Why Games and Entertainment Companies Are Pulling Support in Russia
The international community has almost universally condemned Russia’s invasion of Ukraine. Sanctions worldwide are getting stronger day by day; the world’s financial institutions have completely ostracized the Kremlin’s financial system. The Biden administration recently released a new embargo on energy imports from Russia. Video game and entertainment companies, many of which often remain apolitical in their messaging, either stopped sales or service in Russia or made changes to their offerings worldwide.
Microsoft has suspended all new sales of products and services in Russia in line with economic parameters set by Biden’s foreign policy arm and added that it will continue to “help cybersecurity officials in Ukraine defend against Russian attacks.” Nintendo and Sony are not US companies and are therefore not subject to US law, but the former has delayed Advance Wars 1+2: Re-Boot Camp without explicitly naming the invasion (instead of referring to “recent world events”), while the latter has suspended all sales, including the launch of its newest game, Gran Turismo 7, in Russia. This is just the tip of the iceberg. We are living through a historic economic rebuke to the Kremlin, and a few major publishers are sitting on the sidelines.
So why are these companies so prominent? It depends on the situation.
Many reasons why entertainment companies limit their business in Russia
Some studios seem to be genuinely responding to the growing public pressure. These include EA, which has removed all Russian players and teams from FIFA 22, and The epic that suspended trade in the country but keeps its means of communication available. (Activision went even furtherraising $300,000 in support and equalizing any employee donations with Ukraine on a two-to-one basis.)
It’s fantastic to see the gaming industry take a tough stance in such a heated political scandal. But the invasion of Ukraine remains black and white polarity in the general Western mind, and this has served as a prop for large public companies to stand firmly on the right side of history.
Ukrainian officials have made it clear they want all hands on deck — regardless of industry — to unite against the invaders. On March 2, before announcing many of these lockdown measures, Mykhailo Fedorov, Deputy Prime Minister of Ukraine, turned to the gaming sector “temporarily block all Russian and Belarusian accounts” and stop any planned esports events in the two countries.
How business restrictions led to some of the company’s actions
But other reasons for the boycott are vaguer and less politicized. Nintendo, for example, has suspended deliveries to Russia because, according to the corporation, “significant volatility related to the logistics of delivery and distribution of physical goods. On the other hand, Amazon chalked up the suspension of service (including payouts to Russian Twitch streamers) to a set of Biden sanctions that prevent US companies from sending aviation, defense, and delivery. Components and high-tech products such as semiconductors and telecommunications equipment.” to country.
Other reasons for boycotts are less political.
PayPal, Mastercard, Visa, and American Express no longer work at the border., making it impossible for companies that rely on this payment infrastructure to serve Russian customers. epic, for example, announced that competitive Fortnite players are eligible to win cash prizes until “payment service provider Epic can resume prize support for players residing in Russia.”
And if you don’t understand what sanctions are, Voice has a breakdown of the two main types of sanctions that the US and other countries impose, financial and economic. The financial sanctions concern mainly markets and banking activities, and perhaps the most significant step in this regard is the removal by the European Union of SWIFT. The combination of the two types of sanctions has resulted in many reasons why entertainment companies are unwilling or simply unable to do business in Russia.
Other social media companies such as TikTok have left the region in response to the Putin administration’s recently unveiled censorship policies that threaten legal jail time for anyone caught spreading what the Kremlin defines as fake news — a truly sinister sweep of power that renders media distribution in the country more or less untenable. (The New York Times took all of its journalists out of Russia..) This idea was supported by Netflix, which left the country after refusing to carry a set of pro-Russian channels; after the new law, all streaming services with over 100,000 subscribers are required to conduct state propaganda.
In general, however, most exceptions seem to be related to genuine social feelings. Almost overnight, resistance to Putin’s war became a core belief in the hobby. Gamers themselves reflect this; in this writing, the itch.io kit raised $5.2 million in donations for Ukrainian refugees.
Applying cultural pressure instead of purely economic pressure
However, game publishers and entertainment mega-corporations imposing these sanctions will face a financial blow. It’s not an easy decision when every company is beholden to shareholders and the demands of endless growth. GamesIndustryBus notes that Take-Two is one of the companies stopping sales in Russia, even though Grand Theft Auto Online is the third most popular game in the country in terms of monthly active users.
It is unlikely that a severe shortage of beauty stores will paralyze the Kremlin’s war machine. Despite this, GamesIndustryBiz reports that video games account for less than one percent of total consumer spending in Russia. This is a significant, albeit temporary, reduction in Take-Two’s market share and is likely reflected in its following earnings report.
After all, Russia isn’t a significant component of the gaming or film industry’s portfolio. GamesIndustryBus reports that the country as a whole account for just six percent of the purchasing power of European consumer spending on video games, while, as the Atlantic Ocean noted that Russia was only the ninth-largest market in 2019. It is no doubt more accessible for companies to blame Russia – especially when the country’s economic index is expected to decline as much as 11% and potentially fall into an endless recession.