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Protocol Gaming
Your essential guide to the business of gaming.

Can consoles overcome the chip shortage?

Can consoles overcome the chip shortage?

This week in Protocol Gaming, your weekly guide to the business of video games: chip shortages still plague console sales, iOS games keep taking up more room and Amazon is gamifying the warehouse.

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The Big Story

Chips ahoy!

There was a time when people queued up overnight to be among the first to get a new console. Lines would stretch for blocks and news crews would be on the scene to cover the festivities. Sadly those days are mostly behind us, given the advent of ecommerce, and you know, this whole pandemic thing.

But last year's major console launches were additionally subdued. Not only did the pandemic keep most people indoors, it disrupted the supply chains for just about every gadget in the world.

  • Pair that with a large group of people trapped inside who are looking for ways to pass the time, and you have a perfect storm.

"Demand was greater than we anticipated," Jim Ryan, Sony Interactive Entertainment CEO, told The Washington Post last month. "That, along with the complexities of the supply chain issues, resulted in a slightly lower supply than we initially anticipated."

Even though we're now more than four months out from their launch, consoles are still scarce.

  • Both PlayStation 5 and Xbox Series X consoles are commanding between 50% and 100% markups over their retail prices on sites like eBay.
  • Still, Sony has sold over 4.5 million PlayStation 5 consoles through the end of December, according to a company report — which happens to be the exact same number of PS4s it sold in their first quarter of availability. Though estimates suggest there are considerably more gamers now than there were back then.

Both Microsoft and Sony rely on AMD for the processors and graphics chips in their new consoles, as they did for last generation's machines. The problem is so many other companies are also increasingly relying on AMD's chips for their products.

  • In August, ahead of the consoles' launches, analysts said that AMD's supply chain was not the issue — rather, that demand forecasts had been miscast.
  • AMD actually increased its guidance on each of its earnings calls last year, but there really wasn't any excess capacity to give to console makers or anyone else.

So when will that change? It's not exactly clear.

  • AMD's CEO Lisa Su said on the company's earnings call in January that she expects there to be chip shortages until the second half of the year.
  • It's not like you can easily spin up additional capacity; it takes months to build these chips, and orders are usually locked in many quarters in advance.
  • With the pandemic still in full swing, demand is going to remain high in several chip-heavy industries for a while: PC sales are at their highest in a decade, and new cars will be missing features because the auto industry is struggling to source chips, too.

Microsoft is doing what it can, but it still doesn't seem like it's enough:

  • "With the global chip shortage across several industries, we're working as fast as possible with our manufacturing and retail partners to expedite production and shipping to keep up with unprecedented demand for our new Xbox consoles," a company spokesperson told Protocol.
  • But Microsoft had nothing further to add when asked whether there were plans to partner with other companies to ramp up demand.

With some analysts predicting that chips won't be readily available until at least 2022, it doesn't seem likely that there will be enough consoles available to satisfy demand for the holidays. Then again, by then we might be able to go outside and do things like go to bars and museums, and the more casual gamers may fall by the wayside.

Sony wasn't immediately available to comment.

— Mike Murphy

Overheard

  • "We're angry too. We know that the trust of our communities is hard-earned, and is based on principles of Fair Play. This illicit activity shakes that trust … This is a breach of that principle, as well — and we won't let it stand." —EA is investigating whether employees were involved in a "content granting" scheme with FIFA Ultimate Team, after screenshots surfaced online allegedly showing EA employees selling rare player cards ranging from $1,200 to $2,000. It's already found "questionable activity."
  • "Obviously I can't sit here and say every Bethesda game is exclusive, because we know that's not true. There are contractual obligations that we're going to see through, which we always do in every one of these instances." —Phil Spencer clarified what the Bethesda deal means for game exclusives, but he also said that many exclusives would be heading to Game Pass so PC and mobile players could share in the fun.

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Lootbox

  • Epic Games is suing Google in Australia, arguing that the company forces developers to use its payments system. This expands on lawsuits in the U.S. and U.K. against Google and Apple.
  • On Protocol: Roblox's CBO on how the company sees itself, why it thinks it can be much bigger than a game for kids, and how Lil Nas X helped to convince Roblox that it was time to go public. It closed its first day of trading with a $38 billion market cap.
  • Rust player data was lost after a data-center fire destroyed 25 EU servers. Developer Facepunch has so far been able to bring back 15 of the affected servers, but game progress had to be reset.
  • Moves: Mobile gaming site Playco hired Calvin Grunewald as its new CTO. Grunewald previously worked on Facebook's gaming division and helped launch Instant Games.
  • The average size for top games in the App Store has increased 76% since 2016, according to Sensor Tower. The data only includes the initial install and not any subsequent updates.
  • Indie publisher TinyBuild went public on the London Stock Exchange's AIM market, with a not so tiny $474 million valuation.
  • THQ Nordic has opened a new Barcelona studio called Alkimia Interactive, which will handle the highly-anticipated remake of Gothic.
  • Capcom forced remote employees to go back to the office after a security breach, even as Japan was in a state of emergency over a high number of COVID-19 cases, according to a Biz Journal report (translated by Kotaku). The whistleblowing report alleges other questionable practices at the company, including not allowing a union.
  • Esports gaming community site Super League Gaming is acquiring Mobcrush, which players use to distribute their streams to Twitch and other platforms. With the acquisition, Super League will have a combined player base of more than 3 million users per month.
  • More acquisition news: Media entertainment company ReKTGlobal is acquiring TalentX Entertainment to create ReKTX. TalentX's portfolio includes influencers such as Noah Beck, Bryce Hall, Josh Richards and Griffin Johnson.
  • Gordon Hall, the founder of Rockstar Leeds, has died. Hall worked on several big-name titles during his career, including Grand Theft Auto: Chinatown Wars and Red Dead Redemption. He was 51.

— Karyne Levy

Look Out For

How many packages for a narwhal?

One way to spice up a mundane job? Video games! That's what Amazon thinks, at least: It's reportedly expanding its "FC Games" program, which develops games that reward its warehouse workers for doing their jobs quickly. Workers can then redeem their digital currency for in-game rewards, like narwhals, or real-world swag. One worker told The Information: "The games aren't particularly good, although some people do like it because it helps make the mind-numbing boredom of a 10-hour shift better." Another compared it to "Black Mirror."

— Shakeel Hashim

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