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Nvidia Says Sales of Video Game Chips to Decline in Current Quarter Due to COVID-19

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By Reuters | Updated: 26 May 2022

Chip designer Nvidia forecast its sales of video game chips would decline in the current quarter, and startled some analysts by laying out new supply-chain issues resulting from China’s COVID-19 lockdowns.

Chief executive Jensen Huang told Reuters that Nvidia’s gaming business revenue will post a percentage drop in the mid-teens for the current quarter compared with the previous quarter.

“Overall the gaming market is slowing,” Huang said. Based on the softer market demand, Nvidia has chosen to reduce what it sells into the China market, he said. Nvidia is also taking a hit from Russia and sees “slower sell-through” in Europe, he said.

Nvidia shares fell 6.7 percent in extended trading, even though the company’s first-quarter revenues and earnings topped analyst estimates. The shares are down about 40 percent so far this year in tandem with a wider selloff in growth stocks over concerns of aggressive interest rate increases by the US Federal Reserve.

Concerns over inflation are spreading through the US economy, as consumers weigh purchases of items such as laptops and video game consoles.

Nvidia forecast second-quarter revenue of $8.10 billion (roughly Rs. 62,842 crore), plus or minus two percent. Analysts on average expected $8.45 billion (roughly Rs. 65,557 crore), according to IBES data from Refinitiv. The lower revenue forecast included an estimated reduction of about $500 million (roughly Rs. 3,879 crore) relating to Russia and the COVID lockdowns in China. Chief financial officer Colette Kress said the $500 million figure included about $400 million (roughly Rs. 3,103 crore) lost in gaming sales in China and Russia, and another $100 million lost in data center sales in Russia.

Kress told analysts on the earnings call that China’s COVID lockdowns, in addition to affecting logistics, were hitting consumer spending.

Dan Morgan, senior portfolio manager at Synovus Trust, said it was puzzling that a company that navigated the supply hurdles so well up to now suddenly hit a bump in the road.

Kinngai Chan, analyst at Summit Insights Group, said almost every tech company that has missed on outlook has blamed the Russia-Ukraine conflict and China’s COVID lockdowns. He expected Nvidia to face more downturns going forward.

One analyst was more optimistic.

“The pullback after hours is an overreaction to geopolitical events outside of the company’s control, not a weakening demand environment,” said Logan Purk, analyst at Edward Jones, noting the tumble in Nvidia’s share price.

Weaker prices for graphics chips and lower discretionary spending amid high inflation are likely to pressure Nvidia’s gaming business, according to experts.

A rout in the cryptocurrency market also hurt demand for its graphics processing units, which are favored by miners of cryptocurrency. Kress, the CFO, said in a statement on Wednesday that Nvidia had a 52 percent year-over-year decline in its “OEM and other revenue” category due to a drop in revenue from processors for cryptocurrency mining.

Still, demand from data center clients remained strong as more firms shift to the cloud and incorporate artificial intelligence in their operations. That and automotive sales will help offset the decline in gaming, said Kress. Data center revenue for the first quarter marked a record $3.75 billion (roughly Rs. 29,097 crore), up 83 percent year on year. Gaming revenue in the first quarter was also a record $3.62 billion (roughly Rs. 28,086 crore), up 31 percent year on year.

Revenue for the first quarter ended May 1 rose 46 percent to a record $8.29 billion (roughly Rs. 64,320 crore). Excluding items, the company earned $1.36 (roughly Rs. 105) per share, beating estimates of $1.29 (roughly Rs. 100).

© Thomson Reuters 2022

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Elon Musk’s Neuralink Faces US Federal Investigation, Internal Staff Backlash Over Animal Tests

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Sony previously said Microsoft's earlier offer to keep Call of Duty on PlayStation for three years after the current deal expires was inadequate.
By Reuters | Updated: 6 December 2022

Microsoft has offered Sony a 10-year contract to make each new Call of Duty release available on PlayStation the same day it comes to Xbox, according to an opinion piece in the Wall Street Journal on Monday from a Microsoft executive. Sony’s gaming chief Jim Ryan said in September that Microsoft’s earlier offer to keep the popular game series made by Activision Blizzard on PlayStation for three years after the current agreement expires was inadequate.

Xbox maker Microsoft’s latest offer to Sony comes as it faces increased regulatory scrutiny over its $69 billion (roughly Rs. 5,67,500 crore) buyout deal for Activision Blizzard.

The offer, made in January, has attracted regulatory headwinds in the European Union, Britain and in the US, with Sony criticising the deal and even calling for a regulatory veto.

Last month, EU regulators opened a full-scale investigation into Microsoft’s deal and warned about the impact of the deal. “The Commission’s preliminary investigation shows that the transaction may significantly reduce competition on the markets for the distribution of console and PC video games, including multigame subscription services and/or cloud game streaming services, and for PC operating systems,” the European Commission said in a statement at the time.

The deadline for the European Commission, which is investigating the deal, to set out a formal list of competition concerns known as a statement of objection is in January. Offering remedies before such a document is issued could shorten the regulatory process.

Reuters reported last month that Microsoft’s remedy would consist mainly of a 10-year licensing deal to PlayStation owner Sony.

The deal has been cleared unconditionally in Brazil, Saudi Arabia and Serbia.

“The main supposed potential anticompetitive risk Sony raises is that Microsoft would stop making Call of Duty available on the PlayStation. But that would be economically irrational,” Microsoft President Brad Smith said in the WSJ opinion piece.

Microsoft also said on Monday it was raising the prices of new Xbox games to $70 (roughly Rs. 5,000) from $60 (roughly Rs. 4,000) starting in 2023, according to a company spokesperson.

© Thomson Reuters 2022

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Government Tax Panel Said to Be Unlikely to Reach Consensus on Taxing Online Gaming in December

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A panel of state finance ministers has for weeks been deliberating how it should tax online gaming companies, but is yet to submit its report.
By Reuters | Updated: 5 December 2022

A panel of state finance ministers has yet to submit its report on taxation of the booming online gaming sector that is crucial to a final decision on how the levies should be imposed, a senior government official said on Monday.

The panel has for weeks been deliberating how it should tax online gaming companies — and whether federal tax should be imposed on only the profits of firms or on the value of the entire pool of money collected from participants.

The panel is unlikely to reach a consensus this month, the official told reporters in New Delhi.

Real-money online games have become hugely popular in the country, prompting foreign investors like Tiger Global and Sequoia Capital to back local gaming startups Dream11 and Mobile Premier League, popular for their fantasy cricket games.

Any decision on this in the upcoming meeting of the goods and services tax (GST) council on December 17 will be contingent on the availability of the report which has yet to be finalised, the official said.

The government is also separately working on federal regulations for the gaming sector that research firm Redseeer estimates will be worth $7 billion (roughly Rs. 57,000 crore) by 2026, dominated by real-money games.

Those planned regulations will apply to all real-money games after the prime minister’s office overruled a proposal to only regulate games of skill and leave out games of chance, Reuters reported on Sunday.

During the December 17 meeting of the GST council, the panel of federal and state finance chiefs will also discuss decriminalising the tax laws by way of raising the threshold for prosecution, the official added.

A separate government panel tasked with the rationalisation of GST rates is also discussing the 18 percent tax levied on health insurance, amid calls seeking a lower rate, said the official.

© Thomson Reuters 2022

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Gamers Who Spend Money on ‘Loot Boxes’ Twice as Likely to Gamble, Research Shows

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Loot boxes in games are designed to entice players and are often paid with real-world money.
By ANI | Updated: 5 December 2022

According to new research published today in the peer-reviewed journal Addiction Research & Theory, gamers who purchase ‘loot boxes’ are up to two times more inclined to bet. According to the findings based on more than 1,600 adults in Canada, they are also more likely to have a gambling problem than players who do not acquire these ‘virtual’ treasure chests.

According to the authors, the findings call into question the hypothesis that psychological factors cause the link between gambling and loot boxes, which are outlawed in several countries, like Belgium, and are being considered for legislation in many others around the world.

Their research shows that the link between these video game characteristics and gambling persists even after controlling for childhood neglect, depression, and other recognised risk factors for gambling.

The authors say their findings have potential implications for policymakers and for healthcare. They are calling for more research into the benefit of harm minimization features, with some online platforms having already implemented these – such as telling players the odds of winning when they buy a loot box.

“Findings indicate that loot box purchasing represents an important marker of risk for gambling and problem gambling among people who play video games,” says Sophie Coelho, a PhD student at York University, Toronto.

“The persistent associations we observed between loot box purchasing and gambling may provide preliminary support for the role of loot boxes as a ‘gateway’ to gambling and eventually problem gambling.

“Loot boxes may prime people to gamble and increase susceptibility to problem gambling.”

Loot boxes are designed to entice players and are often paid with real-world money. They contain a random array of virtual things like weapons or new characters and are mostly controlled, unlike online gambling.

There is already evidence of a correlation between treasure box purchases and gambling, as well as compulsive gambling. What is unknown is whether this occurs as a result of recognised psychological risk factors for gambling.

The authors examined the previous year’s loot box purchases among 1,189 students from five Canadian institutions and 499 individuals recruited from an online crowdsourcing platform and an online polling/survey site for this study.

All participants, aged 18 and above answered an online questionnaire on their video gaming and addictive behaviours, as well as their mental health and other issues.

The study considered more psychological risk variables for gambling than earlier research. These included emotional turmoil, impulsive behaviour when agitated, and negative childhood events such as abuse and neglect.

According to the findings, a comparable number (17 percent) of students and community members purchased loot boxes, with an average spend of $90.63 (roughly Rs. 7,500) and $240.94 (roughly Rs. 20,000), respectively. In both participation groups, the majority identified as male.

Over a quarter (28 percent) of students who purchased loot boxes reported gambling in the previous year, compared to 19 percent of non-purchasers. More than half (57 percent) of community adults who bought them gambled, as did 38 percent of non-purchasers.

Students who reported riskier loot box purchasing patterns (example, purchasing more loot boxes) were more likely to have a problem with gambling. This was not the case for community members, which the researchers attribute to limited sample size.

Adverse childhood experiences were consistently associated with an increased likelihood of past-year gambling and greater problem gambling among all psychological risk factors.

The authors say this may suggest that people with troubled upbringings have a heightened vulnerability to developing gambling problems. They add: “This may be compounded by engaging with gambling-like features embedded in video games, such as loot boxes.”

Although the scientific team did adjust “for a large range of transdiagnostic psychological variables”, they state, however, that one of the limitations of their study is that they did not account for every single psychological, sociodemographic, or gaming- or gambling-related confounder of associations between loot box purchasing and gambling – of which some “undoubtedly exist”.

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Government Said to Plan Regulation of All Real-Money Online Games, to Include Games of Skill and Chance

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The Prime Minister's Office is said to have overruled a proposal to only regulate games of skill and leave out games of chance.
By Reuters | Updated: 5 December 2022

India’s planned regulation of online gaming will apply to all real-money games after the prime minister’s office overruled a proposal to only regulate games of skill and leave out games of chance, according to a government document and three sources.

The much-awaited regulations are seen shaping the future of India’s gaming sector that research firm Redseeer estimates will be worth $7 billion (roughly Rs. 57,000 crore) by 2026, dominated by real-money games. Tiger Global and Sequoia Capital have in recent years backed Indian startups Dream11 and Mobile Premier League, popular for fantasy cricket.

An Indian panel tasked with drafting the regulation in August proposed a new body to decide whether a game involves skill or chance, and then let skill games be governed by planned federal rules that call for registration requirements, know-your-customer norms and a grievance redress mechanism.

Chance games — considered akin to gambling, which is mostly banned across India — were set to stay under the purview of individual state governments which would be free to regulate them, Reuters has previously reported.

But in an October 26 government meeting, an official from Prime Minister Narendra Modi’s office objected to such a differentiation, calling for expanded oversight on all types of games, according to the confidential minutes of the gathering reviewed by Reuters.

Differentiating games as skill or chance wasn’t easy due to lack of legal clarity and contrasting court decisions, the minutes quoted the official as saying, adding “online gaming may be considered as one activity/service with no distinction.”

Defining games has been contentious in India. India’s Supreme Court says the card game rummy and certain fantasy games are skill-based and legal, for example, while different state courts have held different views about games such as poker.

Modi’s office and the IT ministry, which is drafting the rules, did not respond to a request for comment.

Three people directly involved in the rule-making process, including two government officials in New Delhi, told Reuters the rules will give the federal administration broader oversight on all types of games while state governments remain empowered to impose outright bans on gambling, or games of chance.

The drafting of the new regulations comes amid growing concerns that the proliferation of such games, particularly among young people, had led to addiction and financial losses, with some reported cases of suicide.

One of the government sources said Modi’s administration continues to be concerned about the potential addiction of such platforms.

The government panel’s August report had recommended new rules should include so-called “de-addiction measures” such as periodic warnings and advisories and fixing deposit and withdrawal limits.

© Thomson Reuters 2022

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Microsoft Activision Deal: Firm Said to Offer EU Concessions Soon to Secure Early Clearance

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By Reuters | Updated: 29 November 2022

Microsoft is likely to offer remedies to EU antitrust regulators in the coming weeks to stave off formal objections to its $69 billion (roughly Rs. 56,350 crore) bid for Call of Duty maker Activision Blizzard, people familiar with the matter said.

The US software giant and Xbox maker announced the deal in January to help it compete better with leaders Tencent and Sony.

It has since then faced regulatory headwinds in the European Union, Britain and in the United States, with Sony criticising the deal and even calling for a regulatory veto.

The deadline for the European Commission, which is investigating the deal, to set out a formal list of competition concerns known as a statement of objection is in January. Offering remedies before such a document is issued could shorten the regulatory process.

“Ultimately, such a move could secure an early clearance with the European Commission and subsequently be used by the parties before other antitrust agencies,” said Stephane Dionnet, a partner at law firm McDermott Will & Emery.

“However, it remains to be seen whether the active complainants will validate such concessions (in particular in terms of scope) and if behavioural remedies will also be accepted by the CMA and the FTC,” he said, referring to the UK and US antitrust agencies.

Microsoft’s remedy would consist mainly of a 10-year licensing deal to PlayStation owner Sony, another person with direct knowledge said.

Activision shares were up 2 percent after the Reuters story was published.

The EU competition watchdog, which is scheduled to decide on the deal by April 11, and Sony declined to comment.

Microsoft said it was working with the Commission to address valid marketplace concerns.

“Sony, as the industry leader, says it is worried about Call of Duty, but we’ve said we are committed to making the same game available on the same day on both Xbox and PlayStation. We want people to have more access to games, not less,” a Microsoft spokesperson said.

The deal has been cleared unconditionally in Brazil, Saudi Arabia and Serbia.

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Microsoft Could Face FTC Antitrust Lawsuit to Block Activision Blizzard Takeover Bid: Report

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By Reuters | Updated: 24 November 2022

The US Federal Trade Commission (FTC) is likely to file an antitrust lawsuit to block Microsofts $69 billion (roughly Rs. 5,63,500 crore) takeover bid for video game publisher Activision Blizzard, Politico reported on Wednesday, citing people familiar with the matter. A lawsuit challenging the deal is not guaranteed, and the FTC’s four commissioners have yet to vote out a complaint or meet with lawyers for the companies, the report said, adding that the FTC staff reviewing the deal are skeptical of the companies’ arguments. The FTC did not immediately respond to requests for comment from Reuters.

“We are committed to continuing to work cooperatively with regulators around the globe to allow the transaction to proceed, but won’t hesitate to fight to defend the transaction if required,” an Activision Blizzard spokesperson said. Any suggestion that the transaction could lead to anticompetitive effects is “completely absurd,” the spokesperson added.

Shares of Activision fell about 2 percent in extended trading after closing 1% higher.

Microsoft, maker of the Xbox game console, announced in January the deal to buy Activision, the maker of Call of Duty and Candy Crush games, in the biggest gaming industry deal in history as global technology giants staked their claims to a virtual future.

Microsoft is betting on the acquisition to help it compete better with videogame leaders Tencent and Sony.

The deal is also facing scrutiny outside the US. The EU opened a full-scale investigation earlier this month. The EU competition enforcer said it would decide by March 23, 2023, whether to clear or block the deal.

Britain’s antitrust watchdog in September said it would launch a full-scale probe.

The acquisition could damage the industry if Microsoft refused to give rivals access to Activision’s best-selling games, Britain’s antitrust regulator has said.

The deal has drawn criticism from Sony, maker of the Playstation console, citing Microsoft’s control of games like Call of Duty.

“Sony, as the industry leader, says it is worried about Call of Duty, but we’ve said we are committed to making the same game available on the same day on both Xbox and PlayStation,” Microsoft President and Vice Chair Brad Smith has said.

A spokesperson for Microsoft said: “We are prepared to address the concerns of regulators, including the FTC, and Sony to ensure the deal closes with confidence. We’ll still trail Sony and Tencent in the market after the deal closes, and together Activision and Xbox will benefit gamers and developers and make the industry more competitive.”

© Thomson Reuters 2022

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