Does the global gaming industry need to hit the reset button? Sometimes you have to restructure a business when it's not doing well, and that was true with our Xbox business. Consumers are making decisions, and so gaming has struggled across the board. It's World Business Report from the BBC World Service. I'm Will Bain, and today we've assembled a panel of industry experts to look at why one of global business's greatest success stories is under so much pressure. and how the gaming industry escapes that squeeze. And we'll also be looking at how fast fashion's biggest name seems to have finally found a home to sell its shares. Yeah, all that to come here over the next half hour on World Business Report. But we're going to start today with a frankly terrifying story in the world of aviation. A 61-year-old Serbian national is recovering in a Greek hospital from friction burns after almost being sucked headfirst out of a plane window thousands of feet in the air. Passengers have told local media the man was left hanging out the window as far as his shoulders before other passengers managed to pull him back inside. Those on board the flight from the Greek city of Thessaloniki to Germany's Memmingham have also said the window was smashed to pieces by parts of the jet's engine, although the airline, the Irish carrier Ryanair, has not commented on this so far. An investigation has been launched by multiple agencies. Well, for more on what that investigation might be studying, we spoke to Scott Hamilton, Managing Director of the Aviation Consultants. Liam, he's got four decades in the aviation trade. He spoke to us from Chicago. This sort of thing is extremely rare. It does happen, but it is very rare. And what we know, at least up to this point, what we think we know is that there was an uncontained engine failure. And a fan blade from that rotating disc at the front of the engine, separated from the engine, went through the nacelle. That's why it's called an uncontained engine failure. And some debris of some kind apparently went and hit the window of the Ryanair 737, shattered the window, and this gentleman was partially sucked out. How lucky is this gentleman, Scott? Extremely lucky on two counts, really. One, this debris could have gone into the fuselage and hit him, and who knows what the outcome would have been at that point. The second is that this happened at a low altitude. The airplane was on climb out from the airport, and the information that I read was that it happened at around 13,000 feet. There was a similar incident a number of years ago with Southwest Airlines in the United States at cruising altitude, 36,000 feet or something like that. And that lady was partially sucked out to her waist. And of course, at 36,000 feet, you just don't have any air to breathe. She died. This gentleman had injuries. I don't know how serious they were, but obviously he was taken to the hospital to be checked out. So there's two examples, Scott. As you say, obviously pretty rare given the number of flights around the world. But how concerning, I guess, for major airlines everywhere that this could be a potential vulnerability, given what you were saying, if it is indeed a part of the engine fan. So what is it that could potentially be done? And will it be something that the major airlines will now be looking at around the world? Yeah, after the Southwest Airlines incident, the Federal Aviation Administration issued an airworthiness directive requiring fixes. And I'm not familiar with the details of it because that happened so long ago now. And it gave the airlines until 2028 to do whatever the AD required. And in this industry, other regulators, in this case the European regulator EASA, routinely adopts those kinds of ADs that the FAA issues. Part of the investigation will reveal just what the AD compliance that the EASA required of European airlines. but that'll all be part of the investigation. We should say as well, it sounds like the passenger was wearing his seatbelt. Would that have mattered? Yeah, if he hadn't had his seatbelt on, he could have been entirely sucked out of the airplane. But of course, at 13,000 feet, when you're still climbing out of a takeoff, passengers, of course, typically have their seatbelt on for a much longer time, typically until they get to cruising altitude. And so, you know, you've worked in the industry and with the industry for such a long time, And, Scott, are there things you think people will be taking away already from this latest event? Well, part of the investigation, as it did with Southwest and other uncontained engine failures, the investigators will probe the maintenance records of the engine. If there was any what's called a boroscope issue, maybe the boroscope didn't see something, they'll look to see whether or not there was metal fatigue. And what's the boroscope? This is an interesting analogy. It's like when you get a colonoscopy. They shove a camera up your rear end. They shove a camera down the front of the airplane engine and look around. They'll be looking to determine whether or not there's metal fatigue of the blade. They'll look to determine whether or not there might have been unidentified pre-existing damage. That's what the investigation of the maintenance records and the boroscopes will look at. And this investigation might take a year, year and a half. Scott Hamilton there, the founder of the aviation consultancy, Liam. and, of course, potentially stock market implications for a whole bunch of the companies involved in that story. Ryanair stock market listed Boeing, the maker of the plane. Of course, some of Ryanair's suppliers. We think this might have been a subsidiary that was flying this. So a story I'm sure we'll be tracking here on the programme over the next couple of weeks as well. Let's turn to other stock market stories now, though. And Chris Lowe of FHM Financial, as always, on a Friday, back with us here on World Business Report from New York. Chris, great to have you back on the programme. Good to be here, Will. The talk of Wall Street Friday, a South Korean firm, a chipmaker. Right. This is SK Hynix, which was up in their debut trading day, 13.5 percent. One of the biggest contributions to a modest rise in the broad markets, up about half a percent. But you know a heck of a story and a big IPO the biggest ever by a South Korean listing on the New York Exchange And of course right in the middle of the data center AI build story because they are a chip maker Yeah, and tells us that, you know, whatever the concerns might be, and you've picked on two of them, right? One about the amount of kind of sort of spending and debt going into AI full stop, but also the kind of public backlash around data centers not yet having an impact on the stock market. Yeah, no, that's right. And I think it's really, you know, it's interesting because we came in on Monday this week. Stocks were down and they were down partly because of the ceasefire falling apart in the Gulf, but also because, again, investors having second thoughts about AI. But, you know, we're starting to get earnings. We're starting to get guidance. and in this particular case this company saying they expect the shortage of chips is going to linger well into the next decade so past 2030 if that's the case this company should do very well well let's uh as people say put a pin in that because chip shortages is something we're going to come to around the troubles in the gaming industry just one of the sort of things in the mix there as well. You talked about an IPO there, Chris, initial public offering. Shein, the fast fashion firm. Lots of our listeners will know, I'm sure. And if they don't, I'm sure their kids do. It's been hunting around for somewhere to have one of these IPOs, somewhere to list its shares. Looked at London, looked at New York. Geopolitics has kind of intervened, sounds like, from wide reporting. Now, it is going to finally list those back at home. Hong Kong. Yeah, that's right. But by listing in Hong Kong, that does give them access to international investment, which really is critical for a company that, after all, does so much business outside of its home country. this and Timu together are probably China's, among China's biggest exporters at the moment. The difference being rather than exporting in container loads to retailers here, they're selling directly to consumers. And a story that I think had Wall Street not been closed up, Chris, would have been this Apple OpenAI one that we heard Sue talking about in the news. Apple claiming that ChatGPT maker OpenAI has used former and current Apple employees to steal hardware designs as the startup prepares to launch its own AI-focused devices. We shall see what the impact of that is on both Apple's share price and what people's sentiment is around OpenAI when trading kicks off again next week, won't we, on Monday? You're listening to World Business Report on the BBC World Service. now a little bit earlier this week long simmering tensions in the gaming industry seemed to bubble over as microsoft announced it was making significant layoffs with its xbox gaming division seeming to bear a large brunt of those job cuts more than 1600 roles immediately axed at xbox with potentially more to come this is what brad smith the president of microsoft told the bbc a little earlier this week about that decision? Sometimes you have to restructure a business when it's not doing well. And that was true with our Xbox business. So we're restructuring it. We all need to adapt and we are adapting to remain successful. What I'm more enthusiastic about is the 4,000 people in the last year who we retrained and moved from one job that we didn't need to a new job that we did. And I think that's got to be the ultimate measure. Brad Smith, the Microsoft president, essentially telling our technology editor Zoe Kleinman there that this was a temporary rejigging of staff, essentially in the Xbox division, to his mind at least, to make Microsoft better equipped for the future. But Peter Moore, former senior exec at Xbox, told us here on World Business Report, he thought the problems ran deeper. Certainly when I were there, it was a simpler time. It was sell a lot of hardware, but the industry's changed enormously. and hardware is expensive. What you're seeing right now with the cost of chips and the hardware price increases does not bode well for selling more boxes. You know, I've said this for a few years now, if Microsoft could get out of the hardware business, they absolutely would. On top of that, inflationary pressures. Is gaming a necessity or a luxury? Well, it's probably a luxury. And so consumers are making decisions. And so gaming has struggled across the board. And Peter Moore also worked for two of the biggest games makers across his career too, Sega and more than a decade at EA. He went on to tell Liana Byrne about the impact, a spike in the price of high-powered AI chips, as Chris was mentioning as well, was having on the sector, something Sajiro Takashita, Professor of Management and Information at the University of Shizuoka in Japan, told us more about on this week's Taking Stock on Business Daily. The shortage of semiconductor is not only for gaming, it's overall industry. I think we have to look into areas like encryption, which I think will need a massive increase in, you know memories at all there will be continuous i think imbalance of supply and demand that will continue from here on and from that point of view i think the trend unfortunately will be continued so there you go there's just a few of the challenges sketched out by some different uh viewpoints there we've pulled together our own panel to try and break this down in a bit more detail for you here this friday and world business report games designer and journalist ollie barda is joining us live from tokyo chloe kelly is with us chloe is from disc traders gaming store in lansing in michigan dana ware is the founder and chief exec of hidden realities games developer also chairs the international game developers association's women in games group and of course chris still was chief economist at fhm financial in new york as well welcome everybody thanks so much for doing this on a on a friday or even a saturday for you ollie as well at this point too dana do you want to just kick us off first of all when that xbox announcement came out earlier in the week. Been lots of chip-chip-away layoff announcements, haven't there, across the industry in the past few years. What did it do to the mood? What was your kind of initial reaction when you heard that from Microsoft and Xbox earlier in the week? Hi, yeah, thank you for having me. Obviously, it was very devastating for us as a community to hear some of the changes that they're making. But it's not just with Xbox and Microsoft layoffs. We seeing a lot of different studios cut back on employees and different initiatives And those initiatives sometimes have brought diverse voices to the community of game making and game development And that for us is really the part that we as women in games focus in on globally wanting to have representation within the industry. Oli we'll come to that and the representation and what it does to creativity too with with all of you guys in a moment but I think you your piece on Forbes online was a really good kind of diagnosis of of how we kind of got to this week so do you want to kind of in brief form kind of sort of sketch that out for us. Yeah, sure. So I've been writing about this since 2015. And the developer layoffs that we've been seeing since 2022 are actually to do with very large, basically game development bets that were made over a very long period of time. And the money layer, which finances a lot of the publishing investment, is basically wanting its money back. And so since 2022, we've seen like 48,000 layoffs across multiple developers. What we're seeing at Microsoft and Sony are two very different things. And if anything, I think they're using the developer layoffs as cover. In terms of what Microsoft is doing is their initial plan was they wanted to create a black box for the living room, which was instigated by the PlayStation 2. That hasn't panned out because the black box is actually the tablet that we all use. And so they've been trying to exit the gaming business, which is only sort of proven by your quote from one of the Xbox people explaining, you know, we want to move to digital. um the sony situation is also again using it for cover because basically they've invested heavily in live service games because they want to make their own fortnight and that hasn't panned out either and the physical scaling back is also part of that the ai chip situation um is purely affecting hardware which is the costs basically so that's a separate issue completely different from all these layoffs got you really interesting um chloe what's it doing in terms of demand and and what you're kind of seeing i suppose in your stores yeah i think people are just kind of on the other end of it a lot of people don't really know aren't really dialed into what's happening in the industry they're just kind of you know going along getting new games and stuff and are just kind of realizing that the consoles are getting more expensive the games to that point to the one that ollie was making are people been flagging that to you in store you know that that it feels like the sort of bills coming perhaps on the on the big games but then also as ollie's kind of saying that that perhaps they're finding it harder to find physical games in stores like yours or titles that they thought they might want to but they're sort of trying to be driven to to buy ever more kind of downloadable purchases or whatever or add-ons oh yeah i mean it always hurts when a new game is out and we just never see a copy and people come in and we just kind of have to say well you know maybe check the playstation store you know what i mean ollie so in that sense has the industry in part done a bit of this to itself from what you're saying then as well yeah i mean definitely with the physical situation i think what's driving that is basically greed um they're trying to treat everything as a digital download because if you do that um you kind of cut out the retail side and you kind of monopolize the the flow of cash um but in terms of the actual ai as in the price is increasing that's games has kind of stayed mostly stable uh it's the hardware that's kind of gone a bit bananas and that's because ai data centers need enormous amounts of ram and gpus and that's basically the stuff that games consoles used to make yeah you know games run ironically nvidia right started out live you know its main customers in the gaming industry and now its main customer is the ai industry yeah i mean from a game development perspective most of what we're dealing with ai now is actually been stuff that's been in the games industry for over a decade so it's kind of weird watching the ai industry sort of explode like this when it's off the back of all the innovation and sort of development that the industry has done for them effectively. Chris, we're old friends. You've helped us out here on World Business Report for as long as I've been on this program, which is more than 10 years at this point. So I'm not trying to put you in the straw man position here of trying to defend big tech. But the rationale, right, as someone who watches all these companies on the stock market, presumably from the Microsoft perspective, right, is that they're losing ground to Anthropic, to Google, and they've got to put enormous amounts of financial firepower somewhere and find it from somewhat. That's exactly right. And I think a really beautiful illustration of that when the Federal Reserve this week announced who will sit on its various new task forces. One of the three running the task force on productivity and jobs is Aisha Sharma, who is the president of the Xbox division of Microsoft. You know, she is picked for that role because she is an expert at finding ways of squeezing productivity from smaller numbers of employees. And I think, you know, that's sort of the overarching theme of this whole conversation is that, you know, it's a very competitive industry, costs are going up. And these companies are so focused on trying to find a way to control those costs. Dana, for our listeners who are big gamers, then what does it mean? What does it mean for a company like you that squeeze that pressure that all of you guys have kind of laid out so far? What does it mean for creativity for cost, etc? It really becomes problematic, honestly, for us, because we do need funding, we do need support, We do need opportunities to be able to use this form of this is an art form for us, right? We tell stories, we have perspectives and we use games as a way to connect with each other and to build community and to feel seen and feel heard and feel and feel represented. And when we feel as though we losing those opportunities and we not finding the support that we need through the big studios And it really does force us to start to look for other ways to sustain our ecosystem What are some of those? I mean, what we're hoping for is starting to look at some of the models that we see outside of the United States, which there's lots of governments who are subsidizing, who are funding, who are giving tax breaks. to various studios all around the world. And we really hope that we can start to see something like that here in the U.S. as well, that we can see it either become something, whether it's a private institution or it's a governmental institution that decides to really acknowledge the fact that games are part of our cultural phenomenon. They are part of our identity as game makers and as game players. this is an art form that we need to support and we are to your point that was made earlier we are part of that innovation process some of these agentic workflows that we see like they have come from off the backs of a lot of the innovation that's come out of the games industry and so if we start to dismantle and lose those opportunities to create and explore and build things that resonate with people, we're going to lose innovation. Chloe, we've seen a little bit of it, haven't we? Pockets of it across the industry. As Dana says, I'm thinking in particular, I was kind of reading today about what the guys on one of the really big hit games, if people are not big gamers listening among us, had done in trying to sort of find a fund, I guess, to help fund kind of startup and innovative studios and new gaming development. Is that an answer here or can it only be part of the answer? You know, the industry doing, trying to find ways to sort of fund itself, trying to help each other. Yeah, I mean, it's tough. I think, I mean, it's a tough sell for people. I mean, people don't want to feel like the industry needs a lifeline in order to just do the thing that people think it's supposed to do in the first place. Right, give joy. Exactly. And I think that there's kind of, I think there's a disconnect between what these big game studios think the consumers want and what they actually want because i don't often see people gravitating towards new live service type games uh i see people you know interested in games that they can complete in like a week or a weekend you know it's not interesting so that some of those trends are changing from the kind of massive because part of the thing as well and ollie jump in on this after as well but isn't some of this the games have got bigger and bigger and bigger haven't they over our all of our lifetimes and the triple a which is sort of the top tier of them now i mean they look like films open world all that kind of stuff you're saying that you're seeing a little bit of a trend perhaps away from that anyway in customers chloe yeah i mean people find their live service game i mean let's be honest for most people it's just fortnite and they just play that And then they try and find other smaller stuff to do on the side. I don't think that it's sustainable or really realistic to expect that people are going to jump from game to game like that. And that certainly doesn't line up with what I see every day at our store. Ollie, what are some of the ways out of this then from the industry? Again, you kind of sketched some of this out in your article. But I did see, when I'm just looking at another article here online, PC Game, where they've sort of pulled a load of people from the industry's kind of LinkedIn and tweets and Blue Sky thoughts. I mean, there doesn't seem to be a consensus about even how to sort of get this back on the rails again. So the interesting thing here is that most people don't have visibility on all aspects of the industry. So I come from publishing. I've worked in development. And the thing that's actually kind of driving a lot of this is, as they mentioned, games like Fortnite being a huge success in terms of live service. So a lot of the money layer is after that money. So they want those kinds of games, even though most gamers are already playing Fortnite and they only have enough room for one thing. I think the solution, if there is one, is quite simply to stop spending quite so much money on big games because we know that there is a huge demand for games. So it's not actually a crash in the sense that demand has disappeared and nobody wants games anymore. It's completely the opposite. what we're having problems with is the fact that publishers are overspending on big games and everybody else is taking the fall for that um and that is the problem so we need to spend less on games stop chasing live service games because you can only have so many of those in the marketplace and actually start giving gamers what they actually want chris quick thought on what you're seeing about where that direction is what anything you'd add on what ollie's saying Yeah, no, I think that's right. You know, because really what you're looking for is a couple of things from a consumer perspective. You know, one, they're looking at something that maybe doesn't cost quite as much because with inflation, consumers are very careful about how they spend their money. and two people are so busy now yeah that something that can be played quickly you can lose yourself in for a weekend and then re-emerge to life uh that's got quite a lot of appeal yeah to what globe is saying dana round us out here then what's the ways out as you see it in the 30 seconds or so we've got left um i think it's gonna be us building communities really leaning on each other to find solutions. Yeah. Well, good luck with it. Thank you all for being with us and giving up, Oli, in your case, the beginning of your weekend, the rest of you, the start of your weekend. Really appreciated all your time. Chloe Kelly, disc traders in Lansing, Michigan there. Game designer and journalist Oli Bader joining us from Tokyo in Japan. Dana Ware, who you heard last there, the chief executive of Hidden Realities. And Dana, also the chair of the International Game Developers Association's Women's Group. And Chris Lowe of FHN Financial. Thanks so much for listening to World Business Report. you
