Nintendo Nears 140 Million Switch Units Sold & Raises Annual Outlook Again in Steady Fiscal 2024 Q3 Report

Next up for this quarters’ recap series, as you clearly know from bookmarking my earnings calendar, is Nintendo. The gaming company that continues to delight audiences and defy expectations.

The Japanese console manufacturer and mega publisher reported figures for the nine months ending December 2023, the third quarter of its fiscal year ending March 2024. Which means I have plenty to break down including quarterly, nine month and trailing annual numbers. A little bit of everything!

Nintendo’s quarterly financial results were down slightly in Q3, however its 9-month figure remains trending upwards during this likely final full year of the Switch’s life cycle.

Super Mario Bros. Wonder was the big winner of the quarter, moving nearly 12 million units as the fastest-selling Super Mario title in series history. Over the April to December span, The Super Mario Bros. Movie and The Legend of Zelda: Tears of the Kingdom were doing heavy lifting along with additional content for its suite of legacy titles like Mario Kart 8 Deluxe and Splatoon 3.

Nintendo shipped upwards of 6.9 million Switch units during the December quarter, and without official discounting at market. While down a bit since last year, that’s a healthy result for a console that saw its first holiday season back in 2017. This pushed lifetime shipments to nearly 140 million, steadily approaching the realm of all time behemoths like Nintendo DS and PlayStation 2.

“When we look at the sales situation so far this fiscal year against this backdrop, we believe that hardware sales have held stable since the first half and that the holiday season results were steady,” Nintendo President Shuntaro Furukawa said in a Q&A.

“We want to maintain momentum in the business through a good balance of both first-time buyers and demand for multiple units. During the holiday season, we noted a particular rise in first-time buyers of our hardware, and we see this as a positive sign for the Nintendo Switch business going forward.”

All of this led management to raise full year guidance yet again, similar to last quarter, for a number of things: sales, profit, hardware and software, in addition to a dividend hike that will return more profits to shareholders. I’ll cover these in more detail in a later section.

Now to the question on everyone’s mind: Where’s that Switch Pro? (Oh no, not again.)

Really, check below as I’ll fully cover the company’s report then drop a set of predictions, including my latest forecast on when the Switch’s successor will be out. Let’s jump into it!

I’ll now dig into the above slides and below charts, which cover all of the numbers Nintendo released during its third quarter 2024 announcement.

Overall, the firm generated $4.18 billion in profit during the three months ending December 2023. That equates to a 6% decline. Operating profit dipped 3% to $1.29 billion.

Across the latest three quarters, net sales grew 8% to $9.74 billion while operating profit rose an impressive 13% to $3.24 billion.

These can be attributed to the yen’s continued weakness overseas, a higher proportion of Switch OLED model shipments compared to the broader family of devices plus add-on content for its more evergreen titles. Not to mention having one of 2023’s biggest movies based on a world-renowned brand, I might add.

Expanding to latest annualized figure, which ends up being the 2023 calendar year number, revenue moved up 7% to $12.53 billion. That’s the best calendar year revenue number for Nintendo since 2008! Operating income bumped up even more, settling at $4.09 billion or an increase of 10%.

These growth numbers are all fantastic for a company that will likely move into its next generation of consoles within the next six to twelve months, and highlights the smart move by executives to diversify into different areas like digital support, intellectual property (IP) adaptation, online services and post-launch content drops.

Moving onto product categories, Nintendo’s hardware and software each contributed exactly 50% during the third quarter. This split last year was 51% and 49%, in favor of hardware. Across the 9-month period, the software slice was larger at 55% of the total. At the same time last year, it was 54%. Not too much movement in either direction over the last couple years.

With respect to regional splits, the latest nine months continued a slight shift away from Japan and towards The United States and its neighbors. The Americas made up 44% of sales, up from 43%. Europe remained flat around 25%, while Japan declined from 24% to 21%.

The digital portion of Nintendo’s sales during Q1 to Q3 moved up a couple percentage points to 48%, fitting the industry trend towards downloads as opposed to retail buying. Digital came in around a quarter of the company’s revenue stream, growing 12% in the last nine months to $2.42 billion.

Here’s where Nintendo stacks up against the industry’s biggest players. First, yen weakness does have a positive impact on revenue in local currency for companies that mainly operate globally, like a Nintendo or Sony. However when converting from yen to U.S. dollar, it doesn’t appear as attractive because of the low rate. Sony, which reports gain next week, had PlayStation at $28 billion annually while Tencent stacked up to $26 billion. Microsoft’s integration of Activision Blizzard brought it to $18.13 billion this quarter, while Nintendo comes in under $13 billion. However, Nintendo’s operating margins are best in industry, even while developing a new hardware.

Focusing strictly on Switch hardware shipments, these totaled 6.9 million during October to December. Compare that to 8.23 million the prior year.

Which is excellent for a console that’s saturated its market as much as Switch has. For context, I estimated that Microsoft shipped 4 million max Xbox Series X|S this holiday. Sony moved 7.1 million PlayStation 5’s in the quarter ending December 2023.

That brought hardware units to 13.74 million during the first nine months of this fiscal year, down 8% from 14.91 million. Management noted this was mostly in-line with expectations for the time frame.

As has been the case for a couple years, the predominant model during this period was the Switch OLED. That version shipped 8.17 million between April and December, up 6% from 7.69 million. Next up was the base model at 3.4 million, down 25% from the prior year’s 5.22 million. Rounding out the list was Lite, which grew 9% year-on-year from 2 million to 2.18 million.

So, this all brings Switch lifetime sales to 139.36 million. Is there a legit chance it clears the Nintendo DS at 154.02 million to become the company’s best-selling device ever? The answer is: absolutely.

Switch is under 15 million away from Nintendo DS. If the company’s target holds this fiscal year, it would need 13 million more during the financial period beginning in April. I am betting that, by the end of March 2025, not only will Switch be Nintendo’s best-selling ever, it will surpass PlayStation 2 at 155 million to secure the top spot on the all-time top seller list. Even if Super Switch exists!

Back to the latest announcement, Nintendo did share some insight into hardware sell-through to consumers. Namely that it’s been steady for the console’s age, and that the OLED version saw increased demand, echoing the growth seen in shipments. And it wasn’t just first timers, there were plenty of people who double dipped or grabbed replacements, according to prepared remarks.

Now swapping over to Nintendo’s other bread-and-butter which is software sales, this is where the team has shined the entire back half of this generation with both new games and existing support.

For the holiday quarter, software unit shipments for Switch totaled 66.87 million. That’s down only 14%. Expanding to the April to December period, unit sales for software dipped 5% to 163.95 million. Considering the saturation and how many titles it’s already moved, that year-to-date figure showed great resilience.

The proportion of first party titles, those published by Nintendo, rose from 79% to 83% in the nine months ending December. That’s more than four out of every five games purchased in this period, namely due to flagship Zelda and Mario launches plus a mainline Pikmin.

How’s about yet another lifetime milestone for the Switch’s historic run? Just this quarter, lifetime unit sales on the platform surpassed 1.2 billion. The strength of its portfolio is unrivaled even compared to prior Nintendo generations, plus there’s the legacy library via Switch Online, broad attraction of franchises like Animal Crossing and third party offerings like Fortnite.

Speaking of big sellers, Switch now has 24 “million-seller” titles which shipped a million units or more in the latest nine months alone. Within that, 17 were first party and 7 were external publishers. Compare this to last year’s 27 overall, and it’s another example of the platform’s appeal.

The elephant in the room was Super Mario Bros. Wonder, not just shipping 11.96 million but also selling-through 10.7 million of those to consumers. For comparison to recent franchise titles in their respective first quarters: Super Mario Odyssey had 9.07 million in 2017, New Super Mario Bros. U Deluxe reached 2.5 million in 2019 and 2021’s Super Mario 3D World + Bower’s Fury saw 5.59 million. Keep in mind the lower install bases at this times, of course.

Elsewhere, new launch in Super Mario RPG Remake shipped 3.14 million since hitting market in November, another benefactor of the Switch effect. July’s Pikmin 4 also hit the 3 million milestone, moving up 720K units to 3.33 million.

After an incredible run since May, The Legend of Zelda: Tears of the Kingdom reached the 20 million milestone this quarter, settling at 20.28 million. While it’s slowed in recent months, it’s still a ridiculous feat to hit this sort of threshold in less than a year.

One one that seems to never slow down is Mario Kart 8 Deluxe, which zoomed past the frankly absurd 60 million milestone this quarter. After somehow shipping 3.57 million in the holiday quarter, it’s held pace at 60.58 million. That’s well above the second place on the platform in Animal Crossing: New Horizons at 44.79 million. I don’t know how Nintendo can top this latest Mario Kart entry, and I don’t envy the designers that have to make its follow-up.

The last statistic revolved around engagement, as Nintendo announced a record 122 million Annual Playing Users as of December, up from 114 million last year. While this isn’t as indicative of active players as something like monthly or daily active users, it does show that buyers at least login to their devices over the years. Separately, Nintendo didn’t share any updates on Switch Online subscribers, last reported at 38 million in September 2023.

Between a nice holiday quarter, the financial growth in the first nine months of fiscal 2024, the fastest-selling Super Mario ever, major milestones for its biggest franchises, diversifying into film and other media plus revitalizing classics to close the cycle, Nintendo’s latest run continued in this earnings report as Switch approaches its seventh birthday next month.

To say it’s exceeded all expectations, and continues to prove analysts wrong, is an understatement.

Before closing out, let’s look at that updated guidance and make a few predictions. Management revised a number of forecasts upward, including financial targets and unit sales expectations.

The firm now expects 3% more net sales and 2% better operating profit during the fiscal year ending March 2024. That translates to roughly $11.4 billion and $3.56 billion, respectively. This indicates Nintendo expects both of these to grow in the single digits, and I expect them to be achieved. If not exceeded by a decent margin.

On hardware, according to Furukawa commenting after the company’s announcement, the Switch will remain its “main business” through the end of March and into the new fiscal year. In fact, he called out internet rumors and asked people to “exercise good judgment” when hearing them.

Fitting with this sentiment, the company raised Switch unit guidance by 500K to 15.5 million. That implies the January to March quarter to have only 1.76 million shipped in order to reach this goal. Personally, I’ve been predicting the 16 million to 16.5 million range for this year. I see no reason to change that now, and I’m even leaning towards the upper end of this range.

The real question on everyone’s mind is the Super Switch! Mainly when, and how much. Executives are playing coy for now, as expected.

“We are unable to make any comments beyond saying that our company is constantly conducting research and development on new hardware and software,” Furukawa said.

There were some small hints in his latest Q&A series posted today. Furukawa pointed out the hybrid model is the “optimal way” to deliver Nintendo’s unique experiences. That all but confirms the successor will have both handheld and console functionality, consistent with recent speculation that’s pointed to a larger screen in portable mode.

I’ve written before that my forecast puts Super Switch in the fourth quarter this calendar year. I’ll also stick to this, expecting an initial announcement after Nintendo’s current financial year ends, so as to not jeopardize hitting that hardware target. This puts a reveal in April or May, then more details and presentations leading into launch around October.

Management also bumped up its software expectations by 3% for the full year, now guiding that Switch will have 190 million units shipped in that period alone. This feels on the money, with slight upside to beat it.

The current slate features one brand new title Prince Peach: Showtime!, a more niche title launching in March that I think will do alright yet not gangbusters. There’s also the remake of Mario vs Donkey Kong out next week. Between these and continued interest in Super Mario Bros. Wonder among others, I’m not worried about Nintendo reaching its more optimistic guidance.

Beyond that, it’s anyone’s guess because Nintendo hasn’t shared much for its offerings beyond a pair of revitalized old games in Luigi’s Mansion 2 HD, on the calendar for Summer 2024, and the pending Paper Mario: The Thousand-Year Door remake sometime this year. Metroid Prime 4 remains a mystery, the only title in its financial report listed as to be announced.

One title that probably won’t hit Switch anytime soon is Palworld, what with The Pokémon Company’s investigation into 2024’s biggest sales surprise so far for potential IP breach and asset usage. While I’m not sure that a legal battle will ensue, I’m sure it will remain on other platforms for the foreseeable future.

That does it for my latest earnings recap. I’ll be back soon with more coverage of the season and other topics as 2024 keeps it moving. Be well, all!

Note: Comparisons are year-over-year unless otherwise noted. Exchange rate is based on reported average conversion: US $1 to ¥143.22.

Sources: Company Investor Relations Websites, Video Games Chronicle.

-Dom

2023 Year-in-Review: Five Most Impressive Gaming Companies & The People Who Defined Them

Continuing the site’s prestigious Year-in-Review series, I’m back with an enhanced category this year that expands on my history of shouting out the developers and publishers that defined the industry the past year.

These are five of the most impressive companies that operated in the gaming space during 2023, leading the charge on what was an extremely strong year of titles. These can be developers, publishers, hardware makers and more.

Plus, fitting the theme of celebrating those that worked hard on putting out great games or related products this year. I’ve added a portion to shout out at least a couple folks at each firm integral to the projects these companies have produced. Companies aren’t monolithic. They aren’t the building, logo or executives. They are people.

Note this is usually reserved for larger, often publicly-traded, firms. I have a separate post incoming soon running down the incredible indie studios that launched amazing games in 2023 as well.

Here’s the full list, in alphabetical order!

Capcom (Japan)

Long-time Japanese publisher Capcom continued its resurgence this past year, launching two of the industry’s most recognizable, outstanding experiences. First in May, teams teams put out a remake to the classic Resident Evil 4, an enhanced version of the already classic survival horror game, becoming one of the fastest-selling Resident Evil titles and scooping up various accolades.

Then there was Street Fighter 6 in June, a return-to-form for the fighting franchise that captivated fighting games and a more casual audience. Plus, September’s Monster Hunter Now was one of my favorite mobile titles of 2023, an exceptional adaptation of the formula to a new set of devices.

Special kudos to Street Fighter 6 director Takayuki Nakayama and art director Kaname Fujioka. These two guided the general design and art of one of Capcom’s fastest-selling fighting games, and a competitive platform that will be heavily featured in official tournaments and off-book battles for years to come.

Insomniac Games (United States)

The team at Insomniac Games single-handedly carried PlayStation’s first party output in 2023, launching a major sequel in its beloved modern Spider-Man series in collaboration with one of last year’s winners in Marvel Entertainment. Plus, it showed resilience earlier this month when hackers breached its data in a cruel criminal act that rocked the industry.

Marvel’s Spider-Man 2, which had the single biggest 24 hours of sales in PlayStation history when it released in October, felt like the pinnacle of the studio’s ethos. It’s a free-flowing take on the comics with its own spin on the hero’s journey that features both Peter Parker and Miles Morales, plus the villainous Venom which is the star of the title’s most exhilarating sequence. It’s a, hm, marvel of technical prowess and smart accessibility, with the snappiest loading and finest traversal of any game this year.

Creative lead Bryan Intihar was wonderfully sharp and candid in interviews, clearly exhibiting his deep love for the series and studio’s legacy. I’d also like to call out Senior Community Manager Aaron Jason Espinoza who runs the developer’s social accounts and is a solid follow himself.

Larian Studios (Belgium)

It was a Larian Studios world in 2023, everyone else was just living in it. The 400-person Belgian team’s appearance here comes on the strength of Baldur’s Gate 3, a decade plus effort that started in early access back in 2020 then fully launched this year in August to widespread critical acclaim and highly-deserved commercial success.

The instant classic has already won multiple Game of the Year awards, and will contend on my list when I finish it up, redefining the computer role-playing space with its scope, breadth and utter audacity of ways to play, reacting to player choices like no other game in recent memory.

One of my shout outs has to be Swen Vincke, photoed above, Larian fixture and star of The Game Awards in his shiny armor. Vincke’s talent is outmatched only by his team dedication, posting an endearing set of thank yous on social to those that made Baldur’s Gate possible. Plus, there’s Adam Smith, who led the title’s writing. The sheer amount of dialogue, story beats and permutations is enough to make one’s head spin, and Smith’s team coordinated it brilliantly.

Nintendo (Japan)

In the potential final year of Nintendo’s now illustrious Switch, it brought the heat in a portfolio of games that rival only the hybrid console’s 2017 launch window. May’s The Legend of Zelda: Tears of the Kingdom and October’s Super Mario Bros. Wonder are easy Game of the Year contenders, with the former reaching nearly 20 million units sold already and the latter being the fastest-selling mainline Super Mario.

The company rounded out its 2023 lineup with Pikmin 4, already the franchise’s lifetime top seller, Metroid Prime Remastered, Detective Pikachu Returns, WarioWare: Move It! and Super Mario RPG remake. Then, back in April, it collaborated with Illumination Entertainment on box office blast The Super Mario Bros. Movie, an awesome adaptation that exceeded most expectations both in quality and cash generated.

Usually it’s Shigeru Miyamoto that’s associated with the Italian plumber, and rightfully so. I want to point out the more unsung, tenured heroes on the team in Super Mario Bros. Wonder producer Takashi Tezuka and director Shiro Mouri. Tezuka-san is a living legend, starting at Nintendo a staggering 40 years ago. Dude was assistant director on 1985’s Super Mario Bros. for crying out loud. Mouri-san is a relative “newcomer” who worked on F-Zero during the Nintendo 64 era then certain 2D Mario and Zelda titles. These two have a magnificent track record and helped craft what I think is the greatest side-scrolling Mario since 1990’s Super Mario World (a game that Tezuka-san also led).

Remedy Entertainment (Finland)

If 2019’s Control was Remedy going for mind-bending action, October’s Alan Wake 2 was its foray into classic survival horror, and a monumental one at that. There’s nothing quite like a Remedy game as the Finnish studio’s approach is unlike any other, pushing boundaries of both technical aspects and genre-mashing to form titles that are wholly different and often groundbreaking.

This year’s masterful sequel to 2010’s Alan Wake was the culmination of a 13 year journey for the team, showing a level of sticktoitiveness that plenty of studios would abandon. Alan Wake 2 is an experience that blends suspenseful story, full motion video and over-the-shoulder mechanics in what’s the most uniquely bizarre triple-A joint of 2023.

From the above image are lead writer Sam Lake and Alan Wake 2 director Kyle Rowley, clearly enjoying themselves while winning at The Game Awards. Industry visionary Sam Lake has become the face of the studio and is prominently featured in their games, thus carving carved out a lane for Remedy’s weird, magical approach to design. As for Rowley, if there’s anything that the new Alan Wake installment should be known for in the annals of history, it’s game direction. The definition of an impressive effort by him and his team.

Sources: Company Media & Investor Websites, Kotaku (Image Credit).

-Dom

Nintendo Achieves Best 1st Half Sales of Switch Era & Raises Financial & Software Forecasts in 2024 Q2 Report

It’s a busy week here at the site and on socials, partly because the earnings calendar is packed. So, there’s no time to waste, I’ll get right into the topic at hand.

Nintendo reported its second quarter of its fiscal 2024 yesterday, which showcased a fantastic first six months. With sales rising more than 20%, this time frame ended up being the single biggest first half of a fiscal year for revenue since the Switch launched back in 2017.

With a couple of caveats. As always.

First, the results were mostly driven by the record first quarter that I wrote about in August. When focusing strictly on the April to June period, revenue and operating profit declined 4% and 20%, respectively due to a relatively light launch schedule and lower quarterly Switch hardware output than a year ago.

Beyond these dynamics, Japan is currently seeing its worst local currency depreciation in decades. Which is always worth mentioning in this context, and Nintendo specifically cites the yen movement in its report, because it has a notable effect on Japanese companies that operate globally.

Echoing this, Switch hardware unit shipments totaled 2.93 million in the quarter. That’s off 10% from the 3.25 million this time last year. Still, it pushed Switch lifetime shipments to 132.46 million, making it only the third gaming hardware ever to pass the 130 million mark.

In terms of new games, Pikmin 4 was Switch’s big title during the quarter, and has shipped 2.61 million copies since June. This amount means it’s already the highest-selling game in the franchise to date. Add it to the list of titles impacted by the Switch effect, which often boosts new titles in existing series to all-time sales records.

The Legend of Zelda: Tears of the Kingdom also contributed to software and continued its monumental run, now approaching the 20 million unit milestone in just its second quarter. The latest mainline Zelda is a smash hit, already at almost two-thirds of 2017’s classic Breath of the Wild lifetime sales!

In what I’d argue is the most important part of the report, and something I predicted would happen during my Q1 article, Nintendo raised most of its guidance for the full financial year. Management now expects higher revenue, operating profit, software unit shipments and will pay a higher dividend to shareholders. The only thing it didn’t raise was Switch hardware shipments, which it “only” reiterated at the current level of expectation.

“For hardware, by continuing to convey the appeal of Nintendo Switch, we try not only to put one system in every home, but several in every home, or even one for every person,” the company said related to its forecast. “Another objective is to continually release new offerings so more consumers
keep playing Nintendo Switch even longer and we can maximize hardware sales.”

Here’s quick bonus for something that happened after this financial period: Nintendo announced today that Super Mario Bros. Wonder sold-thru 4.3 million units to consumers during two weeks on sale. This makes it the fastest-selling Super Mario title, at least since the firm began tracking this stat in 2004. No wonder execs are more optimistic after yet another historic Switch launch.

Just like Drill Mario would, I’m now going to dig deeper into the numbers.

I’ll first address its quarterly earnings then expand to the 1st half and annualized figures for greater context on how Nintendo’s business is faring over time.

For the second quarter alone, revenue came in at $2.38 billion or 4% lower than a year back. Operating profit dropped 20% to $670 million. Which checks out, due to the big release of this period being Pikmin 4 plus Switch has almost achieved hardware saturation in its likely last year.

Taking the full six months into account, Nintendo achieved $5.65 billion in sales and $1.99 billion in operating income, increases of 21% and 27% respectively. That sales number is above even Switch’s best year in 2020, and operating profit is not far off from that year’s high either.

While this is certainly bumped up by out-performance of Tears of the Kingdom and the Super Mario Bros. Movie, slightly higher hardware units and early upside from Pikmin 4, there’s also the element of yen depreciation. While currency movement is usually more temporary, Japan’s currency weakness has been ongoing for many quarters now.

Taking a look into product categories, Nintendo’s hardware business accounted for around 41% of sales during both the first quarter and six months. That’s relatively constant since last year, when it was at 40%. Software accounted for the remaining 59% this time around, where it was 60% last year. A system-seller like Zelda plus certain bundles continue to prop up console sales this late in the cycle.

From a regional perspective, sales shifted out of Japan and into other territories. Both the Americas and Europe stayed the same since last year, contributing 44% and 23%, respectively. Japan declined from 24% to 21%, while what Nintendo classifies as Other jumped up from 9% to 12%.

Both digital and Intellectual Property (IP) related sales experienced the most growth during Nintendo’s first fiscal half, even if these areas still don’t represent a major portion of sales. Digital revenue output moved up 16%, and accounted for exactly half of the company’s Q2 dollar sales, virtually the same as the 51% a year ago. The mobile and IP-related category more than doubled, jumping 133%. Growth came more so from the IP side than mobile, as The Super Mario Bros. Movie stands at over $1.36 billion in box office earnings.

Combining the last four quarters, the company’s trailing 12-month revenue is currently at $13 billion. While down slightly since last quarter’s $13.12 billion, it’s up 6% year-on-year. Annualized operating profit is tracking towards $4.2 billion, down only slightly compared to both Q1 and last year’s second quarter.

If the revenue number holds, and the firm hits its latest target, Nintendo could achieve the highest annual sales since Wii’s massive popularity in 2008, even with the Switch hanging on during its twilight years.

Pulling a similar passage from my last Microsoft write-up, I’d like to compare industry peers to get a sense of where all of them stand right now. Sony, which reports results tomorrow, had PlayStation revenue upwards of $27.8 billion at last count. Tencent came in next at $25 billion, then Microsoft generated $15.78 billion before the Activision Blizzard deal closed. This is where Nintendo slots, at $13 billion. One thing to note is that Nintendo is more profitable than Sony, which is the only firm out of these four that reports profit numbers for gaming, and I’d imagine it has better margins than Microsoft’s Xbox business with its big investments and product expenses lately.

I mentioned a bit about Nintendo’s hardware results up front, I’ll now get into a more detailed breakdown of this product category.

The second quarter saw those 2.93 million Switch shipped to market, compared to 3.25 million a year ago. This tracks, notably after just how many units moved during the prior quarter, including a desirable special edition for Zelda.

Now, during the first six months of fiscal 2024, Switch sales moved up 2% to 6.84 million. While not quite at the highs of the Switch’s glory days in 2020 to 2022, it is above earlier shipments figures before 2019 during the corresponding time frame.

This shows the utter resilience of Nintendo’s hardware appeal, and making games that translate well from console to handheld. Plus, it highlights how the move to an OLED model replacing the base model drives people to picking up multiple devices for themselves or household members.

Out of those 6.84 million for the first half, 4.69 million were OLED versions. That makes up 69% of the total, and it’s 32% higher than last year’s figure. In fact, it’s the only model to grow over this time frame, considering the base model dropped 44% to 1.25 million units and Switch Lite moved down a more modest 2% to 900K.

This continues to life the lifetime Switch hardware figure, now standing at that 132.46 million. Which is still wild to write, mainly because of how it’s outpaced all expectations. Even mine and Nintendo’s itself. Thing is, while it’s secured a Top 3 spot on the all-time best-selling console list, I don’t see it moving up any further assuming Super Switch is out within the next 12 months. There’s still a 21.56 million gap between Switch and Nintendo DS at 154.02 million.

Then again, the Switch has exceeded all expectations thus far. It might surprise me.

One additional item that I found disappointing from Nintendo’s report is there wasn’t any further detail on console sell-thru to consumers, which it has recently added to its explanatory material. This is likely because it’s trending downward. Still, I’d rather the more data, the better. Maybe next time.

I’ll now take a similar look at the current software dynamic for Nintendo, the segment that makes up the majority of its business right now.

Overall Switch software unit sales in the quarter totaled 44.87 million, down 14% from 54 million. On the flip side, 1st half game sales rose 2% from 95.41 million to 97.08 million. It helps to have one of the highest-rated titles of all time launched in this period in Tears of the Kingdom.

These results drove lifetime software sales for Switch to pass yet another major milestone, this time surpassing 1.1 billion copies sold. It’s now upwards of 1.13 billion, an astonishing result. For perspective, the DS and Wii never reached a billion, even with the former selling many more hardware units. The sheer number of games that Switch owners buy, especially first party, is higher than any Nintendo device in history.

Speaking of big sellers, the number of games that have shipped over a million units during the current fiscal year jumped up a sizeable amount. There were only two back in Q1, just Tears of the Kingdom and the ever-present Mario Kart 8 Deluxe. The Q2 number was 16. Out of these, 12 were published by Nintendo while 4 were produced by third parties.

Chief among them being Pikmin 4, hitting that all-time high for a Pikmin franchise game of 2.61 million units in a single quarter. The previous record holder was Pikmin 3 Deluxe, another Switch title that has moved 2.4 million copies since October 2020.

I will point out that while the latest title has the best lifetime unit sales already, it currently has a lower attach rate than its predecessor partially because of just how many Switch have flooded the market. Pikmin 3 sold 1.28 million, or 9% of Wii U console sales, while Pikmin 4 stands at a 2% attach rate. For the time being.

Separately, it’s hard to overstate the pure magnitude of Tears of the Kingdom. The title sold another million units in the quarter ending September, bringing lifetime sales to 19.5 million. It’s not often that a game approaches 20 million units in a couple quarters. Thus, the title held its position as the 9th best-selling Switch title and will easily surpass Super Mario Party‘s 19.66 million next quarter.

I can’t write about Nintendo earnings and not mention Mario Kart 8 Deluxe, the game that never stops selling. It sold more copies than the brand new Zelda title last quarter, moving over a million and a half in Q2 alone. This game is almost a decade old, people! After this latest boost, the Switch version has officially passed 57 million sold to date.

Elsewhere in terms of new milestones, 2022’s Nintendo Switch Sports scored a new mark, passing 10 million to settle at 10.77 million.

While Nintendo usually reports on shipped numbers, it did share some insight into sell-thru to consumers. In addition to the aforementioned record launch for Super Mario Bros. Wonder, Pikmin 4 has sold-thru 2.5 million units globally as of last week, the largest start in series history.

As for engagement and player stats, Nintendo hit us with an update on Switch Online memberships and (its made-up stat of) Annual Playing Users, both of which are growing at this time as the user base expands. Switch Online subscribers now stand at 38 million, up from 36 million as of September 2022. Annual Playing Users, which is the number of people who have played a single game on Switch in the last 12 months, moved up to 117 million. It was 116 million in Q1, and 108 million last year.

Even considering the latest quarter trending down a bit, Nintendo bucked the trend of an aging console during the first half of fiscal 2024, turning it into a historic one for top-line sales compared to all others since the Switch first launched. It certainly helped to have a blockbuster movie to supplement traditional revenue streams, capitalizing on the quality of its big brand identities.

For a console manufacturer, this highlights the need to diversify. Especially when deep into a hardware cycle at a time when investment is ramping up for the next big device and its corresponding launch lineup.

Nintendo has mixed success in the past leveraging IP in various types of media. The last few months show it’s possible, between theme parks and film, proving there’s major upside as long as they instill that magic that has defined the company for generations and appeal to a multi-generational audience. Cross-media is a core factor behind what’s becoming a banner year for the publisher. And now with the announcement of a live-action Zelda flick in development, it will shape the company’s future income as well.

Here’s where I’ll look at that updated forecast, moving into the pivotal back half of the 2024 fiscal period.

Executives increased annual guidance for overall revenue by 9% to $11.2 billion. Operating profit guidance rose 11%, now expecting $3.55 billion. Additionally, it now expects to sell 185 million units of software during the full year, 3% higher than its initial forecast.

I honestly think the financial targets are still too conservative, based on the annualized numbers I referenced earlier. I think management will slightly increase revenue and profit estimates in its next report.

The firm also confirmed annual Switch hardware unit sales guidance at 15 million. That means between the holiday quarter and the first calendar year quarter, it needs to move 8.16 million more units. For context, last year’s December quarter alone saw sales of 8.23 million. While the Switch is a year older, I believe Super Mario Bros. Wonder among other title launches, a new Red Mario OLED model and a Super Smash Bros. Ultimate bundle can produce enough sales to beat the current estimate.

Even though I’m bullish, I’m slightly less upbeat than I was three months ago. I will slightly reduce my target, now expecting between 16 million to 16.5 million in the year ending March 2024.

2023 has been a huge year for Nintendo’s first-party lineup, across mainline Zelda and Mario titles alone, and I believe it has a decent supplemental slate for the holidays that can lead to financial targets being beat. Detective Pikachu Returns, WarioWare: Move It!, a remake of Super Mario RPG plus more content for Mario Kart and Pokémon titles will act as a second helping to the ongoing main courses of Zelda and Mario.

As for what’s ahead in 2024 and beyond, notably for the console transition, I’ll address those in a future article. For now, that does it for Nintendo’s latest quarter. Stay tuned this week for Sony’s results, and hop over to the earnings calendar to track everything this season.

Thanks for reading! Take care, all.

Note: Comparisons are year-over-year unless otherwise noted. Exchange rate is based on reported average conversion: US $1 to ¥140.96.

Sources: Bloomberg, Company Investor Relations Websites.

-Dom

Zelda Tears of the Kingdom & Super Mario Bros Movie Catapult Nintendo Results to Record Highs in 2024 Q1

Here we dough!

Turns out, the Switch is still paying off during its twilight years. Quite literally, for Nintendo.

It sure doesn’t hurt to have a film based on one of the world’s most recognizable mascots either.

Yesterday in Japan, Nintendo reported fiscal year 2024 first quarter financial results. It proved to be a massive three months for the gaming giant, achieving all-time Q1 highs for both revenue and operating profit.

Underlying this record quarter was a historic start for The Legend of Zelda: Tears of the Kingdom and the blockbuster hit that is The Super Mario Bros. Movie. Nintendo shows, yet again, its brands are powerful and management knows how to deploy them, producing some of the highest quality content in games and beyond.

This combination led to Switch hardware output growing since last June. In impressive fashion, the system is steadily approaching 130 million units globally as its its seventh birthday approaches. After moving 3.91 million Switch in Q1, up 14%, lifetime shipments are now 129.53 million.

“In addition to the increase year-on-year in unit sales of both Nintendo Switch hardware and software, another main factor in this growth in net sales was the larger percentage of hardware sales accounted for by Nintendo Switch OLED Model, which has a higher unit price,” management wrote in the slide deck. “The depreciation of the yen also had an effect.”

Nintendo couldn’t have secured a best-ever Q1 without, of course, Tears of the Kingdom. It’s the premier open world adventure of 2023, an easy Game of the Year contender. Plus, unit sales are ascending faster than Link himself. After shipping 10 million copies during its first three days, a Nintendo platform record mind you, it finished the quarter with a staggering 18.51 million.

That’s easily the best launch quarter ever for a Zelda game, and second fastest-selling opening for a Switch title. In fact, the fastest is really two titles: Pokémon Scarlet & Pokémon Violet at a combined 20.61 million.

The real added boost mode, and a genius move by management, was The Super Mario Bros. Movie hitting at the ideal time as theatergoers are back in their groove and it targets such a wide audience. It’s already the second highest-grossing animated film of all time. It launched in April! As a result, Nintendo’s Intellectual Property (IP)-related income segment tripled in sales. Talk about a perfect supplement late in the cycle of Nintendo’s top-selling home console of all time.

Before dipping into the numbers, a quick caveat on the mentioned yen exchange rate: It’s still historically weak. This has an outsized impact on conversions for Japanese companies. Now, let’s see what’s behind Nintendo’s record performance.

I’ve displayed the most important slides from Nintendo’s latest report above.

Overall company net sales jumped 50% in the quarter, to $3.36 billion. Operating income skyrocketed 82% to upwards of $1.35 billion. The strength of Zelda and Mario were in full force.

For perspective, as you’ll see in the chart gallery below, the last time Nintendo’s revenue was anywhere near this high was back in the Wii days. The last time it generated close to this much profit was Fiscal 2021 due to the craze around Animal Crossing: New Horizons.

One notable mention on the profit side was the higher cost of OLED model limits margins, as did a higher portion of retail sales as opposed to downloads, since Tears of the Kingdom is a popular buy in physical form.

“Although the proportion of hardware sales declined and the proportion of first-party software sales increased, our gross profit margin remained at the same level year-on-year,” management wrote. “This was due in part to the lower proportion of digital sales and Nintendo Switch ‒ OLED Model, which has a lower profit margin than the other models in the Nintendo Switch family of systems, accounting for a greater percentage of hardware sales.”

In terms of product types, the company said 41% of sales were from hardware. Compare that to 44% in the same quarter last year, and 46% for last fiscal. This tells me that, while Tears of the Kingdom did push some new systems, most buyers already owned one or more Switches. Digital sales were less than half of Nintendo’s total revenue, at 47%, versus last Q1 at 53%. Digital split was much closer to the full FY 2023 number of 48%.

There’s an intriguing dynamic happening for regional slices. From an overall standpoint, Americas was nearly the same at 44% vs last year’s 45%. The main difference was a lower portion from Europe, which was down to 23% from 26%. The Rest of World segment accounts for the change, moving from 10% to 13%. Then when looking at strictly hardware unit shipments, it’s growth in Japan leading the charge. Unit sales in the Americas and Europe declined 7% and 15% respectively, while Japan rose a whopping 67%.

Even so, Nintendo did point out that console sell-thru was up in all its regions, even if shipments weren’t. Most importantly, total revenue from all sources did in fact move up across all locales. The Americas saw 40% growth, Europe increased 32% while Japan increased 49%.

Another growth vector, albeit to less an extent because it’s still a small portion of business, was the firm’s category of mobile and IP related income on the strength of its animated film division royalties. Dollar sales jumped 190% here, to $232 million. That’s 7% of quarterly net sales, compared to 4% a year back.

Zooming out to annualized numbers really drives home how substantial this latest three month period. Nintendo’s current trailing annual sales accounting for this record Q1 are $13.46 billion. As you see in the chart, based on current exchange rates applied historically, that’s the best annual sales for a first quarter in its history. And nearly the highest ever, behind only FY 2009 Q3. On the profit side, it’s almost there as well. The best trailing 12-month revenue for a Q1 since peaking back in FY 2009 Q1.

Essentially, the company is currently on track for the best annual financial results of the Switch era.

It’s also time to update my peer comparison within the industry, which I started annual in my latest Xbox results piece here. Sony’s latest annualized revenue was almost $27 billion, followed by Tencent’s 26 billion. Microsoft reported $15.47 billion from gaming, then there’s Nintendo here at $13.46 billion. I’ll reiterate what I’ve said before: Sales aren’t everything. Nintendo’s profitability outpaces Sony’s games division for now, at least as of last reported, mainly due to high costs associated with making the PlayStation 5 and related big budget software exclusives.

Total hardware shipments for Switch started the fiscal year at 3.91 million, up an impressive 14% from the 3.43 million last year.

It’s the third highest Q1 shipment number for the hybrid console, behind fiscal 2021’s 5.67 million and 4.45 million in 2022. Nintendo clearly intended there to be enough stock to satisfy that Tears of the Kingdom demand. Plus, it’s clear the market isn’t fully saturated.

From an individual model standpoint, it’s Switch OLED that’s growing. Sales catapulted 86% to 2.83 million. It made up 72% of the total. The other two, Switch base and Switch Lite, declined 51% and 27% respectively to comprise the remaining allotment. This is why management mentioned margins before, as the OLED is the main seller now as the older models phase out.

It’s an effective final push for Switch, which will be seven years old in March.

Switch’s lifetime of 129.53 million, while certainly near another major milestone, still has a ways to go to reach the highs of best sellers Nintendo DS and PlayStation 2. Thinking back to 2017, when I was upbeat about Switch yet never thought it would reach even Wii numbers, it’s pretty wild the hybrid console is even in the conversation for top hardware ever.

Beyond shipment numbers, the report highlighted some sell-through to consumers information. Just like shipments, Switch sold-thru more units to people than the comparable quarter last year. Unlike shipments, all regions experienced growth in sell-thru. Tears of the Kingdom having an OLED special edition bolstered this growth at the consumer level, leading to quarterly sell-thru that beat last year and rivaled the one prior.

As for software, Nintendo shipped 52.21 million units in the latest three months. Not only is that up 26% compared to last year’s 41.41 million, but it’s also the single largest Q1 in Switch history. Even above 50.4 million in Fiscal 2021 after Animal Crossing: New Horizons.

Lifetime game sales for Switch passed a billion back in March, an enormous feat. Now it’s at 1.088 billion.

Since it’s early in the fiscal and late in the console cycle, Nintendo had only two million-selling titles. One of them being Tears of the Kingdom, the other being the never-ending Mario Kart 8 Deluxe.

Based on the 18.51 million shipped for Tears of the Kingdom, it made up 35% of the overall Switch record-breaking unit shipment figure for period ending June. Think about that. More than 1 in 3 games moved for a console with so many epic sellers and this all-time audience base was the new Zelda!

With this frankly absurd start, it’s already 9th best-selling Switch title ever, knocking Ring Fit Adventure out of the Top 10. With less than a quarter on market. This parallels regional data, where it’s 2023’s 2nd top-selling game to date in the U.S, behind only Hogwarts Legacy, according to Circana’s latest monthly report. Oh, and that doesn’t even include digital.

Zelda will compete for best-selling title with multi-platform titles like the yet unannounced Call of Duty 2023, Hogwarts Legacy and Diablo IV plus PlayStation exclusive Marvel’s Spider-Man 2. I believe it could, even on a single platform, be the biggest premium title of 2023 if Nintendo shared its downloaded portion.

Continuing the record Q1 theme, Tears of the Kingdom sold-thru over 15.7 million in its first 8 weeks, immediately making up half of the year’s Nintendo-published software unit sales for 2023. That pushed sell-thru of 1st party Nintendo-published titles to an all-time best since Switch’s start. By a wide above the prior record holder, FY 2021, based on the graph provided.

Separately, one of the rare down notes of this report is the fact that the million sellers list only had two titles. This means the likes of Advance Wars 1+2 Re-Boot Camp, from April, and June’s Everybody 1-2 Switch both did not achieve a million sold. Not that I was upbeat on either of them, especially the latter which is probably the least I’ve seen the Switch audience excited in all its years.

The company also provided its usual updates to lifetime figures for existing titles. Mario Kart 8 Deluxe had yet another quarter over a million, bumped up by all those new Switch owners picking up Zelda, moving 1.67 million. It’s achieved the 55 million mark lifetime, settling at 55.46 million. The Legend of Zelda: Breath of the Wild benefited from the knock-on effect of a new series game, passing the 30 million mark to 30.65 million. And, while not part of this report, October 2021’s best-selling Metroid game Metroid Dread hit a new milestone: 3 million according to its developer MercurySteam.

While we see plenty of date on copies sold, there’s limited stats from the firm around player engagement. Its made-up term of Annual Playing Users, or the number of Nintendo Accounts that used the Switch in the last year, jumped up to 116 million from March’s 105 million. There’s no new data on Switch Online memberships, which totaled 36 million in September of last year.

In a new portion of the report, there’s details into the epic box office earnings of The Super Mario Bros. Movie. Since its theatrical debut in April, the film has attracted over 168 million viewers. Current global box office revenue of nearly $1.35 billion makes it the highest-grossing video game movie ever, and second most successful animated flick only to Frozen II’s $1.53 billion since 2019. Executives noted that its popularity was global, plus it drove sales of various Mario titles on Switch alongside the release.

This is something I’ve said a lot during Nintendo’s historic Switch era: how it’s hard to oversell how incredible of a quarter it was, and how deftly management continues to executive on its strategy, notably its focus on quality experiences and leveraging its legendary IP in smart ways. The fact that a movie led to Nintendo’s best Q1 to date, alongside its re-imagined Zelda approach, shows that the company continues to adapt while remaining true to its core identity.

“By expanding Nintendo IP in areas outside the dedicated video game platform we create new opportunities for consumers to encounter Nintendo IP, and this invigorates our overall business,” management wrote. “Based on the various effects that we have confirmed through the release of this movie, we will continue our efforts towards visual content-related initiatives.”

As expected early in the fiscal year, Nintendo maintained its financial and unit sales guidance for the 12 months ending March 2024. Management anticipates 10% lower annual net sales, near $10.56 billion, with operating profit in that same period declining 11% to $3.28 billion. I think there’s the potential for an upward revision soon, and I expect the company to achieve these. At least, right now.

On the hardware front, the team there anticipates shipping 15 million Switch units for the year. After the 3.9 million of Q1, that leaves only 11.1 million for the remaining three quarters. I expect a slight upward revision from the company in Q2 or Q3, to at least 16 or 16.5 million, which is right at my personal estimate of 16.5 million to 17 million.

Beyond that, it’s about time to be looking ahead to what’s next for Nintendo’s hardware business. It’s a major challenge for management, akin to moving past the Wii and we know how well that went with the disastrous Wii U. The company is in uncharted waters after Switch’s meteoric, historic success that rivals only the Nintendo DS in sales.

Just this past week, the rumor mill began swirling in earnest around a Switch successor, which I will continue to call the Super Switch until told otherwise. Video Games Chronicle and Eurogamer both claim they have sources indicating Nintendo’s next device will have a portable mode, a cartridge slot, could have an LCD screen (as opposed to OLED) in consideration of cost. No word on backward compatibility, which is a key feature question for the almost 130 million owners. Most importantly for yours truly, it’s likely targeting a 2nd half of Calendar 2024 launch. Studios making games for the device apparently have development kits as we speak.

When writing and chatting on social media, I’ve had Early 2025 as my estimate, lining up nicely with the anniversary of Switch’s March 2017 start. While I’ll keep that for the time being, it sounds like I might have to adjust that by a quarter, to Late 2024.

If that’s the case, we won’t have to wait long for more information!

As for software in the future, let’s take a glance at Nintendo’s upcoming lineup. Pikmin 4 hit stores in July, to a breakout start in Japan that points to a potential record launch for the franchise. That’s really all for its published exclusives in the quarter ending September.

October is when the product suite really ramps up, starting with Detective Pikachu Returns. Then it’s the standout title of Super Mario Bros. Wonder, scheduled for late October. Throw in WarioWare: Move It!, probably a premium Pokémon as usual, alongside a remake of Super Mario RPG in November, and these will provide ample momentum leading into the holiday months, and the latter parts of its financial year.

Both Luigi’s Mansion: Dark Moon and a new Princess Peach, yet untitled, have 2024 as the release timing in Nintendo’s material. Could they hit before the Super Switch reveal? Might they come out before fiscal year end in March 2024? Maybe. Then there’s the evasive Metroid Prime 4, still listed as TBA without any sort of information. I’m doubling down in saying that Metroid Prime 4 will be a cross gen title, launching on both current and Super Switch, alongside a premier 3D open world Mario title. Like Breath of the Wild hitting both Wii U and Switch, except with less commercial upside.

Well then, in the meantime until these new games release and Nintendo shares what it’s been cooking up for its console biz, check my earnings calendar and other recent articles for more coverage of the industry.

Thanks for reading my latest recap! It was a substantial one. Be safe, everyone.

Note: Comparisons are year-over-year unless otherwise noted. Exchange rate is based on reported average conversion: US $1 to ¥137.34

Sources: Box Office Mojo, Company Investor Relations Websites, MercurySteam.

-Dom

The Legend of Zelda: Tears of the Kingdom & Nintendo Ascend to Top of May 2023 Circana U.S. Games Sales Report

As we near the end of 2023’s first half, I’m back with another monthly sales recap!

This time, industry tracking firm Circana shared May consumer spending results across the United States games industry. As I expected when I wrote a preview last month, and what was the easiest prediction I’ve maybe ever made, Nintendo dominated the conversation and charts.

Which it often does during flagship title launches, especially in the current Switch era. This time it was the month’s best-selling The Legend of Zelda: Tears of the Kingdom hitting market in mid-May, proving to be perhaps the most popular game during a year stacked with great releases.

In the scheme of things, last month was mostly quiet in terms of quantity of premium titles. Yet the one big launch was just that: massive. Between software sales and corresponding hardware units, Tears of the Kingdom boosted total spending to double-digit growth for the first time in 2023.

All three categories of Video Game Content, Hardware and Accessories moved up, the latter two also in the double-digit range. Hardware dollar sales alone jumped over 55%.

Content saw positive contributions from full game premium software and add-on content, even with Tears of the Kingdom being the only new game among the Top 20 best sellers, however other key areas like mobile and PC suffered declines.

Hardware reflected this mainline Zelda push in that Nintendo Switch returned to win by dollars and units. It’s the first time all year the aging Switch has led on revenue. In fact, Nintendo’s hybrid console generated the most ever May month dollar sales since its launch in 2017.

“Improved PlayStation supply has been one of the most talked about stories of the market in 2023, said Circana’s Mat Piscatella on Twitter. “Every month leading into May it’s been all about PlayStation 5. This month Zelda is the big story.”

Check below for a deeper look at the data set, then a recap and predictions leading into June.

United States Games Industry Sales (April 30th – May 27th, 2023)

Overall video game sales reached $4.12 billion during May, up a strong 12% since last year. This means that for the first time since February, year-to-date spend has turned positive. It’s now at $21.83 billion, up from $21.77 billion thru the same five month period in 2022.

This positive momentum has picked up steam with better console availability and mainstream AAA releases, even as mobile continues to show weakness and subscription growth keeps slowing. People are hitting retail to buy the latest family of PlayStation devices or supplement their Switch ownership with an additional unit for family members to experience Tears of the Kingdom, the biggest global Nintendo launch on any of its storied platforms.

Content as a category, which includes software and related sales, rose 9% last month to $3.62 billion. Thus making up 89% of May’s spend, compared to 90% last year. One area of strength was retail software sales, in particular. For 2023 so far, it’s trending towards growth although not quite there. Currently, annual Content spend is down 2% to $18.73 billion. It was over $19 billion through May in 2022.

As I’ve written about extensively in recent reports, mobile spending keeps trending down. While Circana didn’t share a year-over-year comparison, Sensor Tower said in the announcement that May mobile spending was 2% lower than April. The month’s top earning mobile titles were Candy Crush Saga, Roblox, Royal Match, Gardenscapes and Homescapes.

Tears of the Kingdom comfortably led the premium software list and is immediately 2023’s second top-seller behind only Hogwarts Legacy, which has three months of sales under its belt. All of this accomplished without digital, since Nintendo doesn’t include that portion. That’s right: Using solely retail box sales, which are an increasingly smaller slice of the industry as it shifts towards downloads, Tears of the Kingdom was May’s winner and presently the year’s runner-up.

“New physical video game software spending reached its highest May total since May 2014.” said Piscatella. Not that physical really dictates where the market goes anymore. (Except for Nintendo in this context, I suppose.)

Below the aforementioned Warner Bros product Hogwarts Legacy, which ranked in second, April’s winner Star Wars Jedi: Survivor from Electronic Arts moved down to third place. Rounding out the Top 5 were a pair of sequels in Dead Island 2 and Call of Duty: Modern Warfare 2 from Embracer Group and Activision Blizzard, respectively.

Two of the month’s biggest movers were Ubisoft’s Far Cry 6 jumping back into the Top 10 plus The Legend of Zelda: Breath of the Wild returning to chart in 13th, clearly benefiting from Zelda fever.

In a fun twist, at least for us data nerds, Circana provided additional tidbits around player engagement. The team shared the most played games of May, as measured by percentage of the polled panel playing at least one of these titles in the tracked period. On PlayStation platforms, it was Fortnite, Call of Duty: Modern Warfare 2, Grand Theft Auto V, NBA 2K23 and Apex Legends. For Xbox, it’s a similar list: Fortnite, Call of Duty: Modern Warfare 2, Grand Theft Auto V, Minecraft and Roblox.

Swapping back to premium, the 2023 annual ranks so far stayed pretty stagnant except for the introduction of Tears of the Kingdom into that second slot. Resident Evil 4 Remake now rounds out the Top 5, while Dead Space Remake fell a couple spots to #9. Elden Ring is no longer among the Top 10, ever slightly below in 11th, while Forspoken is hanging on for dear life in the Top 20 at 19th.

Here’s a full look at the overall software charts, which are sorted by dollar sales.

Top-Selling Games of May 2023, U.S., All Platforms (Physical & Digital Dollar Sales):

  1. The Legend of Zelda: Tears of the Kingdom*
  2. Hogwarts Legacy
  3. Star Wars Jedi: Survivor
  4. Dead Island 2
  5. Call of Duty: Modern Warfare 2
  6. MLB: The Show 23^
  7. FIFA 23
  8. Mario Kart 8*
  9. Resident Evil 4 Remake
  10. Far Cry 6
  11. Elden Ring
  12. Minecraft
  13. The Legend of Zelda: Breath of the Wild*
  14. Super Smash Bros. Ultimate*
  15. Madden NFL 23
  16. God of War: Ragnarök
  17. New Super Mario Bros. U Deluxe*
  18. Pokémon Scarlet & Violet*
  19. LEGO Star Wars: The Skywalker Saga
  20. Super Mario 3D World + Bowser’s Fury*

Top-Selling Games of 2023 So Far, U.S., All Platforms (Physical & Digital Dollar Sales):

  1. Hogwarts Legacy
  2. The Legend of Zelda: Tears of the Kingdom*
  3. Call of Duty: Modern Warfare 2
  4. Star Wars Jedi: Survivor
  5. Resident Evil 4 Remake
  6. MLB: The Show 23^
  7. Dead Island 2
  8. FIFA 23
  9. Dead Space Remake
  10. Madden NFL 23
  11. Elden Ring
  12. The Last of Us Part 1
  13. Mario Kart 8*
  14. God of War: Ragnarök
  15. Minecraft
  16. Pokémon Scarlet & Violet*
  17. Fire Emblem Engage*
  18. Sonic Frontiers
  19. Forspoken
  20. NBA 2K23*

As the Hardware segment has done all year, it again exhibited resilience in May, completely rebounding from earlier inventory issues. Spending here skyrocketed 56% to $338 million. This leads to 2023 sales of $2.16 billion right now, or 23% higher than the $1.76 billion thru May last year.

It’s Nintendo and Sony leading the charge yet again, establishing that anyone can go out and purchase their respective consoles as hearts desire. Both companies are seeing hardware sales growth domestically, while Microsoft’s Xbox family isn’t faring nearly as well.

Nintendo Switch boosted to double digit growth since last May, securing the month’s top spot by revenue and units. I mentioned earlier this was its best May ever for dollars. In addition, this was the second best May ever for unit sales, behind only May 2020 which was near the peak of the Animal Crossing: New Horizons craze and quarantine-fueled interest in gaming at home.

Sony secured May’s second best-selling console in PlayStation 5, generating even more percentage gains than Switch. In the “triple digits” according to Circana, meaning at least double the dollar sales of May 2022. PlayStation 5 is still this year’s best-selling hardware, by both dollars and units sold, proving that Sony has been consistent in attracting players to its current generation.

The glaring omission from any performance or growth comments was Xbox Series X|S, thus its sales were lower than last May. It’s again in third place, as its top brass has repeatedly reiterated during the ongoing Microsoft vs The Federal Trade Commission (FTC) trial. In fact, the company’s gaming lead Phil Spencer outright declared that Xbox has “lost the console war.” Even if that war is a “social construct,” according to him, the referenced 16% global market share for Xbox is certainly lacking.

This year’s U.S. sales reports reinforce how Microsoft is consistently behind its peers. Never mind how its business does $16 billion a year in revenue, partially due to a shift of focus away from traditional consoles and towards services like Xbox Game Pass and cloud. But I digress.

Anyways, back to May to wrap up the last of its three major categories in Accessories.

Last month, spending across game pads, peripherals and the like moved up 14% to $159 million. It’s steadily moving upwards for 2023, now at $937 million or 3% higher than the corresponding five month period last year.

In terms of individual accessories, the premium PlayStation 5 DualSense Edge Wireless Controller in all black generated the most dollar sales during May. It’s also maintained its annual lead so far.

Echoing earlier comments around Nintendo and its contributions, The Legend of Zelda: Tears of the Kingdom Series 1 Amiibo Character Pack was May’s top-selling accessory when measured by units.

This report was one of the most straightforward in recent memory. When Nintendo puts out the follow-up to one of the best games ever made, the market tends to listen. And, importantly, spend. Zelda and Switch were the conversation in May, especially since mobile is performing so unevenly and there’s not many brand new premium titles competing for the charts.

Piscatella noted on Twitter that he sees “software getting more top heavy” which “could be tough sledding for games not at the top of the charts.” This is especially true in a modernizing industry that values evergreen, big budget titles.

There’s also subscriptions, where Circana said growth is regulating and normalizing during a user retention phase, as opposed to a user attraction period. Sounds like Xbox Game Pass and the rebranded PlayStation Plus have their base, and aren’t adding as many payers as they were in recent years.

Going forward, June will mark the end of 2023’s first half already!

At present, domestic games spending is trending to be flat for the first six months. Unless June provides a notable boost, which I don’t think it will because I see low single-digit growth, the first half of 2023 might be up a percent or two.

Within premium Content, I expect Tears of the Kingdom to have another great month as a carry-on from May. It’s the type of game that will appear in these charts all year. Just like Hogwarts Legacy has done, which will be among the best-sellers.

For new releases that can compete, I expect Diablo IV from Blizzard to be the best-selling title of June with a potential record first month for the franchise. It’s had a Hell of a start globally, the best in Blizzard’s history, and is a multi-platform juggernaut. It should easily make 2023’s Top 5 list instantly, and could compete to be the year’s top-selling premium title.

Then there’s a pair of Japanese games that will be among June’s top sellers in Capcom’s Street Fighter 6 and Square Enix’s Final Fantasy XVI.

Street Fighter 6 crossed the 1 million copies sold mark within three days of launch, and I believe will fight to a Top 5 position on the overall ranks. And even with Final Fantasy XVI launching on a single platform in PlayStation 5, I expect a similar positioning. Publisher Square Enix announced today that shipped over 3 million units globally during its initial week on sale.

Elsewhere, the F1 series is usually a quiet seller, even if not the most popular. I say F1 23 will be among the Top 15. Then, talk about quiet, there’s Nintendo’s Everybody 1-2 Switch, the successor to Switch launch game 1-2 Switch that debuts a couple days before the June tracking period ends. While I’m usually upbeat on Switch games, that’s not the case here. With it being a lower-priced title and Nintendo not sharing digital, I expect it to miss the Top 20.

For the Hardware segment, it’s going to be a classic battle between Sony and Nintendo. I’m guessing PlayStation 5 will top on revenue while Switch will win on units, the former bolstered by a major third-party exclusive in Final Fantasy XVI and the latter affected by late Tears of the Kingdom purchases.

We’ve come to the end of May’s recap, and June’s predictions. I highly recommend Piscatella’s thread for further details and insights. Check back later for more sales and industry coverage right here.

Be safe everyone. Thanks for reading!

Note: Comparisons are year-over-year unless otherwise noted.

*Digital Sales Not Included

^Xbox & Nintendo Switch Digital Sales Not Included

Sources: Circana, IGN, Nintendo, Square Enix.

-Dom

Star Wars Jedi: Survivor & PlayStation 5 Blast to the Top of April 2023 Circana U.S. Games Sales Report

It’s beautiful outside here in the Tri-State. To me, that’s the perfect opportunity for everyone to enjoy another sales recap!

This time it’s April’s domestic games industry spend report from tracking firm Circana, formerly known as The NPD Group.

Last month, a solid boost from hardware and various premium game releases weren’t enough to offset lower or flat performance elsewhere. This downward movement in key areas resulted in a 5% decline for total spending.

In fact, this past April closely resembled last year’s headlines.

At that time, Lego Star Wars: The Skywalker Saga was the top-selling game. Hardware also generated growth, although overall sales dipped in the high single-digits.

This year it’s Star Wars Jedi: Survivor blasting to the top of the premium software charts. Unfortunately, every sub-section within Video Game Content except for non-mobile subscription sales exhibited declines, meaning that even with new launches, people spent less on gaming.

Just like last year, Video Game Hardware was the only category to move upward in April, bolstered by big gains from Sony’s PlayStation 5, the month’s best seller by revenue, and Nintendo Switch which led by units sold.

“It’s good to see all the new games in the Top 20,” wrote Circana’s Mat Piscatella. “But Lego Star Wars: The Skywalker Saga and Elden Ring provided a tough year ago comparison.”

There were certainly good signals, like consistency in console supply and a healthy number of AAA title launches. Still, mobile continued to struggle, Xbox is nowhere to be found plus inflationary pressure in the market remained. Folks chose other forms of entertainment, perhaps adjacent to gaming like seeing an awesome The Super Mario Bros. Movie, or simply went outside to touch grass, basking in the burgeoning springtime weather.

Historically, April was still a solid result even for overall sales. Here’s a closer look at these monthly figures and, further down, a set of predictions as the industry looks ahead to a Zelda-filled May.

United States Games Industry Sales (April 2nd – April 29th, 2023)

Referencing the above gallery, in totality, people spent $4.12 billion in games during April which is 5% less than the same month in 2022. The annual spend amount is currently trending down a modest 2%, to $17.71 billion. That’s actually a marked improvement since the first quarter as I wrote about in March, when the annual figure was trending towards 5% lower.

April was already the third month this year to experience a decline. The only exception was February due to a substantial boost from Hogwarts Legacy. Last month’s soft result was attributed to a decline in the broadest category of Content, which includes software, add-on, subscription and related spending. Essentially, while people bought more consoles, they spent less on the things they play on those devices. Peripheral spending was consistent, at least.

Focusing on the Content segment, sales dipped 6% in April to $3.6 billion. This means it made up 87% of the overall figure, compared to 88% last year. Within 2023 to date, Content sales are currently down 4%, to $15.11 billion.

Mobile contributes a major portion of Content sales, and Circana’s report said that spending trends were “relatively stable” compared to March. This doesn’t tell a whole lot. All we know is mobile is one of the sub-categories that declined year-on-year because, unfortunately, the report doesn’t get more granular. The top five earners for mobile during April were Candy Crush Saga, Roblox, Royal Match, Coin Master and Gardenscapes.

The story within premium software was new games. Titles launched in April occupied seven of the Top 15 slots on the overall chart.

Star Wars Jedi: Survivor leading April was a super impressive win for Respawn Entertainment and Electronic Arts, considering it went on sale two days before the tracking period ended. Even with that short amount of time, it’s already the 4th best-selling title of 2023. As a quick comparison, its predecessor Star Wars Jedi: Fallen Order launched in second behind only Call of Duty: Modern Warfare in November 2019 during a hectic pre-holiday rush.

April’s runner-up was Dead Island 2, another new launch. It’s a great start for the long-awaited zombie slasher from Dambuster Studios and Deep Silver, which is immediately the year’s 6th best-selling game. This domestic performance reflects its global success, as it sold over a million units within three days on market. Way back in September 2011, the original Dead Island started in 3rd.

Further down, Electronic Arts had another Top 10 finisher in April with PGA Tour at #7. Capcom’s popular Mega Man Battle Network, which surpassed 1 million units globally as the fastest-selling title in Mega Man history, ranked at #8. The latter was the month’s top-selling title on Nintendo Switch as a platform.

In a rare appearance for Microsoft’s Xbox brand, Minecraft Legends started in 11th place. Compare this position to Minecraft Dungeons, which debuted in 15th back in May 2020. These are certainly impacted by the lack of Xbox Game Pass in these kinds of charts, because it’s not realistic to break out spending for individual titles on the service.

The last of the new releases in April were Final Fantasy I-VI Bundle from Square Enix at #14 then Nintendo’s Advance Wars 1+2 Re-Boot Camp one spot down at #15. While the latter’s performance seems lackluster at first, it’s actually pretty good since Nintendo doesn’t share digital. It was the month’s 3rd best-selling title on Switch.

For the 2023 ranks to date, the main movement happened because of Star Wars Jedi: Survivor and Dead Island 2 slotting high on the list, thus pushing two PlayStation console exclusives out of the Top 10: The Last of Us Part 1 and God of War: Ragnarök.

Check out the full charts below.

Top-Selling Games of April 2023, U.S., All Platforms (Physical & Digital Dollar Sales):

  1. Star Wars Jedi: Survivor
  2. Dead Island 2
  3. MLB: The Show 23^
  4. Resident Evil 4
  5. Call of Duty: Modern Warfare 2
  6. Hogwarts Legacy
  7. PGA Tour 2023
  8. Mega Man Battle Network Legacy Collection
  9. FIFA 23
  10. Mario Kart 8*
  11. Minecraft Legends
  12. Elden Ring
  13. Minecraft
  14. Final Fantasy I-VI Bundle
  15. Advance Wars 1+2: Re-Boot Camp*
  16. New Super Mario Bros.*
  17. The Last of Us Part 1
  18. Pokémon Scarlet & Violet*
  19. Madden NFL 23
  20. Super Mario 3D World + Bowser’s Fury*

Top-Selling Games of 2023 So Far, U.S., All Platforms (Physical & Digital Dollar Sales):

  1. Hogwarts Legacy
  2. Call of Duty: Modern Warfare 2
  3. Resident Evil 4
  4. Star Wars Jedi: Survivor
  5. MLB: The Show 23^
  6. Dead Island 2
  7. Dead Space Remake
  8. FIFA 23
  9. Madden NFL 23
  10. Elden Ring
  11. The Last of Us Part 1
  12. God of War: Ragnarök
  13. Mario Kart 8*
  14. Minecraft
  15. Pokémon Scarlet & Violet*
  16. Fire Emblem Engage*
  17. Forspoken
  18. Sonic Frontiers
  19. Octopath Traveler II
  20. NBA 2K23*

Hardware continued as the bright spot in April’s announcement, as it’s been lately due to stock being consistent and ongoing demand from potential buyers. This segment grew 7% last month to $367 million. It’s up 18% for the year to date, earning upwards of $1.82 billion.

Driving April’s bump were double-digit dollar gains for both PlayStation 5 and Nintendo Switch, as compared to the corresponding time in 2022. PlayStation 5 clearly continued its momentum from March, when it moved past PlayStation 4 sales when launch-aligned here in the States, leading the company to achieve its global annual hardware target when it reported fiscal results recently.

Importantly for this consumer report, not only are inventories present, people are consistently looking to snatch up both consoles to play aforementioned new releases and evergreen experiences alike. The $367 million of April is the best hardware spend for an April month since around the start of the pandemic in 2020, when it was $420 million.

When measured by dollars generated, PlayStation 5 was top dog for April driven by its loftier price tag. Nintendo Switch came in second place by this metric.

Flip that around if using units as the measure: Nintendo Switch sold the most units, while PlayStation 5 was runner-up. This is mainly due to the introduction of The Legend of Zelda: Tears of the Kingdom’s OLED model, which had a “very strong” start according to Piscatella.

Expanding to 2023 right now, PlayStation 5 is currently leading by both dollar sales and units moved. As it’s easy to see, Nintendo Switch is second by both of those.

What’s also clear is a distinct lack of contribution from the consistently-third-place Xbox Series X|S. While it’s partly because of Microsoft’s shift away from a hardware focus towards ecosystem and subscription, I’m slowly becoming more concerned with Xbox’s performance as compared to peers. Console sales are moving in the wrong direction, even alongside Nintendo’s long-in-the-tooth Switch.

CEO of Microsoft Gaming Phil Spencer made some rather divisive comments recently in an interview with Kinda Funny, discussing the brand’s current spot within the industry and hardware cycle. I commend Spencer for fielding questions at a tricky time for Xbox, with declining console revenue and a disastrous start for Redfall. What irked me is two-fold. He’s been singing a similar “we have to do better” tone for years, even generations, now. The trajectory isn’t great, even if there are momentary high points like Forza Horizon 5 and Hi-Fi RUSH. Then, certain quotes here have a defeatist slant which is never something people want to hear from a brand’s ambassador.

The boss man seemed almost reserved to the fact that Xbox isn’t picking up market share. Sure, there’s no silver bullet that will turn the tide. Yet lacking a consistent output of exclusive titles and not appealing to the core gamer is unacceptable. I’d love to see a media outlet dig into the underlying fundamentals of the business, hardware in particular, because supply should no longer be an issue. Its earnings reports and regional results imply consumers are balking at picking up Xboxes, which is quite concerning even if that’s the smaller portion of Microsoft’s gaming revenue.

Alright. Rant over. Back to my regularly-scheduled conclusion of April’s recap.

The final segment of Accessories was, somehow, exactly the same as last year’s monthly figure at this time: $158 million. This means it turned positive for 2023 to date, moving up 1% to $779 million.

While not as pronounced, Accessories are running somewhat parallel to how Hardware is faring. Plus, it’s feeling the impact of premium peripherals. The higher-priced PlayStation 5 DualSense Edge Wireless controller in black repeated as the monthly best-seller. The premium pad is also 2023’s top-selling accessory right now.

Similar to the past couple months since its debut, there’s no mention of Sony’s PlayStation VR2. February’s release for the device looks much more like a soft launch now, both literally and commercially, mainly because it’s currently available only via Sony’s own storefront.

Last month’s general performance was decent, even if it’s the second straight yearly decline for an April month since maxing out back in 2021. It was a good time for big hitters like Star Wars and Dead Island franchises, plus Sony and Nintendo benefited from an improving hardware environment.

Personally, I’m keeping a close eye on mobile to determine when, or if, it can bounce back to provide a net benefit to content output. Right now, the industry is mainly being supported by blockbuster launches and console availability, especially as subscription spend normalizes and matures.

Shifting focus towards May, this might be the easiest prediction segment I write all year:

It’s Nintendo’s time to shine. (Zel-duh.)

For Hardware as a category, Switch is fully set to break PlayStation 5’s currently monthly streak on dollar sales, as I expect the hybrid device to lead by both revenue and units.

The Legend of Zelda: Tears of the Kingdom will undoubtedly be May’s best-selling software, even without digital. I mean, it’s already sold 10 million units during its first weekend alone, 4 million of which was in the Americas. The only other title on a Nintendo platform to ever reach the 10 million threshold in three days was November 2022’s Pokémon Scarlet & Violet, and that’s really two games counted as one!

This means that Tears of the Kingdom is not only the biggest Zelda launch of all time, beating out its predecessor, it’s the single fastest-selling software on a Nintendo platform in the history of Nintendo platforms.

What other new launches might chart? Take-Two Interactive’s LEGO 2K Drive is an intriguing one later this week, as I see Top 10 potential on the brand recognition alone. I don’t think the aforementioned Redfall from Xbox & Bethesda has even a remote chance, and I’m pessimistic on Daedalic Entertainment’s The Lord of the Rings: Gollum as well. Most publishers smartly moved out of Nintendo’s way.

Within Accessories, the official retail launch of PlayStation VR 2 could bump up the accessories portion. Will it? I’m not sure, though I’d bet spending will at least be flat again.

All of this will lead to overall domestic spending growth in May, I’d say in the mid-single digits with upside into the teens.

“May should be fun,” Piscatella said, sharing my sentiment. “Subscription growth continues to slow. PlayStation VR2 coming to retail [is] happening not a moment too soon.”

I recommend checking out his Twitter thread for Circana’s full report. Until next time, be well everyone. Thanks for reading!

*Digital Sales Not Included

^Xbox & Nintendo Switch Digital Sales Not Included

Sources: Capcom, Circana, Kinda Funny, Nintendo.

-Dom

Nintendo 2023 Q3 Report Shows Switch Lifetime Sales Passing 122M to Become 3rd Best-Selling Gaming Hardware Ever

It’s time for the last holiday recap of the big three gaming console makers, as I’ve previously covered a shaky quarter for Microsoft and Sony’s record-setting result.

Nintendo posted its third quarter fiscal 2023 announcement in Japan today. The company’s still exhibiting strength when compared to most recent years, though exercising caution going forward into the same tricky macroeconomic environment that many consumer tech firms are facing.

While hardware shipments are slowing as Switch moves towards its sixth birthday next month, the hybrid reached a new milestone this quarter and passed the sales of two legendary devices in the process.

The company shipped 8.25 million Switch units in the three months ending December, now achieving 122.55 million across its lifetime. That moves it above Sony’s PlayStation 4 and Nintendo’s own Game Boy/Game Boy Color which reached 117.2 million and 118.69 million, respectively.

It’s now behind only PlayStation 2 and Nintendo’s DS handheld line on the all-time list, making it the 3rd best-selling gaming hardware to date. It’s technically 2nd on both home console and portable lists if breaking them out individually. I don’t remember anyone saying this would happen when it launched back in 2017. I was among the most upbeat on its prospects. This is the type of monumental run that’s near impossible to predict.

Also contributing to Nintendo’s solid quarter was the historic launch of Pokémon Scarlet & Violet. After shipping an unreal 10 million units during its first three days on market, it’s now crossed another milestone at 20.61 million shipped between its November start and year-end.

Not only is this the fastest-selling Pokémon release ever, it has better initial sales than any game ever released on a dedicated Nintendo device. This monstrous start makes it already seventh place on the Switch best-sellers list, outpacing huge catalog titles like Super Mario Party and Ring Fit Adventure.

“For the months of October through December 2022 which encompass the holiday season, the effects of shortages of semiconductors and other components was largely resolved, and shipments generally went according to plan,” management said in prepared remarks. “However, unit sales were down compared to the same period last year, when Nintendo Switch – OLED Model was released.”

“Shipment volumes for software generally went according to plan. The release of new titles including Pokémon Scarlet and Pokémon Violet contributed to unit sales, but overall software unit sales declined year-on-year, affected to an extent by the decline in hardware sales.”

Even with generally softer hardware output, Nintendo’s top-line is proving resilient when scanning the past decade. Especially considering the sort of inflationary pressures facing consumers and a lineup lacking major titles outside of Pokémon. I’ll now move into the underlying numbers, then a look ahead to guidance and predictions for the months ahead.

I pulled the above gallery of slides from Nintendo’s Q3 report, where it showcases 9-month performance in the period ending December. I’ll back into the quarterly figures, then illustrate trends over a longer period of time as well.

Revenue for the three months ending December 2022 came in at $4.68 billion, down 8% since last holiday. Operating profit experienced a more precipitous dip, moving down 25% to $1.39 billion. Two of my charts in the next section map out movement over time.

Taking this into account, sales for the fiscal year to date have declined a modest 2% to $9.5 billion. Income from operations is trending down 13%, to $3 billion.

Executives said sales dipped slightly despite the yen’s depreciation, primarily because of semiconductor shortages in the earlier quarters and component parts impacting hardware supply. Still, that top-line figure is more resilient than expected, achieving the second best Q3 sales since back in fiscal 2010. Even quarterly operating profit is the third best since that same year, despite the recent double-digit decline. Demand for a spanking new Pokémon generation certainly helped.

I’ll now dig into the current product category mix that impacted last quarter. Leading the charge was Hardware, at nearly 51% of the split. Compare that to 54% this time last year, when Nintendo was shipping more units to retailers. This means software moved from 46% during last year’s December quarter to 49% now, bolstered by the proportion from first-party being 85% of the total. From a geographic standpoint, Americas is 43%, the same as last year. Nearly 25% of Nintendo’s sales came from Europe, down from 27%. Japan made up most of the difference, contributing 24% versus last year’s 21%.

Expanding to see how the latest quarter affects annual sales, check out the second set of charts in the next gallery. Nintendo’s annual sales are currently trending towards $12.25 billion, effectively flat year-on-year. It’s been hovering around a similar value since mid-fiscal 2021. Which proves that, even with a down quarter, annual revenue has been consistent. On the other hand, annualized operating profit dipped to its lowest level in ten quarters, at $3.9 billion. Higher expenses and the yen’s movement are its biggest headwinds.

Similar to recent articles, I’ll list a quick comparison to industry peers. Tencent is the world’s biggest gaming company by sales, currently at $25.8 billion. PlayStation’s record holiday led to $22.84 billion in annualized revenue, its best to date. Microsoft ranks next at $15.56 billion, though could be upwards of $19 billion to $20 billion if it acquires Activision Blizzard this year. That’s based on the latter’s $7.53 billion annual figure reported yesterday, accounting for overlap and redundancies. Nintendo slots here at $12.25 billion, noticeably hamstrung by recent exchange rate shifts. However, Nintendo is currently more profitable than Sony’s PlayStation division when using the latest 12 months, earning $3.9 billion compared to $2.11 billion. Likely due to the cost of producing more PlayStation 5’s and developing AAA titles like God of War Ragnarök.

On the hardware front, this segment continues to cool. Although Switch is showing its age from both a commercial and spec standpoint, it’s still not quite near the end of its life just yet. Nintendo is committed to this device, and is still planning out its transition to the next one.

Unit shipments for Switch during the three months ending December totaled 8.25 million, compared to 10.67 million last holiday, or 23% lower. That brought the current 9-month total for this fiscal year to 14.91 million. At this same point in fiscal 2022, the figure was 18.95 million which implies a 21% decline. Interestingly, that’s the same percentage decline between 2021 and 2022.

Out of the units shipped through Q3 this year, 5.22 million were base model Switch. That’s down a whopping 56%, mainly because of the shift towards the OLED model being the standard version. The OLED model shipped 7.69 million in the last 9 months, nearly double the 3.99 million of its debut year since it started in October 2021. As for the Lite counterpart, sales through the third quarter declined 37% to 2 million units.

Referencing the aforementioned lifetime figure of 122.55 million, it’s approaching all-time best-selling gaming console territory. Can Switch really become the top seller? Well, it would have to beat out two devices in order to earn the crown. Which is a tall order.

After launching in 2004, Nintendo DS ended its life years later as the best-selling handheld device ever, achieving 154.02 million in sales. Almost two decades later, no portable has even come close. Then, the all-time leader right now is Sony’s PlayStation 2, which hit stores in 2000 and skyrocketed to 159 million throughout its tenure. Thus, Nintendo has to ship between 31.47 million and 32.45 million more Switch to reach these heights. If Switch’s successor launches in Late 2024 or Early 2025, that leaves seven to eight quarters for this to happen. An average of 4 to 4.5 million per quarter. While I do think it’s probably attainable, I don’t think I’d bet on it.

Shifting back to this recent report, Nintendo shared insight into numbers around Switch sell-thru to consumers. (Until now in this article, I’ve been talking about units shipped to retailers.) Executives say that people continue to have a “diversification of motives” for purchase, which includes first-time buyers or upgrades to OLED. Even so, sell-thru declined compared to last year, as it did in 2022 as well since it’s been trending downward after peaking during quarantine days.

It stands to reason that, while there’s still an appeal to grab a Switch especially at a retailer discount, fewer people are doing so which signals a nearly saturated market. Combine that with inventory difficulties and a lower average selling price, and we’re seeing a natural downswing in units produced plus revenue generated.

Software shipment data held stronger than hardware for Nintendo, mainly because of just how much demand there was for Pokémon and certain legacy titles reached new sales thresholds.

During the quarter, Switch software sales totaled 76.71 million. Compare that to 85.41 million units last year, thus a 10% decline. Across the three quarters ending December, software units were 172.11 million, down 4% against last year’s 179.29 million.

Software sales over Switch’s lifetime are drawing toward an incredible milestone. Last quarter, overall Switch software was at 917.59 million. Now, it’s 994.3 million. Nearly one billion games sold for the device since 2017! It’s likely cleared that by now, and we’ll know by exactly how much when the company reports next quarter.

During the latest 9-month period, the hybrid featured 27 titles that have sold a million units or more within that time period. Out of that, 19 were published by Nintendo. The remainder were third-party titles. Over the same length of time in fiscal 2022, the amount was 29 in total, 22 of which were Nintendo. Quality software remains the major appeal for Switch, even if existing users are purchasing them as opposed to new console owners.

November’s Pokémon Scarlet & Violet drove today’s results, as mentioned. It’s sold-thru 18.2 million copies to consumers over seven weeks. As if it wasn’t clear how ridiculous its start was, this stat will really put it into perspective: After mere weeks on sale, these are already the fourth best-selling titles ever in the franchise. That’s across all releases since Pokémon Red & Blue kicked things off in the mid-90s! I expect by the end of Switch’s time, it could be the best-selling Pokémon to date. We’re talking one of the biggest entertainment franchises in history! Truly unreal.

Bayonetta 3 hit stores in October as the other new release, and it’s officially a million seller. Developed in conjunction with Platinum Games, the action title started at a hair over 1 million, reaching 1.04 million during the period. That’s equivalent to lifetime sales of its predecessor’s port onto Switch, which hit the platform in February 2018.

Beyond the brand new games, Nintendo provided updates to those launched in earlier quarters during fiscal 2023. Splatoon 3, which splattered series records with its 7.9 million unit start back in September, has since passed the 10 million milestone, settling at 10.13 million. June’s Nintendo Switch Sports sold-in an additional 2.46 million units in the holiday months, scoring 8.61 million to date.

Additionally, the best-selling racing game ever in Mario Kart 8 Deluxe sped past yet another mile marker this quarter. This time it’s the 50 million mark! Shipping 3.59 million units in Q3, it’s now at exactly 52 million lifetime. Two other high sellers achieved new milestones as Super Smash Bros. Ultimate smashed 30 million and Super Mario Odyssey jumped past 25 million, to 30.44 million and 25.12 million respectively.

Beyond software sales numbers, Nintendo tends to give tidbits around engagement and user base statistics. Back in September, Nintendo Switch Online reached 36 million paid members. I’ll update this section if the company shares an updated figure. Otherwise, the “statistic” of Annual Playing Users, which measures the number of accounts that have opened a single Switch game over the past 12 months, rose to an all-time high of 112 million in December. It was 106 million in Q2. So, the vast majority of Switch owners still use it at least once a year. Shocking revelation!

Despite the outlined financial and unit sales reductions, Nintendo had quite an impressive third quarter as compared to recent years. Especially for revenue. Nintendo Switch beat out two iconic gaming device families for lifetime sales and Pokémon Scarlet & Violet had a frankly ridiculous performance. No doubt there are signals that parts of its business are coming down off recent highs, yet Nintendo has the sort of quality software lineup to soften the blows of hardware slowdowns.

Moving into the final quarter of its fiscal 2023 period, management shared updated guidance in today’s announcement. This is where a bit of nervousness creeps in, yet I’m not as concerned for the overall health of Nintendo’s trajectory. Especially given where it was during the dire straits of the Wii U years, this looks almost as rosy as ever.

Intriguingly, just after raising financial targets last quarter, executives reverted back to lower estimates this period. They adjusted their revenue forecast down 3% to $11.73 billion, implying a 6% decline since last fiscal year. Similarly, operating profit guidance was revised downward 4% to $3.52 billion. Even so, these updated figures would be the third best annual results since fiscal 2010.

Then for the second quarter in a row, Nintendo reduced annual Switch shipment guidance. Management now anticipates 18 million shipments, down 5% from Q2’s 19 million. That means the firm has to produce 3.09 million between January and March to end the fiscal period. Personally, I think it’s now a bit too conservative. My bet is it beats the target, moving upwards of 19 to 19.5 million, which is slightly below my target from three months ago.

Along the same lines, Nintendo lowered its annual software estimate 5 million units, or 2%, to 205 million. This is where I’m more skeptical, mainly because of a light slate in the three months ending March. A good portion of the 32.89 million needed this quarter to achieve that target has to be follow-on sales of things like Pokémon and Mario Kart. New releases that will also drive this include Fire Emblem Engage, which launched a couple weeks back, Kirby’s Return to Dream Land Deluxe later this month then March’s Bayonetta Origins: Cereza and the Lost Demon. These aren’t chart-toppers or anything.

One lingering question of course is might Advance Wars 1+2: Re-Boot Camp launch in the coming months? While Nintendo still has it as TBA in its reporting, alongside the likes of Metroid Prime 4, there’s speculation recently based on retailers that it could hit market soon, which could bump up software results. I remain cautious, the same way I’m thinking Nintendo will narrowly miss its latest annual software sales guidance.

“Sell-in of hardware units during the third quarter was generally in line with expectations,” management said. “However, hardware sell-through during the holiday season did not perform as expected, and therefore the unit sales forecast for the fourth quarter has been modified. The software unit sales forecast has been modified as well, largely due to taking into consideration the modification of the hardware unit sales forecast.”

Near the beginning of next fiscal year, May’s The Legend of Zelda: Tears of the Kingdom is clearly the biggest launch for Nintendo in quite some time. It will be a massive success and compete for best-selling premium title of the year globally and in areas like Japan, though perhaps not domestically on The NPD Group’s lists since Nintendo doesn’t share digital sales here.

In an exceptional bit of news that bucks the industry trend lately, as many firms are laying off workers, Nintendo plans to raise employee salaries by 10% for those that work in Japan. Reuters reports this decision by management as inflation grips the local economy. While it will certainly increase costs, it’s the right way to maintain talent that drives its best-in-class output.

To showcase that output, the company is hosting its first Nintendo Direct of 2023 tomorrow. The 40-minute long presentation will primarily focus on Switch titles launching in the first half of the calendar year. I’m looking forward to seeing what’s there for Zelda, which ports Nintendo announces and any indication of future first-party announcements in what might very well be the final year of Switch.

Time flies!

Speaking of having fun, thus ends my latest big results recap of the season. What is your initial reaction to Nintendo’s results? Have you bought a Switch and contributed to that lifetime total? Will it reach that annual target? Are you betting it will be the best-selling console of all time eventually?

For now, feel free to leave a comment or hit me up on social media. Remember my earnings calendar thread for companies reporting this quarter across gaming, technology and media. Thanks as always for reading! All the best.

Note: Comparisons are year-over-year unless otherwise mentioned. Exchange rate is based on reported average conversion: US $1 to ¥136.39.

Sources: Company Investor Relations Websites, NBC News (Image Credit), Reuters.

-Dom

Annual U.S. Games Industry Consumer Spending Declines 5% in Final NPD Group Sales Report of 2022

Better late than never!

Data firm The NPD Group has shared its final games industry sales report for 2022 tracking spending in the United States. Within, it showed a modest sales decline since last year. Mostly expected during the start of a regression towards pre-pandemic values after an all-time best the prior year. There was resilience in the final quarter as bigger games hit market and supply concerns eased, minimizing the downward movement and making 2022’s $56.6 billion the second best year on record behind 2021’s $59.6 billion.

Not bad, all things considered.

During this piece, I’ll recap both the most recent monthly results and annual figures. Buckle up for an in-depth read.

December was one of the brighter reports compared to earlier months, ending a fourth quarter recovery that made full year figures look much better. The big holiday period was the second straight month where total spending increased, after a number of months either down or flat.

That’s even considering a very slight decline in the major category of Video Game Content, which measures software, mobile, subscriptions and related spending. Call of Duty, Pokémon and Madden NFL led the charge here, as often happens. For Video Game Hardware, the only category that grow in 2022 to a best-ever result, Sony’s PlayStation 5 console and Nintendo’s hybrid Switch both spent time atop the monthly rankings.

“Factors impacting 2022 spending included continued supply constraints of console hardware, a relatively light slate of new premium releases and macroeconomic conditions,” said The NPD Group’s Mat Piscatella.

As I’ve covered in the past, 2021 was the height of pandemic spending for many regions, including the States. 2022 proved to be the anticipated regression towards more normalized results, exacerbated by mobile weakness and inflationary pressure on people’s wallets. Still, Q4 showed there’s still substantial demand for big budget premium games and new hardware when it’s actually available at retail.

There’s also the cultural touchstone that was Elden Ring, nearly out-earning Call of Duty, which broke into the mainstream zeitgeist more than any FromSoftware game could ever do in the past. Combine that with annualized sports releases, a dual launch year for Pokémon and exceptional showings from Sony-published exclusives, and premium gaming helped offset mobile’s under-performance.

Check below for a full recap of each category last year and a look forward towards 2023.

United States Games Industry Sales (November 27th, 2022 – December 31st, 2022)

Total consumer spend on gaming within the U.S. rose 2% in December, to $7.58 billion. Driven by double-digit gains in the hardware category that more than offset losses elsewhere. This fits the growing trend along with October’s plateau and November’s increase towards growth.

That strength in the final quarter pumped up full year spending to $56.6 billion, which ended up being down 5% compared to 2021. Growth areas like console and subscriptions weren’t enough to out-gain losses in premium software and mobile, also hurting due to macro pressures like inflation.

The largest category of Content dipped a modest 1% in December, down to $5.55 billion. Which means it made up 73% of overall monthly spending, compared to 75% in November. Holiday demand and mobile regaining footing contributed towards the upside.

Speaking of mobile, this sub-segment returned to growth in December as geolocation, simulation, action and shooters gained ground. Still, 2022 became the first 12 months in tracked history where people spent less than the prior year on mobile. Shooters exhibited a most precipitous decline at 26% while casino gains proved popular, moving up 1%. Candy Crush Saga, Roblox and Coin Master were the year’s Top 3 earners here.

Call of Duty: Modern Warfare 2 repeated as December’s best-seller on the premium list, which it’s done each month since October’s launch. This led to Activision Blizzard’s military shooter earning the top spot on 2022’s overall rankings as well, as I predicted. That marks a staggering 14 consecutive years where a Call of Duty game was the country’s best-selling title.

Familiar faces continued on the premium best-sellers list for December as Pokémon Scarlet & Violet and God of War: Ragnarök generated the 2nd and 3rd most dollar sales, in that order. Elden Ring benefited from solid demand during the holiday season, returning to the Top 10 at #7.

Late year launches Need for Speed: Unbound and Crisis Core: Final Fantasy VII: Reunion started in 8th and 10th, respectively, a quite good showing considering the heavy hitters around it. The only other new title Callisto Protocol under-performed in 17th place, partially because its digital portion was not included. Even if downloads were considered, I’m skeptical it would have cracked the Top 10.

As mentioned before, Call of Duty: Modern Warfare 2 was the year’s best-seller. In fact, there were two Call of Duty entries among the Top 12 as people somehow retained interest in 2021’s Call of Duty: Vanguard. Then, Elden Ring and Madden NFL 23 rounded out the Top 3 for 2022. Sony’s PlayStation publishing arm had a sensational year with three single-platform games in the Top 13 and another developed title in the Top 10. God of War: Ragnarök finished ahead of bellwethers like Pokémon and FIFA while Horizon Forbidden West and MLB: The Show 22 scored Top 10 spots. Other observations include over-performance of Nintendo’s Kirby and the Forgotten Land floating to #14 and Sega’s Sonic Frontiers speeding up to #16.

Here’s a full look at the software lists for December and 2022 overall, including our first look at the top-grossing mobile titles.

Top-Selling Games of December 2022, U.S., All Platforms (Physical & Digital Dollar Sales):

  1. Call of Duty: Modern Warfare 2
  2. Pokémon Scarlet & Violet*
  3. God of War Ragnarök
  4. Madden NFL 23
  5. FIFA 23
  6. Sonic Frontiers
  7. Elden Ring
  8. Need for Speed Unbound
  9. Mario Kart 8*
  10. Crisis Core: Final Fantasy VII: Reunion
  11. NBA 2K23*
  12. Just Dance 2023
  13. Mario + Rabbids: Sparks of Hope
  14. Minecraft
  15. Super Smash Bros. Ultimate*
  16. Nintendo Switch Sports*
  17. The Callisto Protocol*
  18. Animal Crossing: New Horizons*
  19. Splatoon 3*
  20. Gotham Knights

Top-Selling Games of 2022, U.S., All Platforms (Physical & Digital Dollar Sales):

  1. Call of Duty: Modern Warfare 2
  2. Elden Ring
  3. Madden NFL 23
  4. God of War Ragnarök
  5. Lego Star Wars: The Skywalker Saga
  6. Pokémon Scarlet & Violet*
  7. FIFA 23
  8. Pokémon Legends Arceus
  9. Horizon Forbidden West
  10. MLB: The Show 22^
  11. Mario Kart 8*
  12. Call of Duty: Vanguard
  13. Gran Turismo 7
  14. Kirby and the Forgotten Land*
  15. NBA 2K23*
  16. Sonic Frontiers
  17. Gotham Knights
  18. Minecraft
  19. Nintendo Switch Sports*
  20. Super Smash Bros. Ultimate*

Top-Selling Games of 2022, U.S., Mobile (Top Grossing):

  1. Candy Crush Saga
  2. Roblox
  3. Coin Master
  4. Royal Match
  5. Pokémon Go
  6. Evony
  7. Clash of Clans
  8. Homescapes
  9. Bingo Blitz – BINGO Games
  10. Jackpot Party – Casino Slots

The Hardware category is up next, as December generated upwards of 16% growth to $1.53 billion. I believe this might have been a record December month for the console category as inventories flooded the market during the holiday rush, notably from Sony’s suppliers. It also proves that demand is constant at this point in the cycle, which it really should be.

Expanding to the last 12 months as a whole, Hardware sales reached $6.57 billion, jumping up from $6.1 billion in 2021. The NPD Group did say this amount was an all-time best, an incredible achievement considering how slow this segment began the year.

PlayStation 5 leveraged better inventory to become the best-selling console by dollar sales during both December and 2022 as a whole. It was the first year since the new console generation in 2020 that Nintendo Switch didn’t lead on revenue. Big budget IP like God of War and Horizon plus a premium racing game in Gran Turismo 7 bolstered the console, alongside its higher price point that lifted up the revenue side. In the back half especially, Sony’s suppliers seemed to be the best at adapting in this supply environment to secure enough shipments to satisfy pent-up demand.

Even so, Nintendo Switch did win December and 2022 when measured by units, boosted by its more attractive cost and appeal to households that want more than one gaming device. While it didn’t have any pure flagship titles outside of Pokémon, a series which somehow launched two best-sellers in Pokémon Legends Arceus and Pokémon Scarlet & Violet, Nintendo always produces high quality titles that strengthen system sales as series like Kirby and Switch Sports amplified the lineup.

While the Xbox Series X|S came in third place during December and the year on all metrics, it held its own during a tough time for consoles. Microsoft continually cited how it had the best start of any Xbox console in history, albeit at a global scale. There were a few months in 2022 when it achieved second place, though its Series X model in particular seemed to be hit especially hard by supply challenges. The Series S doesn’t generate as much revenue, so Xbox doesn’t compete as much when it comes to monthly best-sellers even in its home market. Not to mention, its slate of first-party software was sparse, which didn’t help.

The general tone of the console business turned quite upbeat as the year went on, ending with a great December and up nearly double-digits for 2022. It’s also a positive sign of things to come, as I’m turning bullish on this portion of the market.

The final segment of Video Game Accessories saw the biggest declines during both December and 2022 as a whole. Last month, spending here dipped 2% to $503 million.

Unfortunately, The NPD Group didn’t share which accessory was the best-selling of the month. Lately it’s been a version of the PlayStation 5 DualSense controller, however there’s a chance that an Xbox game pad took home the win. I have a question out to the team for comment.

It follows that for the year, spending in this category fell 8% to $2.51 billion. Microsoft’s Xbox Elite Series 2 Wireless Controller ended 2022 as the year’s best-seller here, a popular upgrade choice for core players that benefits in comparisons like this because of a hefty price tag.

That’s a wrap on the final domestic sales report of 2022. It was a transitory year for the industry, as certain areas returned towards the mean while others under-performed. Mobile weakness, less premium AAA launches and a seemingly lower tie rate for peripherals all put pressure on the final figures. That said, historically it was still the second best annual spending in history so the industry is doing just fine. Easing supply concerns in the latter parts of the year and select premium titles helped keep the result high compared to prior years, even the likes of 2020.

“2022 finished strong, with improving performance in the category compared to a year ago following the May 2022 lows.” Piscatella said on LinkedIn. “With improving supply of console hardware – and a highly anticipated slate of new releases – 2023 looks like it could be a great year for the market.”

Looking ahead to the coming months, I wrote up a general 2023 predictions article earlier in the month. I’ll recap some of those points and touch on more domestic predictions.

When it comes to the overall consumer spending number for this year, I’m looking at virtually flat or an increase in the low single-digits. Assuming a 3% rise would bring 2023 sales to around $58.3 billion. I’m not anticipating another down year for mobile, and a more robust content calendar for AAA releases will bump premium output. Combine this with hardware availability and I’m thinking buyers will spend about what they did last year.

I’m forecasting Content will also be flat or up slightly. It starts with mobile, which should rebound, and continues with a busier software lineup than 2022. On the premium side, depending who you believe, there might be another annual Call of Duty title which I expect to be the best-seller if it does come out. Shoot, Call of Duty: Modern Warfare 2 could even repeat if it has a substantial expansion attached to it instead.

Other contenders include sports titles, of course. This year’s Madden game, in particular. In the next couple months, Hogwarts Legacy and Star Wars Jedi: Survivor will be massive and both will compete for a Top 5 finish. Nintendo’s major release is The Legend of Zelda: Tears of the Kingdom, slated for May, and should be Switch’s annual best-seller even if another Pokémon hits market. Sony’s flagship is Marvel’s Spider-Man 2, listed for launch in the Fall, which will set records for a PlayStation exclusive launch and will certainly be part of the year’s Top 5.

For Xbox, the story is Starfield which some people think will still be out before June. (Spoiler: It won’t.) It’s hard to predict where an Xbox Game Pass release ranks; I could see it as part of the Top 10. Elsewhere, Diablo IV will be a huge hit when it starts in June. I just don’t know if it competes for a Top 3 spot at the end of the day. Final Fantasy XVI is a wildcard. Ubisoft has a couple chances in Assassin’s Creed Mirage and Avatar: Frontiers of Pandora if they actually launch this year. Then there’s always a surprise or two.

Moving over to Hardware, it’s Sony’s year by a comfortable margin. I bet PlayStation 5 will be 2023’s best-seller on both revenue and units. It will lead most months by dollar sales, and split with Nintendo Switch on units depending on supply and titles i.e. May when Zelda debuts and whenever Marvel’s Spider-Man comes out. I also don’t expect a Switch hardware announcement, and I do think it will land in second place. Xbox can compete for second, I just remain hesitant on Microsoft’s conversion strategy.

Well, that about does it. What stands out to you during December and 2022? Surprised by any of the results? How did your predictions go? What’s in store for 2023? Drop a line here or social media!

I highly recommend checking out Piscatella’s thread on Twitter and the full report at the website here. Thanks for reading these throughout the year! Check back for the first recap of 2023 in a few weeks. All the best, everyone.

*Digital Sales Not Included, ^Xbox & Switch Digital Sales Not Included

Note: Comparisons are year-over-year unless otherwise mentioned.

Sources: GeekWire (Image Credit), The NPD Group, Rokas Tenys (Image Credit), Video Games Chronicle.

-Dom

Monthly U.S. Games Industry Spend Increases for 1st Time in 2022 During November NPD Group Report

‘Tis the season.

Awards season? Well, technically yes. I’ll certainly be writing my Year-in-Review articles soon enough! And gaming’s biggest night in The Game Awards aired last week, showcasing the best of the year that was 2022.

What I really mean it’s when The Holiday Sale Season ramps up for video game companies and their efforts to push as much as they can to gamers everywhere. Any time people are shopping, I’m here to analyze sales results.

Because of that, today I’ll be recapping The NPD Group’s recent report on U.S. game sales during the highly-coveted month of November bolstered, of course, by Black Friday. It’s the time when manufacturers and retailers employ strategies to attract people to open those wallets.

And it was a very good month at that, especially in the context of 2022 so far. It’s the first month of the year in which monthly sales increased across the games industry. This is a huge data point given the general economic environment. It continued the strength from October, where buying leveled off after 11 consecutive months of declines.

Overall consumer spending on gaming rose 3% in November, signaling that easing inflation and better supply conditions for hardware proved to be tailwinds for the industry. Out of the three categories of Video Game Content, Hardware and Accessories, only Content saw a decline year-on-year mainly due to ongoing mobile weakness. Both Hardware and Accessories generated double-digit growth, the former boasting a substantial gain over last year’s figure.

There’s a few underlying reasons why November came in above expectations. First the release calendar has been stacked the past two months with commercial darlings, including the likes of Call of Duty from October then new titles in long-running series like God of War, Pokémon and, yup, even Sonic the Hedgehog!

Then, the improved stock of consoles, notably for Sony’s flagship PlayStation 5, is getting better at meeting consumer demand. Additionally, The NPD Group cited areas like non-mobile subscription spending, peripherals and digital full-game downloads on consoles spurring growth as well. All of these combined for a terrific month of higher sales.

On the premium software side, Call of Duty: Modern Warfare 2 continued its reign as the top-selling game during November, which it also accomplished the month prior around its debut. Just below that, three brand new games arrived within the Top 4: God of War Ragnarök, Pokémon Scarlet & Violet plus Sonic Frontiers. I’ll dive more into each later in the piece.

Within Hardware, PlayStation 5 was November’s best-selling console as measured by both dollars generated and units sold. Considering some discounting of its Xbox Series X|S competitor and the launch of mainline Pokémon games for Nintendo Switch, this win for Sony is quite impressive.

“I wasn’t expecting that we’d see any month with growth in 2022, but here we are,” said The NPD Group’s Mat Piscatella on LinkedIn. “Great new games sell really well. Would be great if more were released. The big uptick in new generation hardware supply sure helped too. Really fantastic month overall, especially when considering all the other market challenges out there.”

Here’s a look at the full report alongside my usual rundown. Get your hot cocoa ready!

United States Games Industry Sales (October 30th, 2022 – November 26th, 2022)

As shown in the info-graphic above, spending across all of gaming reached $6.29 billion in November, indicating the aforementioned 3% growth. Last year, this total was roughly $6.11 billion. For more context, November spending peaked at an all-time high back in 2020 when it reached upwards of nearly $7 billion.

Expanding to the year currently through 11 months, buying is still down 6% to $48.97 billion. Last year’s figure as of November was $52.19 billion.

The largest segment of Video Game Content hit $4.74 billion last month, or 75% of the total, which equates to a decline of 5%. In an ongoing surprise to those of us who track this regularly, mobile continued to drag down the category so much that things like premium games and other software-related sources weren’t able to offset its losses.

“Thanksgiving and Black Friday did not bring a reprieve as [mobile] spend during the week was down 5% year-over-year and 1% from 2020,” said Sensor Tower’s Dennis Yeh in the report. “Barring a meteoric (or catastrophic) final few weeks of 2022, annual U.S. mobile gaming spend should decease 1% – 2% from 2021.”

Mobile’s best-seller list was topped by the likes of Candy Crush Saga, Roblox, Royal Match, Coin Master and Clash of Clans. Indicators showed that casino, action and tabletop mobile titles ramped up in popularity during November, while role-playing and shooters were “struggling.”

Swapping to premium software, Call of Duty: Modern Warfare 2 repeated at the top spot during November and continues to be 2022’s leading seller. Activision Blizzard’s military shooter likely benefited from the launch of its Warzone 2.0 battle royale counterpart, plus it now has a full month of retail sales on the books. Nothing shocking about this particular result.

The first new release on November’s combined software list was God of War Ragnarök fighting its way to the 2nd spot. Comparatively, its predecessor in 2018’s God of War earned the top spot when it released in April of that year. Sony’s major exclusive for the back half of 2022 really only missed out on leading the month because it went up against the juggernaut that is Call of Duty.

PlayStation’s Game of the Year candidate is immediately among the Top 5 best-selling titles of 2022. This domestic success parallels its epic global start as the game shipped a staggering 5.1 million copies during its first five days. This is a record launch among first-party games in PlayStation history. Boy, that’s a whole lot!

Speaking of a great start, next up was the latest pair of Pokémon titles in Scarlet & Violet on Nintendo Switch which combine to reach 3rd place. A couple caveats being this includes full sales of both games, then excludes digital because Nintendo still doesn’t want to share that data. To compare against recent entries, Pokémon Legends Arceus started in first during (an admittedly less busy) January earlier this year while November 2021’s Brilliant Diamond & Shining Pearl also debuted in 3rd.

Pokémon Scarlet & Violet already occupy the 7th spot on 2022’s best-seller list. Beyond the domestic result, it’s a historic beginning for this game worldwide, shipping a whopping 10 million units within its first three days. That’s the fastest-selling on any Nintendo platform. Ever. Its monstrous launch set records for the series, Switch as a console and across Nintendo’s entire history!

Moving over to Nintendo’s 1990’s era rival in Sega, the #4 spot on November’s list went to Sonic Frontiers. It’s a rare appearance from the Blue Blur, as there haven’t been many mainline Sonic releases lately. Sonic Mania was a critical success back in 2017 then didn’t sell enough to chart at the time. This latest 3D platformer in Sonic Frontiers is turning out to be quite a fast seller, fittingly, moving 2.5 million copies worldwide within a month on sale.

Familiar names and big movers filled in the remainder of the overall ranks in November. Marvel’s Spider-Man: Miles Morales and Mario Party Superstars jumped back into the Top 10. The only other brand new title among the Top 20 was Tactics Ogre: Reborn slotting in at #17, which really is remarkable amidst plenty of big hitters.

Shifting to the 2022 list with just one month to go, Call of Duty: Modern Warfare 2 edges into first place. As expected. It’s the first time since Elden Ring dropped in February that FromSoftware’s masterpiece hasn’t held the year’s top spot. Past that, Madden NFL 23 has secured 3rd as Lego Star Wars: The Skywalker Saga moved down to 4th. MLB: The Show 22 seems to be impacted the most by new entries ahead of it, however it still retains a Top 10 position for now.

Check below for all premium software ranks for November and 2022 to date.

Top-Selling Games of November 2022, U.S., All Platforms (Physical & Digital Dollar Sales):

  1. Call of Duty: Modern Warfare 2
  2. God of War Ragnarök
  3. Pokémon Scarlet & Violet*
  4. Sonic Frontiers
  5. Madden NFL 23
  6. FIFA 23
  7. NBA 2K23*
  8. Gotham Knights
  9. Marvel’s Spider-Man: Miles Morales
  10. Mario Party Superstars*
  11. Elden Ring
  12. Animal Crossing: New Horizons*
  13. Mario Kart 8*
  14. Mario + Rabbids: Sparks of Hope
  15. Persona 5
  16. NHL 23
  17. Tactics Ogre: Reborn
  18. Minecraft
  19. Horizon Forbidden West
  20. The Legend of Zelda: Breath of the Wild*

Top-Selling Games of 2022 So Far, U.S., All Platforms (Physical & Digital Dollar Sales):

  1. Call of Duty: Modern Warfare 2
  2. Elden Ring
  3. Madden NFL 23
  4. Lego Star Wars: The Skywalker Saga
  5. God of War Ragnarök
  6. Pokémon Legends Arceus*
  7. Pokémon Scarlet & Violet*
  8. Horizon Forbidden West
  9. FIFA 23
  10. MLB: The Show 22^
  11. Call of Duty: Vanguard
  12. Gran Turismo 7
  13. Mario Kart 8*
  14. Kirby and the Forgotten Land
  15. Gotham Knights
  16. Minecraft
  17. NBA 2K23*
  18. Nintendo Switch Sports*
  19. Marvel’s Spider-Man: Miles Morales
  20. Animal Crossing: New Horizons*

The biggest boost to overall spending last month came from Hardware as a category. Console sales rose a momentous 45% during November, reaching upwards of $1.25 billion. This is a stark contrast to the 10% decline during October, which was mainly driven by weakness in Nintendo Switch. Seems like Nintendo may have been holding shipments to attract buyers during the more competitive time frame, or people weren’t as interested until they began Black Friday and pre-holiday shopping.

This excellent monthly result means that 2022 sales have turned positive for Hardware. After trending down 2% as of October, this category is now up 6% for the year right now. It’s generated over $5 billion in sales through the first 11 months, compared to last year’s $4.74 billion.

Funny how that happens when people can actually buy a console if they want it! And the demand is certainly there, as strong as it’s been early in this generation.

Benefiting from a generous supply improvement, the PlayStation 5 earned the top spot in the segment during November by both dollars and units. By my count, that’s four months in a row where Sony’s newest generation has led the segment by both metrics.

Nintendo Switch came in second place by both metrics. While The NPD Group didn’t share growth statistics for individual platforms, like it had in recent months when Xbox and PlayStation families showed double-digit growth, I’d imagine that all three major platforms gained ground based on how the category fared.

After this latest monthly win, PlayStation 5 remains the best-selling hardware platform of 2022 in year-to-date dollar sales. Hanging in there in its own right, Nintendo Switch leads in units.

This dynamic of added availability, especially for PlayStation 5, combined with both an ongoing appetite and better buying power from consumers is providing a boon for hardware late in the year. The perfect time for it to happen for these manufacturers, because they are able to meet the demand during the crucial holiday months. Two years into the new generation, we’re finally seeing the supply side of the curve catching up to demand.

Another solid result during November’s report was Accessories, which often benefits when people spend more on consoles because they acquire peripherals and extra controllers. After moving down 8% back in October, this segment returned to positive territory last month netting $289 million in sales or 10% higher than this time in 2021.

That brings the year so far to $2 billion in spending on Accessories, which is currently trending down 9% due to weakness in earlier months.

Game pads and headset/headphone sub-categories in particular boosted Accessories as a whole during November. The top-selling peripheral last month was the PlayStation 5 DualSense Wireless Controller Galactic Purple, paralleling Sony’s win on the hardware side. While The NPD Group didn’t confirm explicitly, I’d bet Microsoft’s Xbox Elite Series 2 Wireless Controller remained the year’s best-seller due to its outsized price and revenue potential.

Taking everything from November, it was arguably 2022’s best sales result for the U.S. games industry. It’s refreshing to see sales growth again.

Last month was exceptional for consoles, as PlayStation and Xbox continue making up ground after a slower start plus Nintendo Switch is holding up well enough late into its life cycle. On the content front, mobile certainly presents a concern; for now, it’s premium sales of new and earlier games propping up that segment. And there was clearly a good amount of demand for peripherals late in the year.

Now, moving into the last month of 2022, it’s a crucial time that will determine where domestic sales end up for the year. I’m more upbeat than I was even a couple months back, even if I’m thinking we’ll see lower sales in 2022 than last year.

Which wouldn’t be bad at all. 2021 was a record year for domestic spending on games here after all, generating over $60 billion!

Unless December is a major surprise to the upside, I’m expecting total sales will be down for the year in the mid single-digits. Against last year’s $60.4 billion, assuming a 5% drop would bring 2022 to around $57.4 billion. This indicates a December month of roughly $8.4 billion, which would be an improvement since last year’s final month.

Even as a slight drop, almost $58 billion in spending would be a great result for 2022 given the economic challenges and downward pressure the industry has experienced most of this year. It’s not where the industry could be if supply constraints and a number of delayed games didn’t happen. The world is still dealing with a global pandemic during which working dynamics and supply chains shifted drastically.

As for individual predictions, again Call of Duty: Modern Warfare 2 will win December in the Content category. For 2022 in aggregate, I think the Top 3 top-sellers from November will hold serve and finish like that.

December will be much trickier for Hardware. Anecdotally I’ve been hearing more about Xbox Series X|S stock. We know Sony has been moving up its shipments. Nintendo is there for families and households looking for a better entry point. I’m guessing PlayStation 5 will lead December on both dollars and units, with Xbox Series X|S in second by dollars and Switch in second by units.

As for the year, PlayStation 5 will carry this late momentum to a win on revenue. Alongside, Nintendo Switch will take home the crown when measured by units.

So that’s the final thread I’ll be writing on NPD results during this calendar year, because December’s result will take place sometime in January. We’ll have to see how the predictions go, and if the industry surprises me as it often does!

If you want more on the report from The NPD Group, I recommend Piscatella’s thread that’s now on LinkedIn. He has more on platform charts and further details.

Hope everyone is safe and well going into the holiday season, and I’ll be back very soon with my Year-in-Review posts before diving into the new year. Thanks all for the continued support!

*Digital Sales Not Included, ^Xbox & Switch Digital Sales Not Included

Note: Comparisons are year-over-year unless otherwise mentioned.

Sources: Newsweek (Image Credit), Nintendo, The NPD Group, PlayStation Twitter, Sega Sammy.

-Dom

Nintendo Switch Lifetime Sales Pass 114 Million In Upbeat Fiscal 2023 Q2 Despite Annual Hardware Target Reduction

It’s time for some Nintendo!

The latest of the big three console manufacturers to report this quarter, behind Microsoft and Sony, shared its fiscal 2023 second quarter results out of Japan earlier today.

I’d call it mostly upbeat, as both sales and operating profit experienced gains, yet it’s also dashed with cautionary signals and statistics. There’s upside, partially due to the yen’s continued weakness, while headwinds on the supply side and an aging life cycle show signs of a console business slowdown.

Headlines include how Switch passed yet another sales milestone this quarter while Splatoon 3 made quite the splash for consumers after its release in September. Especially in its local Japanese market.

On the hardware side, Nintendo Switch lifetime sales reached 114.33 million after the company shipped 3.22 in the three months ending September. It’s only the third home console to pass the 114 million mark. Still, Nintendo is somewhat uneasy about this portion of its business going forward, reducing in its annual unit sales forecast.

Splatoon 3 was the headliner for new software, shipping a whopping 7.9 million units in less than a month on market. That’s a record-setting launch for the franchise by a wide margin, plus the second fastest start of any Switch game this calendar year behind only January’s Pokémon Legends: Arceus.

Looking briefly at financial performance during the first six months of the current fiscal year, Nintendo’s net sales and operating profit rose 5% and under half a percent, respectively. While hardware unit sales are down 19% for the year so far, software sales are up almost 2% which shows the resilience of Switch buyers and reflects the ongoing appeal of Nintendo’s quality titles. Even amidst economic slowdowns and inflationary pressure.

Thus, executives decided to increase their forward-looking forecast for both net sales and profit metrics other than operating income, the latter of which kept constant. As the Switch pushes into the late part of its life cycle, Nintendo remains upbeat on consumers buying content for it, especially given the upcoming calendar including a sizeable impact from Pokémon launches this holiday season.

“Although software sales accounted for a larger percentage of overall sales for our dedicated video game platform business, and first-party software accounted for a larger percentage of overall software sales, the gross profit margin remained at the same level as the same period last fiscal year.” the company wrote in its slides. “This was due to the addition of Nintendo Switch OLED Model to the hardware lineup with its lower profit margin compared to other models, and the increase in component costs due to factors such as the semiconductor shortage.”

Check below the folder for a full dive into Nintendo’s business during Q2, including company guidance and my personal predictions for the annual period ending March 2023.

Starting with Nintendo’s overall performance, net sales for the six months bumped up 5% to roughly $4.91 billion. Focusing strictly on the quarter ending September, this was up 16% to $2.61 billion.

As has been the case recently for Japanese companies, there’s currently an outsized impact from currency fluctuations which hits those that operate globally even more than the average. Currently, around 72% of Nintendo’s business is outside of Japan. Because of this, the company said the impact of exchange rate changes on first half net sales was upwards of around $480 million. Backing that out, revenue for this time might even be down 5%.

Personally, I tend to stick with the gross number because currency impact is something that’s faced by all global companies. It’s still good to understand how much it’s affecting a company’s business when a given local currency is dropping as precipitously as the yen.

Alright, enough of this currency exchange rate lesson. Shifting now towards operating profit, this particular metric rose slightly in the first half to around $1.65 billion. Strictly for the second quarter alone, it amounted to $887 million which grew more than 18%.

Essentially this shows how both net sales and operating profit increased by double-digits during Nintendo’s second fiscal quarter.

What kind of product category mix was underlying this movement? Well, for Q2, software amounted to almost 60% of total sales compared to 55% this time last year. It follows that hardware sales dipped to 40%, down from 45%. This reflects the shift away from Switch console contribution as the cycle matures, plus the challenges of production the manufacturer and its suppliers have faced lately.

“While hardware unit sales declined by volume year-on-year due in part to the semiconductor shortage, overall hardware sales increased mainly due to the depreciation of the yen.” the company’s slides noted. “Looking at our mobile and IP related business, royalty income remained stable, but income from smart-device content declined.”

To better understand the quarterly movement in sales and profitability within a broader context, you’ll see the first two charts below illustrating this movement over time and the next two are annual figures. It was the second best quarterly output in the last decade plus. Twelve-month trailing numbers are moving back in a positive direction. Nintendo’s business is proving to be resilient, notably due to high quality game releases plus the aforementioned currency movement, plus hardware is still selling when it’s hitting retail. Not to mention, people that bought Switches during the pandemic still seem to be spending on games.

How do Nintendo’s latest numbers stack up to the biggest industry peers and their gaming businesses? While Tencent doesn’t report until later in the month, its latest annual revenue was $24 billion. Sony’s gaming business generated $20 billion, while Microsoft’s Xbox division topped $16 billion. Nintendo is up next, with its current annual sales figure at almost $13 billion. However, Nintendo’s profitability is vastly superior to PlayStation; the former has generated more than twice as much operating profit in the last 12 months, $4.43 billion compared to under $2 billion. PlayStation’s investment in the new PlayStation 5 line of consoles, the Bungie acquisition and ramping developments in software and virtual reality are chomping a serious chunk of its bottom line.

Nintendo’s hardware business is clearly slowing in terms of share and shipments, however there are a number of bright spots showing that Switch’s life cycle is far from complete. In fact, it’s going to hit major milestones in the near future.

During the first six months of fiscal 2023, Nintendo shipped 6.68 million Switch units. This is 19% lower than the same period last year, when it was 8.28 million. The drop can be attributed to the base model, which produced 2.23 million units against last year’s 6.4 million. Obviously the OLED model saw tremendous growth considering it launched in October 2021. As it replaces the base version, it now makes up over half of Switch’s total unit sales.

The lifetime unit sales of 114.33 million is up 21.46 million since September of last year, when it totaled 92.87 million. Switch has maintained its respective spot as the third best-selling home and portable console of all time. The popular hybrid is closing in on Sony’s PlayStation 4, the second best-selling home console in history, which ended production recently at just over 117 million. Even further, the 118.69 million of Game Boy and Game Boy Color is also in sight.

By the end of Nintendo’s financial year in March 2023, if not the holiday quarter, the Switch will occupy the second spot on the all-time list for both home and handheld hardware. What a run! And it’s not nearly done.

All of these are based on the number of units shipped to retailers by Nintendo. Additionally, the company shared some insight into how it’s selling-thru to consumers. Compared to the July to September time frame last year, Switch is selling-thru at the same rate. From what I can see on Nintendo’s slides, sell-through last year was roughly 3.4 million units of Switch in the quarter and just slightly less this time around. Even though shipments declined by roughly 15% this Q2.

This was attributed to demand being stable, and the introduction of Splatoon 3 alongside its more ongoing titles that still attract interest. That second part especially is the driver of Nintendo’s ongoing attractiveness to buyers, and investors, plus its financial performance. Consistent demand for its hardware products bolstered by key exclusives, especially as the technology gap with modern consoles continues to widen.

Speaking of games, Nintendo Switch software unit sales rose a bit in the six month period, moving up 1.6% to 95.41 million. For the quarter ending September alone, it was exactly 54 million. Compare that to 48.6 million in the same 3 months last year and this reiterates what makes the company so consistent.

On the fiscal year so far, Switch has seen 15 titles ship a million copies or more. Eleven of these so-called “million-sellers” are published by Nintendo itself while the remainder are via external partners. While this is down from 18 in the same period last year, it’s still a healthy amount of games hitting this coveted milestone.

Unit sales for Switch games lifetime have now crossed the massive 900 million milestone. To be exact, 917.59 million games have shipped for the console. That figure was at 681 million this time last year, meaning over 236 million games have sold in the past year. It’s hard to put these numbers in perspective, other than to say that’s a heck of a lot. While it won’t quite hit 1 billion this fiscal year, it will certainly eclipse that the following year.

In the new release realm, Splatoon 3 blasted its way onto the market in September with that 7.9 million copies sold number. That includes 5 million from Japan alone! To help put this in perspective, here’s how its predecessors started during their first respective quarters: Splatoon 2 sold-in 3.61 million in 2017 while 2015’s original Splatoon debuted at 1.62 million.

First month sales of Splatoon 3 are already more than halfway to the 13.3 million lifetime figure of Splatoon 2! It’s already among the Top 20 best-selling titles published by Nintendo on Switch to date, coming in at #18. It’s truly become one of Nintendo’s flagship entries, and the biggest commercial success of its new IP this generation.

The other new title showcased in Nintendo’s earnings was Xenoblade Chronicles 3. Since its launch in late July, it’s accumulated 1.72 million in units sales. While that might not sound like a lot in the context of other Switch games, this is an exceptional result for the Xeno universe. Back in 2017, its predecessor Xenoblade Chronicles 2 started with 1.31 million and was the top-selling title ever for developer Monolith Soft at the time. Now, Xenoblade Chronicles 3 has captured that crown.

In other record-breaking news, Kirby and the Forgotten Land sold-in an additional 2.61 million units during Q2, making its lifetime total 5.27 million. This is substantial because it’s now the best-selling mainline Kirby game of all time, outpacing the 3.98 million of 2021’s Kirby Star Allies. Keep in mind, this is a 30-year old franchise in collaboration between Nintendo and HAL Laboratory. What a fantastic success story!

Elsewhere, Nintendo Switch Sports is now the 20th best-selling Nintendo-published title on Switch, reaching 6.15 million units. Mario Strikers: Battle League passed the 2-million mark, settling at 2.17 million. Then there’s more impressive milestones from Mario Kart 8 and Animal Crossing: New Horizons, which seem to stand out every time I write an article on Nintendo. Mario Kart 8 zipped past the 48 million mark, somehow selling 1.59 million in the quarter to reach 48.41 million lifetime. Animal Crossing: New Horizons is the latest in the 40 million club, achieving 40.17 million to date.

This is where I like to provide updates on subscription numbers for Nintendo Switch Online or any sort of engagement statistics from the company. And now I can! Nintendo’s corporate briefing, updated a day after its earnings report, said that Nintendo Switch Online now has 36 million members. Compare that to 32 million in September 2021. Also, the company noted that the (frankly made up) metric of “Annual Playing Users” rose to 106 million. It was 104 million last quarter.

Considering the macro environment right now and pressure on consumers from areas like inflation and the appeal of other entertainment verticals, Nintendo’s Q2 performance was mostly promising. Especially when looking at the quarter on its own, rather than the six months, which revealed double-digit gains for important financial metrics. As Switch approaches its sixth birthday in the midst of various economic challenges, the console and its games still hold mass market appeal.

Alongside, Nintendo provided updated guidance for the remaining six months of its fiscal year.

The company now expects to generated 3% more, or upwards of $12.3 billion, in annual net sales. This would be a modest 3% decline compared to the prior year. It also maintained its operating profit target of $3.73 billion, indicating a 16% decline.

“While there is a gradual improvement in semiconductor and other component supplies and a recovery trend in hardware manufacturing for Nintendo Switch, taking into consideration production and sales performances thus far, we have modified the Nintendo Switch hardware sales units forecast for the fiscal year,” said the company’s slides. “By continually working to front-load production and selecting appropriate transportation methods in preparation for the holiday season, we will work to deliver as many Nintendo Switch systems as possible to consumers around the world.”

Thus, Nintendo now expects to ship 19 million Switch hardware units in the year ending March 2023. That’s down from 21 million it expected last quarter. For reference, it shipped 23 million in the prior fiscal year. Based on the 6.68 million already on market in the six months ending September, that leaves 12.32 million during the back half. Most of that will have to come during the holiday period.

My forecast last quarter saw 20 million on the lower end. Based on where supply has been and Nintendo’s conservative tilt, I’m formally pulling down to a range of 19.5 million to 20 million.

And no, I don’t expect its price to increase.

The company’s estimate for annual software unit sales remained the same at 210 million, which would be down from 235 million in fiscal 2022. As I wrote last quarter, I’m a bit skeptical it can reach this mark. Especially now that The Legend of Zelda: Tears of the Kingdom has a May release.

Mario + Rabbids: Sparks of Hope and Bayonetta 3 launched a couple weeks back, though both remain more niche than many of their counterparts or mainline entries. The real drivers will be, of course, Pokémon Scarlet and Pokémon Violet. The franchise seems immune to over-saturation and sells big on a consistent basis. I’m expecting a grand entrance for these, with a potentially record-setting start. Otherwise, Nintendo’s slate in the coming months is light. Even the Super Mario Bros. Movie isn’t out until April!

The last item I’d like to mention is Nintendo’s announcement of entering into a joint venture with long-time partner DeNA Co. Ltd. Both companies have collaborated on the technical side of Nintendo’s account system along with mobile offerings since 2015, and this latest venture will even be a Nintendo subsidiary due to its size and capital structure.

“Based on the expertise accumulated over the seven plus years and the experience of co-developing
multiple services based on Nintendo Account, Nintendo and DeNA will advance their partnership and
establish a joint venture company.” said the company’s announcement. “With the objective to strengthen the digitalization of Nintendo’s business, the joint venture company will research and develop, as well as create value-added services to further reinforce Nintendo’s relationship with consumers.”

I welcome this sort of team-up, and really anything that can bring Nintendo’s digital capabilities and online services closer to its competitors.

With that, this concludes my third big recap of the last couple weeks. What stood out to you with Nintendo’s latest announcement? Do you think it can meet or exceed its latest targets? Are you planning to buy a Switch or any games in the coming months? Drop a line her or on Twitter, I’m always down for a discussion!

Feel free to hop back over to my earnings calendar to stay current, as there’s plenty of action still to come this season. Thanks y’all for visiting and I hope everyone is doing well!

Note: Comparisons are year-over-year unless otherwise mentioned. Exchange rate is based on reported average conversion: US$1 to ¥133.93.

Sources: Company Investor Relations Websites.

-Dom