allow people to legally fix their own consumer electronics, instead of relying on manufacturers or authorized repair services.
• The ESA says such policies “present unique security and piracy risks to the video game ecosystem” and has sought exceptions for gaming hardware makers.
• The country’s most prominent legislation on the issue, New York’s recently passed Right to Repair bill, exempts game consoles from its repair requirements. An ESA rep confirmed to Axios that the group had lobbied New York on this position.

Industry scandals involving sexual misconduct at ESA member publishers, including Activision late last year, have raised questions about the group’s role in policing its industry.

• The ESA publicly condemned harassment, but Pierre-Louis declined to say if the ESA had taken any actions or addressed Activision on the issue directly. “We speak to our members about the issues of the day and comment publicly when it's appropriate,“ he said.

What’s next: The ESA’s E3 show is set for a return in 2023, with events firm ReedPop producing.

Mega-publisher Ubisoft delayed one major game and canceled two other announced releases today.

Why it matters: A publisher that used to release blockbusters like clockwork is very clearly struggling.

Details: The company pushed Avatar: Frontiers of Pandora, the marquee reveal of its showcase event a year ago, out of this year to the 12 months following March 31, 2023.

• It also canceled the planned free-to-play, 100-player battle royale Ghost Recon: Frontline and Splinter Cell VR and two unannounced games.
• The Ghost Recon move follows a disastrous unveiling last October that fans lambasted for straying too far from the series’ traditionally more tactical gameplay.
• Nixing Splinter Cell dials down Ubisoft’s commitments to virtual reality games. Two years ago, it announced Splinter Cell and Assassin’s Creed VR releases in development in partnership with Oculus/Meta.

Between the lines: The company announced the cancellations in a call with investors, during which Ubisoft chief financial officer Frederick Duguet promised a reduction of expenses via “stabilization of headcount,” “cost discipline” and “even more focus on our biggest development opportunities.”

• Asked about the reason for Avatar’s delay, Ubisoft CEO Yves Guillemot cited production difficulties, saying the biggest impact came from difficult current industry working conditions in which “people can’t come to the office as often.”

NFTs, or blockchain-based digital goods bought and sold with cryptocurrency, remain controversial in gaming.

• Case in point are two announcements from yesterday.

👍 Square Enix announced it will sell physical, commemorative Final Fantasy VII trading cards and figures that will include access to digital NFTs, launching in November 2023.

• In January, company president Yosuke Matsuda said NFTs had a bright future, despite some “overheated trading,” and predicted they would someday “become as familiar as dealings in physical goods.”

👎 Minecraft studio Mojang announced that blockchain and NFT technologies do not align with “Minecraft values of inclusion and playing together” and will not be supported or allowed to be affiliated with the globally popular, kid-friendly building game.

• “The speculative pricing and investment mentality around NFTs takes the focus away from playing the game and encourages profiteering, which we think is inconsistent with the long-term joy and success of our players,” developers at the Microsoft-owned studio wrote.

Between the lines: While the NFT market has plummeted this year, crypto gaming efforts are still racking up investor dollars.

• A report by Drake Star Partners noted that blockchain/NFT companies drew more than $2 billion in investment in the first half of 2022.

🚶‍♂️ Activision Blizzard employees are holding another walkout today, at studios in New York, Texas and California, calling for better company protections for marginalized workers and for the company to offer relocation assistance to those working in states with anti-abortion or anti- LGBTQ legislation. Organizers expected hundreds to participate.

• An Activision rep told Axios the company is focused on "ensuring gender equity throughout the company and comprehensive access to reproductive and other health care services for every employee."
• Earlier this week, quality assurance workers at Blizzard Albany, formerly Vicarious Visions, announced the formation of a union, which is likely headed to a vote administered by the National Labor Relations Board.

🇲🇲 The makers of mobile game War of Heroes say players’ spending will be used to fund resistance to Myanmar’s ruling military, the New York Times reports.

📉 Gaming influencer group FaZe Clan went public yesterday, only to see its stock price drop 30% in its first day of trading.

🤔 Sony PlayStation has hired an antitrust lawyer, a new senior director role for the division, Bloomberg reports.

💬 Xbox is getting Discord voice chat, well before Sony, which invested in the company last year.

🔍 Apple has begun announcing games that will leave its 3-year-old Apple Arcade subscription service. Downloaded games will be playable for two weeks after they’re delisted.

• Per a newly updated Apple support post, developers may then offer their delisted games on the App Store and players’ save progress should be retained.

🎮 Doom co-creator John Romero is making a new first-person shooter.

🎮 Last of Us co-creator Bruce Straley has launched a new studio.

🗓 Nintendo’s Wii U and 3DS eShops will close on March 27, 2023.

🧱 The new Atari 2600 Lego looks cool but for some reason only has 2,532 pieces.

A fairly sedate week coming up.

Friday, July 22

• Capcom Arcade 2nd Stadium (Console, PC) and Live A Live (Switch) are released.

Saturday and Sunday, July 23 and 24

• Farmcon 2022, an in-person and virtual convention for fans of the Farm Simulator games, is held all weekend.
• For esports fans, we recommend a skim of Juked's handy calendar for the weekend’s events.

Monday, July 25

• A quiet day.

Tuesday, July 26

• The open beta for MultiVersus (PC, PlayStation, Xbox), a fighting game starring Warner Bros. characters, begins.

Wednesday, July 27

• Another quiet day.

Thursday, July 28

• A showcase for upcoming Annapurna Interactive games is held at 3pm ET.
• Azure Striker Gunvolt 3 (Switch) and Bear & Breakfast (Switch, PC) are released.

Friday, July 29

• Sony releases quarterly earnings.
• Xenoblade Chronicles 3 (Switch) and RimWorld: Console Edition (PlayStation, Xbox) are released.

New newsletter publishing plan = new features. Let’s try some micro-impressions, shall we?

Stray (played on PS5 for two hours, also out on PC) — I’m a cat exploring my way through a robot-occupied city in a post-human future.

• It’s good (and apparently short, if you care).
• I’m most charmed by the chance to role-play the recognizable rhythms of cat movement that make jumping through Stray’s world feel so different than bounding through one as Super Mario or other familiar gaming heroes.
• In Stray, I move as my real-life cats always have: that pause before a vertical leap onto a high shelf, that drop back down to the floor with a quick -kerthump-.
• Everyone’s now posting videos of their cats watching Stray’s cat. Mine just mosey’d by.