The next big games conference
Can a battered industry lead entertainment's future?
The SuperJoost Playlist is a weekly take on gaming, tech, and entertainment by business professor and author, Joost van Dreunen.
Earnings this week were a bit of a slaughter, with most of the major firms reporting so far showing double-digit declines.
It’s painful, yes, but also a necessary part of the overall industry’s transition. What worked well a few years ago, no longer does. Instead of expecting the games sector to buck the overall malaise and increased volatility, perhaps it makes more sense to look for firms with a clear plan on how to get through all this.
The general unwillingness among investors to stay with a stock the second it starts to decline tells you most don’t look much further than the next quarterly earnings. There’s, in fact, a strong case to be made for a longer-term thesis in which many incumbents will survive just fine. In the wake of the 2008 financial crisis, Nintendo’s shares dropped over 50% and EA lost two-thirds, trading for about $16.
Not Ubisoft, though. Ubisoft is cooked.
On to this week’s update.
BIG READ: The next big games conference
The Entertainment Software Association (ESA), the industry's most prominent advocate, is looking to reinvent itself.
This week, it announced a strategic pivot with iicon, a thought leadership summit aimed at connecting the games industry with other entertainment and media sectors. Scheduled to take place in Las Vegas, it marks a clear break from its now-defunct E3 trade show, which had been the industry’s marquee event for over two decades.
The ESA’s new event positions gaming within the broader entertainment industry. Earlier this week I spoke with ESA President Stanley Pierre-Louis, who told me:
"For decades, video games have been at the forefront of technological and cultural innovation. With iicon, we are creating a space for visionaries across industries to come together, connect and reimagine what's possible through interactive entertainment."
It aligns with the new strategic direction seen across major publishers and platforms. Game makers are deploying their intellectual property and franchises across a wider range of channels in response to the industry’s overall slowdown. Pierre-Louis points to success stories:
"...we've seen enormous success in the adaptation of video game intellectual property content into film and television, into streaming. And it's been exciting to see Last of Us, Fallout, the Super Mario Brothers movie."
E3’s demise reflects a changing landscape where events like Summer Game Fest and the Video Game Awards have emerged as the preferred showcases for trailers and announcements targeting consumers.
With the incoming Trump administration, the ESA’s to-do list has expanded, too. The threat of tariff increases is serious, especially during a period of anemic growth. And unlike Mexico and Canada, which managed to postpone import tax increases by ‘making a deal’ with President Trump directly, game-related imports from China are increasingly at risk. It deters investors and discourages publishers from taking creative risks, making games both more expensive and less innovative.
To that end, the ESA was quick to respond and released a statement earlier this week that reads:
“Video games are one of the most popular and beloved forms of entertainment for Americans of all ages. Tariffs on video game devices and related products would negatively impact hundreds of millions of Americans and would harm the industry’s significant contributions to the U.S. economy. We look forward to working with the Administration and Congress to find ways to sustain the economic growth supported by our sector.”
Challenges remain, however. The organization faces criticism for its selective advocacy, refusing to engage with workforce issues during industry-wide layoffs and unionization efforts. In 2024, the games industry shed about 14,500 jobs globally, many of them in the United States. When I ask him, Pierre-Louis is direct: "From ESA's perspective, we don't typically comment on workforce issues." This stance seems wanting, given the organization provides comprehensive data on how many people the industry employs and the significance of its contribution to the overall US economy.
Last year, the ESA also drew criticism for opposing preservationists' and historians' access to digital libraries, citing concerns about unauthorized free gaming without "appropriately tailored restrictions." To critics, it evidenced the ESA’s prioritization of IP holder interests. In part, this position reflects the organization’s financial transformation from 2018 to 2023, as membership dues grew to represent two-thirds (65%) of its $40 million annual income, while E3-related income disappeared completely.
Even so, the change in focus is encouraging. For one, the ESA’s financials have sobered under Pierre-Louis’ leadership. During his predecessor’s tenure, the Gallagher years, senior management compensation grew much faster than salaries for the remainder of the organization. Between 2007 and 2019, leadership compensation doubled, from $2.8 million to $5.7 million, and grew much faster than salaries for the rest of the staff.
Since Pierre-Louis’ appointment in 2019, the top salaries have remained at the same level, increasing only 2% by 2022, while other salaries show an increase. That is not a function of a revenue decline, however. The ESA's major sources of revenue have continued to perform well, even with the demise of E3, declining only slightly from $40.3 million in 2019 to $38.6 million in 2022.
To do its job well, the ESA needs an annual event.
"For decades, video games have been at the forefront of technological and cultural innovation," says Pierre-Louis. "With iicon, we are creating a space for visionaries across industries to come together."
The approach leverages gaming’s influence across entertainment, healthcare, education, and other sectors. It offers a vision of gaming that no longer plays defense and instead embraces its ambition as a source of innovation. Under Pierre-Louis, the ESA appears positioned to evolve beyond traditional industry advocacy to facilitate broader technological and cultural conversations.
I’m inclined to believe them.
Hosting a multidisciplinary event that positions gaming as equal to other forms of entertainment is a welcome new direction for an industry that has been subject to regulatory scrutiny for years. Perhaps its various stakeholders will also learn from industries like film and television, where union-based labor and historical research have long been standard practices.
The ESA's transformation reflects a broader maturation of the games industry itself. As gaming evolves from a siloed entertainment sector into a foundational technology driving innovation across multiple industries, its advocacy organization must similarly expand its scope. The organization's financial stability and Pierre-Louis' pragmatic leadership provide a promising foundation. But its long-term relevance will depend on its ability to balance member interests with the industry's growing responsibilities as a cultural force. The real test will be whether the ESA can help gaming embrace not just the opportunities, but also the obligations that come with its expanding influence.
MONEY, MONEY, NUMBERS
Roblox shares drop 18% on earnings release
Despite posting 21% y/y growth of net bookings, totaling $1.361 billion, falling just short of consensus estimates of $1.37 billion. Overall monthly unique payers grew 19% y/y to 18.9 million, and average bookings per monthly unique payer increased 1.4% to $23.97.
The main culprit was the decline in daily active users, which fell slightly to 85.3 million in the three months ended December 31, from 88.9 million in the prior quarter. Management pointed to last year’s launch on the PlayStation, contributing to a strong influx of new players, and now making for a tough year-over-year comparison. In addition, the platform’s suspension in Turkey, where it is banned over safety and child abuse concerns, weakened growth, according to CFO Michael Guthrie.
Based on the earnings call, it felt like management is growing weary of Wall Street. Guthrie pointed out
“we now have seven, at least for me, seven years into people pushing back on aging up, and we just continue to age up. So by my prediction will be in year eight. We continue to edge up... and done in 12 months from now, we'll have the exact same question.”
Investors nonetheless insist on remaining skittish as Roblox’s growth is slowing down. The deceleration suggests an apparent inflection point, especially concerning the firm’s path to profitability. The market's reaction reflects broader concerns about the sustainability of Roblox's growth-at-all-costs strategy in an environment where investors are increasingly focused on profitability metrics and operational efficiency.
After markets opened on Thursday, Roblox’s share price dropped from $75.47 to a low of $61.77.
Nintendo reports $2.9 billion in quarterly revenue
Falling below market expectations amid declining hardware and software sales, Nintendo finds itself at the bottom of the ninth for the current Switch platform. Hardware sales declined 26% year-over-year to $1.4 billion and software sales dropped 31% to $1.3 billion.
Nintendo’s mobile and IP-related income emerged as a notable bright spot, however, generating $124 million and exceeding expectations. Even so, operating profit showed a significant decline to $340 million, compared to $1.2 billion in the same period last year, reflecting the transitional state of Nintendo's product lifecycle.
Nintendo has adjusted its fiscal 2025 guidance, lowering its net sales forecast to $7.9 billion from $8.5 billion, and revising its net income projection to $1.8 billion from $2 billion. The adjustment accounts for shifting consumer behavior as the market anticipates the launch of the Switch 2, announced in January for release later in calendar 2025.
The financial results illustrate the complexities of managing a mature console platform while preparing for next-generation hardware. The decline in current Switch hardware and software sales suggests a classic case of the Osborne effect, where consumers defer purchases in anticipation of upcoming new technology. Despite near-term pressure on financial metrics, Nintendo’s strategic positioning remains strong as it navigates this critical transition period, supported by a robust balance sheet and diversified revenue streams across hardware, software, and mobile gaming segments.
Electronic Arts comes in low with $2.2 billion
EA experienced significant headwinds in its fiscal Q3 2025 performance, resulting in net bookings of $2.215 billion, substantially below earlier projections of $2.475 billion. It represents a concerning inflection point for EA's core business model, particularly in its Live Services segment.
The shortfall primarily stems from two key areas. First, EA Sports FC, the company’s flagship football franchise, saw its Ultimate Team feature decline by approximately 15% year-over-year. This is particularly notable given that Ultimate Team historically generates roughly $2 billion in annual revenue and has been a consistent growth driver for over a decade. Second, Dragon Age: The Veilguard wildly underperformed expectations, reaching only 1.5 million players versus an anticipated 3 million. I’m not sure that’s even a real metric, ‘reaching players.’
Analysts pointed to EA Sports FC’s new “Rush” 5v5 game mode (Did someone say Helldivers? Who said that?) which may have created an unexpected challenge by being “almost too successful” in terms of player engagement. The new format represents a significant departure from traditional 11v11 gameplay, offering faster-paced matches and enhanced social features that allow multiple friends to play together online.
The mode’s integration across multiple parts of the FC ecosystem—including Ultimate Team, Club, Pro, and Kick-Off modes—illustrates EA’s ambition to innovate within its flagship franchise. According to management commentary from the October earnings call, Rush quickly became the preferred way to play for over half of veteran players, with matches played with friends more than doubling year-over-year.
Even so, the success appears to have created unintended consequences for EA's monetization model. The fundamental challenge stems from how Rush's 5v5 format interacts with Ultimate Team's established economic ecosystem. The shorter format requires different squad-building approaches compared to traditional 11v11 matches, potentially disrupting the carefully balanced “meta” that drives Ultimate Team's player card marketplace and monetary transactions.
This dynamic likely explains the seemingly paradoxical situation where increased engagement led to decreased monetization. While players embraced Rush’s social and gameplay innovations, the mode may have diverted attention and spending away from traditional Ultimate Team activities that historically drove revenue. The complexity of Ultimate Team’s economy—built over years of careful iteration by EA’s live operations team—means that even popular new features can have unexpected ripple effects on player behavior and spending patterns.
In response, EA has reduced its Live Services revenue guidance by approximately $540 million compared to projections made in October 2024. The timing of this performance decline is especially challenging given the competitive landscape ahead, with major releases like Grand Theft Auto VI on the horizon and Nintendo's next-generation console launch expected in 2025.
In the period to come, EA faces the complex challenge of reinvigorating its core Ultimate Team monetization model while simultaneously evolving its broader portfolio strategy. The company maintained its full-year bookings guidance range of $7.0-7.15 billion, suggesting some confidence in its ability to navigate near-term headwinds despite the significant quarterly miss.
Brookhaven acquisition signals next phase
Voldex's acquisition of Brookhaven, boasting 60 billion visits and 120 million monthly active players, is a pivotal moment in gaming's evolution from user-generated content to a sophisticated entertainment ecosystem. For one, it positions Voldex as Roblox's largest developer with 145 million monthly active users and reflects broader industry transformations in monetization and brand engagement.
The deal, backed by significant equity financing led by Raine Partners with participation from notable investors including Makers Fund [Disclaimer: I’m an advisor.] and QIA, represents a pivotal moment in Roblox's ecosystem consolidation. Voldex, which transitioned from Minecraft server development in 2015 to Roblox game development in 2018, has established a pattern of successfully scaling acquired properties through its proprietary live operations platform and analytics infrastructure.
The acquisition seems timely, especially considering a statement from Roblox’s CEO, Dave Baszucki, on the firm’s earnings call:
"Over the next four or five years as we move to 10% of the gaming content space running through our platform... we want to move as much money as we can through to the developer community."
PLAY/PASS
Play. This cheeky ad for Hay Day features Gordon Ramsey. I love it when angry British people are nice.
Pass. Netflix has decided to abandon six titles previously slated for release as it learns more about what its members like.
UP NEXT
I’m waiting for Hasbro’s earnings before discussing Mattel’s to see what everyone’s plans are to tackle all this bluster around tariffs.