MediaTalk | Season 4 | Ep. 27 - From Fortnite to Smart Frames: Gaming Growth, Hardware Inflation and AR Innovation

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Mike Reynolds: Hi, I'm Mike Reynolds, a senior reporter covering the media industry with the S&P Global Market Intelligence tech, media and telecom news team. Welcome to "MediaTalk," a podcast hosted by S&P Global Market Intelligence, where the news and research staff explore issues in the ever-changing media landscape. Today, "MediaTalk" is lucky to have S&P Global Market Intelligence Kagan analyst, Neil Barbour, as a returning guest. Neil is part of the consumer tech team, keeping eyes on connected devices, streaming operating systems, and video games. He also leads Data and Dimensions, a podcast dedicated to exploring the transformative evolution of the internet into immersive virtual spaces. Neil, how are you doing today?

Neil Barbour: Thanks, Mike. Great to be back.

Reynolds: All right. Today we're going to tap into Neil's coverage of video game world, but we're also going to ask him to play movie critic of sorts, and then discuss his role as a model of smart glasses. That I'm looking forward to. Anyway... Neil, are you ready?

Barbour: Yeah, let's ride, Mike.

Reynolds: All right. As you look at the landscape here what kind of caught your eye? Tencent, I guess, is the leading player, and continues to be so.

Barbour: I talked about this a few months back on my podcast with Matthew Ball, who was tapped to be Microsoft's Chief Strategy Officer. But the idea here is that there are really two consistent drivers of revenue in the gaming space over the past 18 months, and that was true into the first quarter as well. One of which was Roblox, and we'll get to that a little later but the other is these Chinese mega publishers, and Tencent is the king here. A few years ago they were boxed in by slowing revenue in the mobile space, which maybe was downstream of some domestic regulatory overhang. So they diversified and stood up some new projects to appeal to PC players, maybe tap into some international trends. Now mobile has resumed growth, and those expansion projects are ramping at the same time. So they've got a few really good things going right now and you can see that at the top line.

Reynolds: Okay. I don't know much about this company, NetEase, Neil. They had a good quarter as well.

Barbour: Yeah, same story. Another Chinese mega publisher, they saw their domestic portfolio was in a little trouble a few years back, and they made a big effort to get into other markets. Some of these names will pop off the page. Marvel Rivals, it's a hero shooter involving all your favorite comic book characters, or all your favorite comic book characters in the Marvel Universe anyway. They found a solid base on PC and on console. They just put out a game called Where Winds Meet at the end of last year that has... It's a free-to-play open world combat thing. Looks pretty cool. So all those projects are doing really well. Just like Tencent, some of their legacy projects also started to ramp again at the end of last year and into Q1 this year, so they have a couple things to grow on. But the one thing I would watch out for here is that some of these new games from these big publishers they're going to be lapped pretty soon, so their first year or their first 18 months their first cycles will be over, so maybe some of that growth burns off. That said, APAC publishers have gotten really good at maximizing live service games, those kind of games that go on forever. Maybe you don't pay up front, but you're constantly feeding them a slow drip of content as they put in new costumes that go with the holidays or new characters from popular intellectual properties from movies or TVs that are getting really hot in that specific market. They just have a really good sense of dialing into what people want, and they've been able to pull out the length of some of these games, like 10, 12 years. So it's hard to tell when some of these games will stop growing.

Reynolds: Good on them. Now, you'd mentioned Roblox a little while ago. It seemed like it's a very good quarter.

Barbour: Yeah, so two things to keep in mind about Roblox. One you're absolutely right. The growth rate is tremendous. I think you could stretch back to them going public. They've grown year over year and in many cases quarter over quarter on a pretty consistent streak. But two things to keep in mind, as I said. One is that the content community really delivered in 2025, and that was one of their strongest growth years. It just had pandemic level engagement patterns. But that was largely due to this great string of content. Grow a Garden, Steal of Brain Rot... 99 Nights of the Forest. Yeah, if you've got kids, you know these names. Just a generational run of hits. We've been monitoring usage and the top growing experiences in 2026 so far, nothing's even touching those games. And so without those buzzy, memetic pieces of content, it's going to be really tough to keep up that growth cadence. The second thing is that they're responding to a lot of pressure from parents and regulators to keep their kids safe on that platform. So now when you go to trying to sign up or you try to get into chat or something like that, they're going to try to check your age, and that adds this new level of friction that wasn't there before. Anyone in user acquisition will tell you that you want as few barriers as possible in that process. And in the name of safety, it makes a lot of sense but I think you can see some of that friction showing up in their user growth story.

Reynolds: Interesting. Interesting. Nintendo's also had a positive quarter, right?

Barbour: Yeah, so when we were looking at the Switch 2 when it released in the summer of last year, this really strong hardware sales story emerged. In fact, it's the strongest growing console of the connected console era, which we start with the Xbox 360. So the weird thing was it didn't look like a lot of people were buying software at the same time. But now a year on, they have more games in the market, some are catching players' imagination a little better. So game sales are catching up, and you can see them in lockstep. The hardware's selling well, the software's selling well. Everything's moving in the right direction. Maybe that's no big surprise. We've heard from these console guys that it can take a few months after the hardware sale to turn that purchaser into a really engaged, active user. What's interesting is that they're ramping without an obvious breakout hit. There's a couple things. There's Poképia, which is kind of like a Stardew Valley meets Pokémon thing that outperformed expectations. There's a big Donkey Kong game that came later last year that's continually finding a market. People pick up the console, they say, "What can I play?" What you can't really play right now is a brand-new Mario or Zelda game. There's older Mario and Zelda games that they have updated to run better on the console, but there's not a big new statement piece. Even as these kind of second- and third-tier games are really moving a lot of units, you could probably see Nintendo getting excited. When we put that new Mario and we put that new Zelda into the market, they're probably pretty excited for what that growth curve is going to look like as well.

Reynolds: Okay. All right. Sony I think you described as steady, but maybe perhaps more indicative of the broader console business overall?

Barbour: Yeah, that's right. In fact, we told clients that's a pretty good barometer of maybe where the games business actually is if you strip out the ascendant new hardware from Nintendo and some of the Chinese mega publishers. So mid-single digit growth. That's where we have the broader games industry moving right now. You can see a couple big games came to the market. We'll talk about those a little bit later. There's the perennials. There's your Roblox, your Fortnite. Growth slowing there, but there's still some stuff to grow on, particularly as they hit new, big content rushes. Fortnite's always playing around with cool new stuff. There was a big Simpsons release last year that did well. So they always have little surprises like that going on. The problem that they're looking at is that the costs are also growing. Around hardware, around development, around all the other fringe stuff. So even if revenue is still growing, mid-single digits might not be getting the job done to grow margins... and they're running out of levers to really pull there without spending a lot of new money. And again, I go back to that AI component crunch. Everything just costs more, so they're a little trepidatious to spend a lot more money to build up a brand-new game themselves. You've seen that in the past few years. They make fewer games year on year. They're looking at Grand Theft Auto VI, which is finally locked in for a November release and they're saying, "Bring it home, baby."

Reynolds: Okay. All right. Let's look at the segments a little bit. It looks like for PCs that's where the growth was at the top of the dial for this period anyway.

Barbour: Yeah. PC, the fastest growing segment of the stack. Some of that is just how easy it is to game on PC these days. Pre-built gaming rigs are everywhere. You can get them at Walmart. You can get them at Costco. Get them down at the gas station. You can take them home, install Steam, Epic Game store. You're off and running. I remember just 10, 15 years ago how complicated it was to assemble all the components, install the right drivers, to get a controller to work correctly. Now all that stuff happens right out of the box. That's a slow societal shift around how people view PCs. Used to be primarily productivity with light gaming. Now it's primarily gaming with light productivity. But there's also a growing class of PC gamers in APAC who got a good taste of high-end gaming from mobile and want to see what else is out there. That's why in part you can see the China mega publishers leaning into PC more. Not only do they see that as a Western market, they see that as a growing opportunity in APAC markets as well. Seeing all this, Xbox was signaling in March that they were going to really lean into PC for the next console cycle. They walked some of that back since. Maybe we'll tease that out later. But it's really a sign that PC is a strong current in gaming.

Reynolds: Yet mobile's still the king overall, right?

Barbour: Yeah, undeniably. By far the biggest attack surface for publishers. I think what we have to watch out for in mobile, and this is a consequence of its size, like I said, is that we see evidence of regulators, particularly in APAC, cracking down on mobile every once in a while. I nodded to it when I was talking about Tencent and NetEase earlier. But sometimes they're limiting playtime for minors or they're limiting how many publishing licenses they will release. In some of those countries they only allow a certain amount of games to be published every year, and so you have to apply for a license. And then sometimes we've seen a country will outright ban a game published by some company who is based in another country if the political relationships are shaky, maybe they're afraid of spyware or something like that. So that kind of comes in and out of the market. Right now there's a really clear lane it seems like, and a good mix of legacy and new content hitting consumers. So you're not going to see the growth arc you saw in the pre-pandemic era, but mobile is and will remain the top dog in this space.

Reynolds: All right. You've touched a little bit here and there already about consoles. Overall, what kind of quarter was it for the console guys?

Barbour: Yeah, what I think a lot of games reporting and analysis is missing right now, with all eyes on AI and its downstream impacts, is that we are in year six of the PlayStation 5 and Xbox Series console cycle, and that's when these consoles are really supposed to be making the most amount of money, and that's happening. There's a new big Resident Evil game out in the market. Sold a ton of copies. There's this game called Crimson Desert. It's an oddball open world thing that shows really well, and it sold a ton of copies. The PS5 and Xbox Series install base is not quite as large as the PS4 and Xbox One were at this point in their life cycles but they're not really that far behind either. These big games, they have a chance to find a really big audience. The downer is that because consoles are so expensive right now, there isn't much of an opportunity to talk new users into the market on the strength of this new software. So these consoles would have had a much larger install base if inflation and tariffs and supply chains hadn't been in the way. And that's weighing on stakeholders.

Reynolds: What's any sense for an average price or a ballpark run of prices there?

Barbour: So Microsoft just put another price increase into the market that I think takes effect in August, and so their kind of fully loaded Xbox will run you $800 as of August 1. Something on those lines. PlayStation is keeping a similar model at $650. I imagine they'll probably move that price up a little bit as it goes along. And look we have heard directly from those vendors that they're paying double, triple what they were paying for RAM last year and the year before.

Reynolds: I gotcha. You mentioned Microsoft in your report. You said they were the weakest of the top 10 players during the first quarter.

Barbour: Yeah, again, and I'm going to hammer away on the hardware probably here, but Microsoft is just in a tough spot. Of all the companies that were locked out of user growth, they arguably had it the worst. When RAM shortages really ramped up, they didn't have the volume contracts that a Nintendo or a Sony would have. Those two just sold more units in the past couple years. So when they had to renegotiate with suppliers, the suppliers didn't have the incentive to lock in with them that they would the other downstream vendors. So they didn't get as favorable terms as they would have wanted to. Plus, they just don't have the user base to swallow the magnitude of those price jolts. A lot of the way that the console ecosystem works is that you sell the hardware at a loss, and you make up for it with games purchased down the line. And if you don't have enough users purchasing enough games, it's hard to make up so they had to move bigger price increases in key markets earlier than their peers. Now when a big console game hits, Sony just benefits from it a lot more. Xbox's first party software had a tough year with some tough comps, and if the new Call of Duty hits and a few other things break their way, we could be having a way different conversation next year. But right now it doesn't look great.

Reynolds: Okay. One thing I found interesting though, I guess the mantra's always been that there's a combination of having the big games and, complemented or supplemented by, smaller, more boutique games. But that doesn't seem to be the case anymore, or won't be the case anymore. Right.

Barbour: Yeah, great point. So Xbox shuffled its management team in February, most notably installing Asha Sharma as CEO, and they're looking at the books, and they're seeing the low margins and the rising costs and a portfolio of software that maybe hadn't really served the company all that well in the past few years.

Reynolds: Yeah.

Barbour: Around the turn of the decade, the previous management team was loading up on that software that you're talking about. They wanted to turn Game Pass, which is their subscription service, into the Netflix of games. So there'd be all this new software and different stuff to play all the time, different genres. And that strategy worked for a while, but then it stalled out around 35 million subscribers. Not a great comparison, but Netflix has around, what, 325 million subscribers. So they didn't quite get where they wanted to get there. They had to take a look at what they had and say where do we need to focus here? We can't be as scatterbrained maybe as we were before.

Reynolds: Okay. Company's also changing direction a little bit in terms of making some of the titles available to other consoles?

Barbour: So interestingly, the new management, when they rolled out their Xbox showcase they were thinking maybe we'll take some of these games exclusive again. So initially last year when they saw that the Xbox wasn't heading in quite the direction they had thought they were going to move more of their software onto other platforms. Some Microsoft games started showing up on PlayStation started showing up maybe on Nintendo consoles here and there. Interestingly, they sort of reversed course on that a little bit over the summer when they started announcing their games for the fall. Gears of War in particular now won't be available on Sony PlayStation, the new Gears of War anyway. I believe it's called E Day. It'll be available only on Xbox. Now the part I don't really get is that they also said that they're having a hard time making new consoles. This isn't just us from an analytical tower looking down saying it must be hard for Xbox to make new consoles. They're saying it themselves. So the point of new exclusive games is to drive console sales, but if you can't make the consoles to sell, I'm not really sure which direction they're going there.

Reynolds: If I can ask you now, Neil, if you can play movie critic a little bit for us. When MediaTalk recently spoke with our guys our Siskel and Ebert, Wade Holden and Mack Matthews, we had joked about perhaps the top grossing movie of 2026 might be released on April Fool's Day. Super Mario Galaxy movie. It's done very well, but maybe somehow a billion dollars is disappointing at the box office?

Barbour: Yeah, I'll concede Universal spent as much, probably much more, to make and market this movie as they did the first one, and they got less out of it. In almost any other industry, that would be seen maybe not as a failure, but as a cause for concern. If you're not growing, you're shrinking, right? So yeah, I think you can look at this and say it was a bit of a disappointment, and maybe we should start thinking about, just like we saw with the comic book stuff last decade, this is not a renewable resource, and that the content partnerships will have to be really strong, and the execution has to be there for this to keep growing. Otherwise, it might start heading in the other direction and stop being a cash cow and start being a liability like maybe some of the comic book stuff was toward the end of the lifespan of some of those franchises. But look, if you stack up the Mario movie against a lot of other movies this year it obviously beats those other movies. And that speaks to the growing primacy of video games in the lives of average consumers.

Reynolds: Yeah, it's interesting. Again, going to the well, when the water's not as high, you gotta make a decision. So maybe some time will pass before they do another one. We'll see, but a billion dollars is a billion dollars. Smart glasses time if you will, Neil. You were at...

Barbour: Yes, sir...

Reynolds: Augmented World Expo 2026. It was in Long Beach, California last month. Can you give us a sense for where the industry was as everybody got together out in California?

Barbour: I make it a point of pride to always go to these shows and try on all the smart glasses and take a picture and circulate them around just so everyone gets a sense of how bulky or how small or just how close these smart glasses are to being assimilated into our daily fashion statements. Let's zoom out here just a second though. The way I would think about smart glasses is that they're another part of the wearables ecosystem, right? So pulling and pushing smartphone information into different modalities and offering different access points. So think about your watch right now, right? If you have a smartwatch. It's so as to reduce the number of times you have to pull out your phone and put in or take out information. Smart glasses are the same thing. Right now Meta has audio-based smart glasses that are very affordable, they have relatively robust battery life, and they can serve you audio notifications and other info throughout your day. Then they have a step up called the Meta Ray-Bans, which have a little window in the frames that'll show you some snackable visual info, maybe the weather, a text message, a FaceTime call. At AWE, the big next turning was Snap Spectacles. It has bigger screens, it has screens in both eyes, it has motion tracking. So it unlocks all these other use cases. So the big one they showed was, like, imagine you're working on your car and you need to replace the spark plugs. Well... you look at the engine through your smart glasses, it points at what parts have to come out, how to get to the spark plugs, what do you do when you get there. So that kind of hands-free information conduction is the main value proposition here. What gives me pause is that they did not have a hands-on demo at the show. I spoke to a rep (laughs)... Yeah, exactly. I spoke to a rep he said they're fully functional, they're ready to go, they're just saving some of these demos for...

Reynolds: They're just not there.

Barbour: They want to keep the hype train going is the way it was explained to me. They're going to show them now and they're going to show what they do later. They're ready to ship later this year, they just didn't want to show them. I'll also say that they looked a little bulky. If you looked at someone who was wearing these, you would... There's no doubt something's going on there. That they're not hiding that they're wearing a pair of smart glasses on you. And at $2,200 they are a good sight more expensive than anything else on the market.

Reynolds: I gotcha. In the background I think there was, "Apple has something brewing," and everybody was maybe talking about that.

Barbour: So Apple does not tend to visit a show like this, but you're correct that they're hovering in the background, at least in spirit. I heard this everywhere, "When is Apple going to make a pair of smart glasses?" A lot of people think they'll have something ready to sell next year, like an audio-based smart glasses, like the thing Meta has on the market right now. And I think that's a fair enough assessment, yeah. Maybe display-based glasses in two to three years. What I might be wary of is that this is the same crowd that thought Apple doing a VR headset was going to save that segment. Apple did do a VR headset and it didn't save that segment.

Reynolds: Okay.

Barbour: That said, Apple might be more careful with smart glasses. That's more in their wheelhouse, a wearable lifestyle device rather than an aspirational computing device, but we'll see.

Reynolds: All right. You had mentioned Snap Specs. Something else that we have a picture of you with is with XReal's Aura.

Barbour: I got to go hands-on with the Aura as opposed to the specs, which I didn't. And I thought they made a very good first impression. It was doing most of the stuff you can do with an Apple Vision Pro and a Quest, but in a smart glasses form factor. And it did those things very proficiently. Now this isn't the all-day wearable that Meta or Snap are trying to build. It doesn't really have see-through frames. They use a display technology where the lenses have to be shaded, so they look exactly like sunglasses. So you can't really wear them in the office, so to speak. But they're doing a lot more. And they have the immersive content, and you can see them for session-based productivity, if you have to just knock out a report or fire off some emails on the plane and you want the full monitor experience, you can put these smart glasses on and you'd have them. Or if you want to watch 3D content on the go or play games, they're a pretty good solution for that use case and they come in at a much more affordable price rate. They didn't exactly nail that down, but they said no more than $1,500. So a prosumer gadget, but still an interesting play.

Reynolds: All right. Last one, I think you dubbed one of the products the "Show Sleeper Hit."

Barbour: Yeah, that's right. Definitely want to give a shout-out to Raven Prism. This is a team of engineers that have been working on smart glasses at other companies for years, like Google and Samsung, and Apple. So they've really thought through the challenges around this market. Two quick hits to give you an impression of how far these guys are thinking ahead. They've developed a system where you put the battery packs on the back of the frames toward the ears so it doesn't weigh on your nose. That's been a big problem with the smart...

Reynolds: Okay, yeah. That's a good idea.

Barbour: Yep. Exactly. The bridge of your nose starts to get red and it hurts after a long session with these smart glasses. And you can hot swap the battery so you don't need to take the glasses off to recharge them in the middle of the day. You can bring along an extra set of batteries, take off the old ones, snap on the new ones, and keep going. The other thing I think will go a long way, at least in the near term, is that they include these modules to cover the front-facing cameras. So if you don't want to weird people out in your periphery by, "Oh, I've got cameras pointing at you," and it's a security risk, and it just makes people uneasy in general you can pop those on when you're in that kind of situation. And then when you're ready to do that home auto repair thing I mentioned earlier, you can pop them back off and it can have that visual information that it needs. So little stuff like that I think is going to go a long way in the early goings of this market. You could make the case that phones present the same security issues in terms of having a camera everywhere that smart glasses do. It just took a while for people to get accustomed to and learn the social mores around that. And perhaps we'll get there with smart glasses as well, but that these options are on the market and that people are thinking about it in this way I think it could give them an edge.

Reynolds: Okay. And they're supposed to come out later this year?

Barbour: I think they're taking pre-orders later this year. I think they're going to see how that goes and maybe, but I think they are aiming for, yeah, 12 to 18 months or something like that.

Reynolds: Okay. All right. Neil, thanks for that little fashion show, if you will. And that concludes this episode of "MediaTalk." I want to thank our guest, Neil Barbour, for joining us again and sharing his insights on gaming as well as playing movie critic and working the smart glasses runway. Appreciate it, Neil.

Barbour: Thanks, Mike. Thanks for having me on.

Reynolds: You can check out all of Neil's articles and his podcast, "Data & Dimensions," on our website, CapIQ Pro, including those about e-sports and the intrigue and shifting dynamics around video games tied to the FIFA World Cup, which has now reached the business end of the expanded tournament. And this is Mike Reynolds. Want to thank all of you for listening. We'll catch up soon on the next installment of "MediaTalk."