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Gaming earnings: The pandemic is their call of duty

  • Revenue
    • EA (Q4): $1.39 billion (+12% YoY vs. $1.19 billion expected)
    • Activision/Blizzard (Q1): $1.79 billion (-2% YoY vs. $1.32 billion expected)
  • Earnings:
    • EA (Q4): $418 million (+100% YoY, above expectations)
    • Activision/Blizzard (Q1): $505 million (+13% YoY, above expectations)
  • Guidance:
    • EA: $5.525 billion for the fiscal year
    • Activision/Blizzard: $1.69 billion in revenue for next quarter

The big number: With so many people stuck at home, it seems like they've all turned to buying new games to pass the time. Both EA and Activision/Blizzard pulled in massive revenue this quarter, with EA growing 12% over the same period last year. While Activision actually shrank a bit, its $1.79 billion in revenue was still well above what analysts had been expecting for the quarter.

People are talking: According to Activision, one of its most popular games franchises was just as much to thank for its earnings this quarter as the pandemic. "Our business exhibited accelerating momentum entering the second quarter from the dual tailwinds of strong execution in the Call of Duty franchise following last year's increased investment, and increased engagement as people turned to our interactive content as they sheltered at home," the company said in a release.

Opportunities: Both EA and Activision seem to be making the most of this unprecedented time. "With more people staying at home, we have experienced, and are continuing to experience, heightened levels of engagement and live services net bookings growth to date," EA said in a release.

Activision said in its release that work-from-home orders haven't affected its ability to design and release games to date, and the company hasn't shifted any release dates for future games yet. Competitor Nintendo, which reports its earnings on Thursday, is likely to be in a similar boat. Its Nintendo Switch consoles are sold out across the U.S., and its most recent game, Animal Crossing: New Horizons, has become a cultural sensation.

Threats: As with every business right now, there's no knowing where this pandemic will go. People do still tend to spend on entertainment even in recessions, so there's the chance that games-makers will have little problem developing and shipping new games from home that people will want to buy. But for consumers looking for new consoles, any disruptions in supply chains could hurt game publishers if new users can't access their content. Similarly, in-store sales will likely to continue to dwindle if lockdowns continue; EA noted a roughly 3% drop in packaged sales compared to the same quarter last year. With stores closed, there's inventory going stale on shelves that gamers may no longer want when stores open back up. Who will want FIFA 20 when FIFA 21 is on the way?

The power struggle: There is the chance to get carried away here. Although it acknowledges the unknowns in the economy, rising unemployment, and slow retail sales, Activision says it believes "there is potential for overperformance if these risks do not materialize." Keeping gaming revenue up, especially for games that rely on frequent microtransactions and access to the internet, could be a challenge in a prolonged recession.

App store laws, Microsoft AR and Square buys Tidal

Welcome to this weekend's Source Code podcast.

Cole Burston/Bloomberg

This week on the Source Code podcast: First, an update on Google's user-tracking change. Then, Ben Pimentel joins the show to discuss Square buying Tidal, and what it means for the fintech and music worlds. Later, Emily Birnbaum explains the bill moving through the Arizona legislature that has Google and Apple worried about the future of app stores. And finally, Janko Roettgers discusses Microsoft Mesh, the state of AR and VR headsets, and when we're all going to be doing meetings as holograms.

For more on the topics in this episode:

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David Pierce

David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

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The future of computing at the edge: an interview with Intel’s Tom Lantzsch

An interview with Tom Lantzsch, SVP and GM, Internet of Things Group at Intel

An interview with Tom Lantzsch

Senior Vice President and General Manager of the Internet of Things Group (IoT) at Intel Corporation

Edge computing had been on the rise in the last 18 months – and accelerated amid the need for new applications to solve challenges created by the Covid-19 pandemic. Tom Lantzsch, Senior Vice President and General Manager of the Internet of Things Group (IoT) at Intel Corp., thinks there are more innovations to come – and wants technology leaders to think equally about data and the algorithms as critical differentiators.

In his role at Intel, Lantzsch leads the worldwide group of solutions architects across IoT market segments, including retail, banking, hospitality, education, industrial, transportation, smart cities and healthcare. And he's seen first-hand how artificial intelligence run at the edge can have a big impact on customers' success.

Protocol sat down with Lantzsch to talk about the challenges faced by companies seeking to move from the cloud to the edge; some of the surprising ways that Intel has found to help customers and the next big breakthrough in this space.

What are the biggest trends you are seeing with edge computing and IoT?

A few years ago, there was a notion that the edge was going to be a simplistic model, where we were going to have everything connected up into the cloud and all the compute was going to happen in the cloud. At Intel, we had a bit of a contrarian view. We thought much of the interesting compute was going to happen closer to where data was created. And we believed, at that time, that camera technology was going to be the driving force – that just the sheer amount of content that was created would be overwhelming to ship to the cloud – so we'd have to do compute at the edge. A few years later – that hypothesis is in action and we're seeing edge compute happen in a big way.

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Saul Hudson
Saul Hudson has a deep knowledge of creating brand voice identity, especially in understanding and targeting messages in cutting-edge technologies. He enjoys commissioning, editing, writing, and business development, in helping companies to build passionate audiences and accelerate their growth. Hudson has reported from more than 30 countries, from war zones to boardrooms to presidential palaces. He has led multinational, multi-lingual teams and managed operations for hundreds of journalists. Hudson is a Managing Partner at Angle42, a strategic communications consultancy.

Investors didn’t like Ubisoft and Activision’s earnings

Both stocks plunged on the companies' forecasts.

The outlook is good for console manufacturers, but not so much on the software side.

Image: Protocol

Big Tech companies weren't the only ones reporting earnings this week; some of the biggest players in the gaming industry were, too. And there was a sharp divide: While the outlook's good for console manufacturers, things are less peachy on the software side.

Sony and Microsoft both reported earlier in the week, and both companies' gaming divisions had pretty good quarters. While PS4 sales dropped, unsurprisingly, software and subscription revenue soared. And an optimistic outlook for the PS5 — Sony's hoping to sell 7.6 million by the end of March — and the subscription and software sales that should entail, led Sony to raise its full-year operating income forecast by 13%.

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Shakeel Hashim

Shakeel Hashim ( @shakeelhashim) is a growth manager at Protocol, based in London. He was previously an analyst at Finimize covering business and economics, and a digital journalist at News UK. His writing has appeared in The Economist and its book, Uncommon Knowledge.

Transforming 2021

Blockchain, QR codes and your phone: the race to build vaccine passports

Digital verification systems could give people the freedom to work and travel. Here's how they could actually happen.

One day, you might not need to carry that physical passport around, either.

Photo: CommonPass

There will come a time, hopefully in the near future, when you'll feel comfortable getting on a plane again. You might even stop at the lounge at the airport, head to the regional office when you land and maybe even see a concert that evening. This seemingly distant reality will depend upon vaccine rollouts continuing on schedule, an open-sourced digital verification system and, amazingly, the blockchain.

Several countries around the world have begun to prepare for what comes after vaccinations. Swaths of the population will be vaccinated before others, but that hasn't stopped industries decimated by the pandemic from pioneering ways to get some people back to work and play. One of the most promising efforts is the idea of a "vaccine passport," which would allow individuals to show proof that they've been vaccinated against COVID-19 in a way that could be verified by businesses to allow them to travel, work or relax in public without a great fear of spreading the virus.

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Mike Murphy

Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.

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