TheGamingEconomy’s Daily Digest brings you the prevalent business stories in gaming. In today’s news: Nvidia revenue climbs 41%; Sony wrestling with PlayStation 5 price-setting; and Google Activision Blizzard deal valued at USD$160m (£123m).
Nvidia revenue climbs 41%
Nvidia has published its financial results for the forth quarter and fiscal year 2020, with quarterly revenue rising by 41% year-on-year to reach USD$3.11bn (£2.39bn), with operating income for Q4 climbing by 237% to USD$990m (£761m). The increase has been attributed to strong adoption of its NVIDIA Accelerated Computing division, along with its RTX ray-tracing capabilities and AI unit. Despite the strong performance in the final quarter, revenue for the financial year in full fell by 7% to USD$10.92bn (£8.397bn), with operating income sliding by 25% to USD$2.85bn (£2.19bn).
In terms of the first quarter of the 2021 financial year, the ongoing outbreak of the COVID-19 strain of coronavirus has been forecast to have a significant effect on NVIDIA’s financials, with the Santa Clara, California-based firm reducing its revenue outlook by USD$100m (£76.9m), while it confirmed that it is still yet to close the proposed USD$6.9bn (£5.3bn) acquisition of chipmaker Mellanox Technologies from March last year.
At the time of writing, Nvidia Corporation (NASDAQ: NVDA) stock is performing well in pre-market trading, up 6.51% at USD$288.40 (£221.78).
Sony wrestling with PlayStation 5 price-setting
Sony is reportedly wrestling with the decision over price-setting for its upcoming PlayStation 5 console as a result of rising manufacturing costs, according to anonymous sources speaking to Bloomberg. Cost-per-unit for the device has reportedly risen to USD$450 (£346), driven by high competing demand for flash memory components from 5G smartphone manufacturers and increased cost of cooling system components, meaning the Tokyo-based conglomerate would have to affix a retail price of approximately USD$470 (£361) to maintain a similar gross margin to that of the PlayStation 4.
According to those familiar with the matter, Sony executives are torn between maintaining a profitable margin on the console, or selling it at a loss, depending on whether the rival Xbox Series X device from Microsoft launches at a lower retail price. Speaking to Bloomberg, Maquarie Capital analyst Damian Thong said, “Consumers will benchmark their expectations based on the PS4 Pro and PS4. If Sony prices above that, it would likely be to balance a need to offset higher materials cost, against risk to demand.”
Google Activision Blizzard deal valued at USD$160m (£123m)
The recently-signed partnership deal between Google and Activision Blizzard, which sees media rights from the developer-publisher’s properties move exclusively to YouTube, was reportedly valued at USD$160m (£123m) over three years, according to sources speaking to The Esports Observer. This would represent a marked increase (78%) from the USD$90m (£69m) reportedly paid by the previous rights-holder, Twitch, although this only conferred the rights to the Overwatch League (OWL) IP. Activision Blizzard is also set to benefit from a series of “significant” incentive clauses for advertising sales and viewership targets.
The deal also saw Google Cloud become the “preferred” provider of game hosting infrastructure for Activision Blizzard, which opens the possibility for the developer-publisher’s titles to feature on the Stadia cloud gaming platform. This element of the partnership has also been cited as potential reason behind the withdrawal of Activision Blizzard’s titles from the rival Nvidia GeForce NOW service, which took place earlier this week.
Speaking to The Esports Observer, Stuart Saw, SVP of esports at Endeavour, suggested the deal could have major ramifications in the potential battle between tech giants Google and Amazon in the gaming space. ““If you look across Google, YouTube, Cloud, Stadia, Ads — gaming is a big vertical for them. Externally, this is one of the first examples where Google’s cross-group strategy has been immediately obvious.” Saw said, “The right hand is complimenting the left. This is a big, headline acquisition and proof of concept for both Cloud and YouTube. They’ll both be looking to use this as a case study against Amazon’s AWS and Twitch across the market.”