Is Gaming’s COVID-Era Boom Sustainable? Take-Two and Microsoft Execs Weigh In (Video)

TheGrill 2021: Strauss Zelnick and Phil Spencer also get candid about the lack of diversity in the industry

The pandemic was a boon to many retail businesses. This was especially true for the gaming sector, an industry that saw accelerated growth that led to some of its highest gains in history.

For Strauss Zelnick, CEO and chairman of Take-Two Interactive, the boost to business during the pandemic will continue as gamers grow up. Zelnick shared his insights with TheWrap’s CEO and founder Sharon Waxman during TheGrill 2021. Phil Spencer, head of Xbox and executive vice president of gaming at Microsoft, was also part of the spotlight conversation.

According to Zelnick, the average gamer’s age is 37 or 38, and “our cohort continues to grow. As people turn a year older, they don’t stop playing games.”

Gaming became another major outlet for social interaction as lockdowns and isolation were enforced throughout the global pandemic. “We saw that strength accelerate, but not accelerate from a baseline of zero,” said Spencer. “Three billion people on the planet play video games today.”

In 2018, the global gaming market was $115 billion and grew to $131 billion in 2020. This year it is expected to surpass $138 billion. This exponential growth has been one of the biggest windfalls in the history of gaming. Take-Two Interactive saw its revenue hit $3.4 billion last year and is continuing to see strong growth in 2021. For Microsoft, last quarter’s gaming revenue rose by $357 million, a 11% increase year over year to $3.7 billion.

Similar to Zelnick, Microsoft sees this growth as predating COVID. Gaming has been on the rise even leading up to this. Spencer pointed to titles such as “Grand Theft Auto” and “Minecraft” that have had longevity in the market despite being released many years ago. 

When the pandemic hit, Zelnick was concerned that the entertainment market would suffer from the consumer recession or depression. But much like streaming media taking off, interactive entertainment went up especially because of the social element. Video games have been a place for digital connections, for old friends and new.

“We were just so well suited to a pandemic where people felt lonely, and they were alone,” Zelnick told TheWrap.

One of the challenges that did come up for gaming companies was the consoles rapidly selling out at the start of the pandemic. Microsoft was gearing up to the release of the next generation console, but Xbox demand continued to soar even with the next console coming out. Their jobs became about managing the supply chain and logistics aspects as the pandemic put a halt to many operations worldwide.

“We’ve proven … they still value these dedicated consoles,” Zelnick said.

Another challenge ahead, though not unique to gaming, is diversity in the business. Asked how they would grade the diversity and inclusion efforts in the industry, both leaders said they would give it a bad grade: There is much more to be done, especially in an industry dominated by older white males. There isn’t enough ethnic diversity, Zelnick admitted. Take-Two has made it a priority for years, because greater diversity is consistent with “making great entertainment.”

“It’s a poor grade,” Spencer agreed. “A ‘C’ might be generous.”

Watch an excerpt from the panel above and the full conversation here.

For over a decade, TheWrap’s Grill event series has led the conversation on the convergence between entertainment, media and technology, bringing together newsmakers to debate the challenges and opportunities facing content in the digital age. Tailored to C-Suite and high-level attendees, TheGrill presented by WrapPRO, delivers a unique series of curated discussions, industry panels and virtual networking activations that explore the ever-changing media landscape. View the full panel and all Grill content here: