Roblox And Electronic Arts Are Struggling With Muted Player Spending

On Thursday, Roblox Corporation RBLX dialed back its growth forecasts after its first quarter report reflected a slowdown in player spending due to an uncertain economic outlook and persistently high inflation. Upon the report, the shares of the metaverse giant slid more than 20% in early trading and closed 22% lower on the day. Earlier this week, Electronic Arts Inc EA also provided a lackluster revenue forecast for the full year. 

Electronic Arts- miss and soft guidance.

Electronic Arts slightly missed revenue and earnings estimates with its latest quarterly results. With a revenue drop of 5.1% YoY, Electronic Arts posted sales of $1.78 billion. But while Electronic Arts reported a loss of $0.04 per share for last year’s comparable quarter, it now posted GAAP profit of $0.67 per share. All in all, there weren’t many positives in the latest quarterly results that Electronic Arts posted as besides having a tough quarter, the video game publisher also announced more challenges lie ahead.

Roblox also cut its forecast

The metaverse giant guided for full-year bookings in the range from $4 billion to $4.10 billion. It previously guided in the range between $4.14 billion and $4.28 billion. As for the current quarter, Roblox also guided for bookings ranging from $870 million to $900 million, attributing its conservative approach due to the fact that Easter happened earlier this year, and thus, its increase in engagement took place during the already reported quarter.

With their latest results, Electronic Arts and Roblox confirmed the hard truth, which is that the gaming industry is struggling with lower engagement. The growth rate of number of hours that users aged 13 and above spent on the platform was Roblox’s lowest in two years.

Roblox is toying with digital ads in attempt to diversify revenue.

Earlier this month, Roblox began displaying virtual billboards that featured content from Walmart WMT and others, while it continues to build infrastructure for the ad platform.  Brands are getting increasingly interested in Roblox, with the company ending 2023 with strongest brand engagements with more than  300 brand activations, including those from Nike Inc NKE, Lego, Ralph Lauren Corporation RL.

Undoubtedly, Roblox is in all the right places, including AI and XR, as it aims to empower every user to become a creator. But, it is also facing intense competition. One of its main rivals, Epic Games, is enabling creators to create experiences and publish them into Fortnite. Although Fortnite has a somewhat older player base, it is undoubtedly going after young gamers as well. Back in February, Epic Games unveiled it made a strategic partnership with Walt Disney Company DIS.  Together, Epic Games and Disney will work on creating an expansive gaming and entertainment universe that will be connected to Fortnite. Besides this ambitious multi-year project, Disney also committed to invest $1.5 billion to acquire an equity stake in Epic Games. By gaining the unique magic of Disney and its content for all ages, Epic Games brought the rivalry with Roblox to a whole new level and became a much bigger threat.

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