Tag: Sales

Starfield, Mortal Kombat & EA Sports FC Drive Gains in Circana’s September 2023 Games Industry Sales Report

DomsPlaying

It’s the fourth quarter of 2023 already?! Seriously, time. Slow down.

As we inevitably enter the final stretch of what’s been a tough year for the games industry yet a great year for new releases, not only does Microsoft finally own Activision Blizzard, it’s secured another big win with its latest hit Starfield.

Even so, Sony held its own in the hardware realm during a big September for industry sales as reported by tracking firm Circana (formerly known as The NPD Group).

Last month, consumers spent nearly $4.5 billion on gaming. That’s up 10% since the same time in 2022. It marks the fifth consecutive month of growth and the second best September on record behind 2021.

Within the premium software ranks, six of last month’s top seven top sellers were new to market.

Starfield proved to be best among them, rocketing to the top of September’s overall chart. The sci-fi role-playing game from Bethesda Softworks became the first Xbox console exclusive to top the monthly list since State of Decay 2 back in May 2018.

September’s solid sales result also benefited from the latest entries in long-running series. Mortal Kombat 1 from Warner Bros. fought to second place while Electronic Arts’ rebranded soccer series EA Sports FC 24 scored third.

As for Hardware, PlayStation 5 again led all console sales, as it has most of 2023. Which is even more notable in a month where software was led by an Xbox console exclusive. Sony’s supply consistency and third party offerings keep it relevant at all times.

Circana’s Mat Piscatella confirmed on Twitter that premium game sales are doing “great” right now, though September’s growth for this particular segment came in a bit below his expectations.

Scroll down for a detailed look at the numbers, then my predictions moving into yet another busy month in gaming.

United States Games Industry Sales (August 27th, 2023 September 30th, 2023)

As referenced earlier, people spent upwards of $4.5 billion across gaming in September, up 10%.

Two of the three major categories, Content and Accessories, also generated double-digit growth. Underlying this upward momentum was a decent boost from mobile, a slew of software launches and a fair bit of interest in premium peripherals. All of this was enough to offset a decline from Hardware.

That means across the first nine months of 2023, spending rose 2% to $39.4 billion. All three categories experienced gains during this time frame.

Beginning with the largest area of Content, last month it contributed $3.85 billion. That made up nearly 86% of September’s total. For the year so far, it’s up 2% to $34 billion.

During September, sales from mobile devices moved up 4%. The list of top earners was unchanged compared to August, led by MONOPOLY GO!, Royal Match, Roblox, Candy Crush and Pokémon Go in that order.

Moving to premium software, September’s winner Starfield was best on both Xbox and PC, with the latter being its lead platform here. It’s immediately the 7th top-selling title of 2023. Note: These ranks do include revenue from the early access version, but they don’t include Xbox Game Pass subscriptions because that’s more broadly tracked in the subscription category.

Circana put together a handy list of Bethesda titles for comparison, this time using dollar sales (as some earlier charts were based on units). Fallout 76, Fallout 4 and The Elder Scrolls V: Skyrim all started in second during their respective launch months. The only other recent Bethesda title to lead its debut was The Elder Scrolls IV: Oblivion in 2006, meaning Starfield is in rarefied air for the team.

Next up was Mortal Kombat 1 at #2, the latest in a long lineage of gruesome sellers from NetherRealm Studios. It led the PlayStation platform chart, and is already the 8th best-selling of 2023. For context, both Mortal Kombat X and current franchise leader at 15 million unit sales Mortal Kombat 11 led their first months.

Yes, not only does this fighting game franchise consistently kill it commercially, it’s also adopted a convoluted naming convention. Can’t wait until Mortal Kombat 2 launches (again) in a few years.

Rounding out the Top 3 was EA Sports FC 24, which starts in 14th on the annual chart to date. Turns out it didn’t necessarily need FIFA branding. This year gained double-digit growth in units and dollars compared to FIFA 23. Domestic success echoes globally, where Electronic Arts said it had 11.3 million players at launch, a million more than its predecessor, growing new players by 20%.

The next new titles to chart were Payday 3, NBA 2K24 and The Crew Motorfest in 5th to 7th place, respectively. The usual caveat being Take-Two Interactive, the publisher of NBA 2K, doesn’t share digital, so it’s likely the basketball sim would be higher all included. Still, Payday 3 securing a Top 5 start reflects strong demand for the first franchise title in a decade.

The Crew Motorfest continues to be a pleasant, if quiet, sales surprise, racing to 7th place here amidst a crowded field. The Crew 2 started in 4th back in June 2018. Ubisoft said this latest release had the best first week globally in the history of The Crew, a franchise that has attracted over 40 million players during its nine year history.

You might be asking: Where’s Baldur’s Gate 3 since it hit PC in August and PlayStation last month? According to Circana, its publisher Larian Studios is another that doesn’t share digital for the purposes of charting. Piscatella said it’s doing “exceptionally well” especially on engagement over time. It ranked second on their Circana Player Engagement Tracker, ahead of Starfield in 3rd. On console, it was #20 on that list.

Briefly touching on the 2023 to date sales chart, Hogwarts Legacy and The Legend of Zelda: Tears of the Kingdom kept their spots at #1 and #2 while Madden NFL 24 moved into the Top 3 after a full month of sales. Elsewhere, Armored Core VI: Fires of Rubicon is a big mover, jumping four spots to 16th.

Read on for a full look at September and 2023 software ranks.

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

  1. Starfield
  2. Mortal Kombat 1
  3. EA Sports FC 24
  4. Madden NFL 24
  5. Payday 3
  6. NBA 2K24*
  7. The Crew Motorfest
  8. Armored Core VI: Fires of Rubicon
  9. Hogwarts Legacy
  10. Call of Duty: Modern Warfare 2
  11. Star Wars Jedi: Survivor
  12. Resident Evil 4 Remake
  13. The Legend of Zelda: Tears of the Kingdom*
  14. Minecraft
  15. Mario Kart 8*
  16. Rainbow Six: Siege
  17. Gran Turismo 7
  18. Elden Ring
  19. Sea of Thieves
  20. Diablo IV

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. Madden NFL 24
  4. Diablo IV
  5. Call of Duty: Modern Warfare 2
  6. Star Wars Jedi: Survivor
  7. Starfield
  8. Mortal Kombat 1
  9. Resident Evil 4 Remake
  10. MLB The Show 23^
  11. Dead Island 2
  12. Final Fantasy XVI
  13. Street Fighter 6
  14. EA Sports FC 24
  15. FIFA 23
  16. Armored Core VI: Fires of Rubicon
  17. Elden Ring
  18. Remnant II
  19. Dead Space Remake
  20. Mario Kart 8*

Hardware was the only main segment to see lower spending this September than last, down 8% to $451 million.

Underlying this, Xbox Series X|S generated single-digit growth while PlayStation 5 and Nintendo Switch declined. No specifics on the actual numbers, but this gives a sense of how last September was quite strong for PlayStation and Nintendo in particular, and Xbox benefited from Starfield demand.

Even so, console sales are up 10% for 2023 right now to $3.7 billion. Hardware is the only major category trending towards double-digit annual growth.

Despite having “slightly” lower unit sales year-on-year, PlayStation 5 continued its trend atop the console ranks, leading September as measured by both dollars and units sold.

For the second straight month, Xbox’s family of devices landed in second. Circana pointed out that last month saw the highest Xbox ecosystem units sold since September 2016. Plus, Xbox revenue was the best since September 2014. While Microsoft’s strategy is more diversified than its counterparts, of course it wants people to buy retail boxes.

Thing is that Xbox’s big console exclusives don’t necessarily sell as much hardware as they used to in generations past. What they do is bring people to Game Pass and can stimulate sales on other platforms, like PC.

Expanding to the full year, PlayStation 5 is best in hardware on both revenue and units, as it has been for most if not all of 2023. Sony recently announced a slightly slimmer revision to its latest box, while also upping the price of its digital only version in certain territories, which will hit U.S. stores next month. Thus, I expect its dominance this year to continue.

Moving onto our final category of Accessories, spending during September bumped up 11% when compared to a year ago, to $197 million.

Circana shouted out a couple sub-areas here with double-digit spending growth. Racing controllers moved up 18%, while Gamepads increased by 15%. The former perhaps due to the ongoing popularity of titles like Gran Turismo 7 and The Crew Motorfest alongside anticipation of Forza Motorsport which hit market last week, and the latter to play all the fancy new games.

In terms of last month’s best seller, that goes to the Marvel’s Spider-Man 2 Limited Edition version of the PlayStation Dual Sense controller. Makes sense, considering it became available well before its game counterpart launches tomorrow and was one of the most sought after products in all of gaming this year.

I’ve also confirmed directly with Circana that the premium PlayStation 5 DualSense Edge pad continues as 2023’s leading peripheral on revenue.

Lastly, a tidbit on augmented and virtual reality. Piscatella noted that February’s PlayStation VR2 continues to have a “low single digit attach rate,” implying that less than 5% of PlayStation 5 owners have purchased one. It’s a high barrier to entry, after all, considering it’s tethered to the console.

This category could see a decent boost soon as the Meta Quest 3 officially hit stores earlier this month. I think Meta’s new headset has some good upside. The product series is the closest thing the niche AR/VR market has to a commercial hit, even if it won’t be mainstream any time soon.

With its bevy of AAA game launches and a resilient hardware against a high comparable, September was great month overall for domestic industry sales. It highlights Xbox’s evolving dynamics in the console space, alongside the appeal of PlayStation 5 for multi-platform titles. Nintendo was a bit quiet, although that will certainly change in the fourth quarter.

On the subscription side within Content, Piscatella described its spending as having a lot of “churn” implying a good amount of turnover without moving too much in either direction. People moving from one service to the other, rather than being additive.

He and others have described how subscription growth hit a plateau after an initial ramp up phase. Domestically, Xbox’s Game Pass revenue rose last month (unfortunately no specifics publicly on actual numbers) however other services were lower year-on-year. This implies that PlayStation Plus had a down month.

Well then. No rest for the weary! October is shaping up to be massive.

There’s a monumental battle scheduled between Mario and Spider-Man. PlayStation and Nintendo. It starts tomorrow with new games for both big name brands, and these will dictate how high spending can go this month.

Due to this, among other new releases, I’m thinking spending will go up in October potentially in the double-digit range.

That will be driven by Content, which has two of the year’s best-reviewed titles in Super Mario Bros. Wonder and Marvel Spider-Man 2. The big question is which of these will have a better ranking on the premium chart, and lead one of the year’s biggest months?

My official Twitter poll is virtually neck and neck, with Spider-Man having a slight edge at the time of publishing. While Nintendo Switch has a massive ownership base and Mario is one of the biggest IP in the world, this will solely count retail sales for that title. Considering this, I’m guessing that Spider-Man swings into first during October.

Then there’s the likes of Assassin’s Creed Mirage, Detective Pikachu, Forza Motorsport, Sonic Superstars and Alan Wake 2. Shoot, there’s even Skull Island: Rise of Kong, a new dreadfully bad King Kong game!

I can see Assassin’s Creed Mirage jumping into the Top 7. Sonic Superstars maybe Top 10. Alan Wake 2 is a straight up digital release, and I don’t know if Epic Games is a chart participant. One thing I can safely say is Skull Island: Rise of Kong will regrettably miss the Top 20.

On the hardware side, I’m leaning towards PlayStation 5 on dollars and Nintendo Switch getting units. Partially because each will have special editions associated with their respective flagship games. (Talk about fence-sitting, hah.)

I’m way upbeat, basically all around, on the start to this final quarter!

Highly recommend checking out Piscatella’s thread on social for more pre-Halloween sales goodies. He’s been answering a lot of questions there too, especially around digital, Starfield and Baldur’s Gate 3. Much respect, Mat.

Thanks everyone for reading my latest recap! Be safe.

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

*Digital Sales Not Included

^Xbox & Nintendo Switch Digital Sales Not Included

Sources: Bethesda Softworks, Circana, Electronic Arts, PlayStation Blog, Ubisoft.

-Dom

Remnant II & PlayStation 5 Lead July 2023 Circana U.S. Games Industry Report to Solid Growth

DomsPlaying

As we hang onto the summer as best we can here in the Northern Hemisphere, people are still finding time to pick up and play games.

As it should always be!

Industry tracking firm Circana has posted its July monthly report for spending across the games industry in the United States, and it’s a good one with a few pleasant surprises.

July continued a positive trend of monthly growth lately, bouncing back to a year-over-year increase after last July’s decline. Total monthly spending moved up a modest 1% to nearly $4.2 billion. Circana attributed a boost from digital premium spend outpacing retail and add-on. Plus, subscription spending rose as well.

Gains were seen across two main categories of Video Game Content and Accessories, while Hardware was the only segment to see declining sales. The main drivers were a return to growth, albeit just slightly, for mobile alongside with sizeable launches in premium software, plus a resurgence for various older Call of Duty titles throughout the period.

The biggest July launch of all was a great one for Gunfire Games and Gearbox Publishing with Remnant II. This domestic performance echoes a fantastic global start for the follow-up to 2019’s Remnant: From the Ashes, an impressive run for a soulslike action series that’s become a darling of the industry’s middle tier.

There were two additional new launches charting during July in Nintendo’s Pikmin 4 and Exoprimal from Capcom, as the former outpaced its predecessors while the latter surprised me as I didn’t expect it to land within the Top 20.

For console sales, Sony’s PlayStation 5 can’t be stopped. It won July, just as it did during June and most of 2023 so far, on its way towards becoming the year’s top seller. Supply problems are a distant memory by now, and Sony is capitalizing on demand that’s still going for its latest generation.

“Hardware is no longer comparing to significant supply constraints,” noted Circana’s Mat Piscatella on social media. “[It’s] not likely to see big growth rates as we have over past months. Normalized demand curves may be back.”

Read below as I dig into last months’ numbers and provide predictions for August, the start of the year’s big commercial push!

United States Games Industry Sales (July 2nd, 2023 – August 2nd, 2023)

As mentioned in the intro, consumers spent 1% more on gaming last month than they did a year ago to upwards of $4.19 billion. Last July, sales had dipped almost double digits, meaning the latest result is a welcome return to growth for the industry.

During the year right now, overall spend is also up 1%. The current total is $30.68 billion, boosted by earlier performance in the Hardware category.

The largest contributor of Content rose 2% during July, to $3.72 billion or 89% of the monthly pie. Compare that to 87% of the total last year. Underlying this upward movement was improvement in mobile and key new software releases hitting market.

As I’ve written about over the last year and more, mobile has been lagging other areas of domestic spending. Now, according to Sensor Tower as part of the report, it’s bouncing back. Don’t get too excited, it hasn’t been doing that well. Spending came in less than a percent above July 2022, at 0.2% to be exact. This was partially due to shifts in the top earners, in which Royal Match led the charge, followed up by MONOPOLY GO!, Roblox, Candy Crush Saga and good old Pokémon Go.

Shifting to premium software, three new titles landed among July’s 20 best sellers.

The win for Remnant II parallels its global success, where it sold-thru over a million units to consumers during its first four days. I’d wager it’s well on the way to 2 million and beyond. The first game, as a new brand in an increasingly competitive landscape, took a bit to find its footing yet became a breakout hit at over 2.5 million copies lifetime, a great result for this sort of title that straddles the line between indie and AAA.

Following that up were two titles published by Activision Blizzard in Diablo IV, which I thought could win the month, in second alongside 2022’s Call of Duty Modern Warfare: 2 jumping back into the Top 3.

The next July release to chart was Pikmin 4 at #6. The first party exclusive to the Nintendo Switch began four spots ahead of its predecessor, which debuted in 10th place during August 2013 after hitting Wii U. I’ve said it before and I’ll say it again, this is yet another example of why I wish Nintendo included digital sales for these U.S. reports. I think Pikmin 4 had a legitimate chance at a Top 5 start, which would be fantastic for a series that’s not one of the company’s flagship offerings.

As much as I was surprised to see Remnant II win July, I might be even more shocked that Capcom’s Exoprimal managed to even chart. The multiplayer only dino-hunting shooter fought to 16th, which I’d call great for the new intellectual property that many critics called bare bones at best. Perhaps I underestimated the desire for fresh ideas, or the fact that people want to shoot dinosaurs. Either way, it’s a fine start.

One more minor story on the charts is how three Call of Duty games finished in the Top 20. Two legacy Black Ops titles, among others, experienced a ton of returning players because Xbox fixed matchmaking for their online components. (Might be related to that small deal Microsoft is finalizing..) It also shows the brand’s sheer dominance that a game from 2012 in Black Ops 2 garnered enough interest to grab July’s 13th spot.

Checking the annual ranks so far, it’s the same exact Top 10 as the first half of 2023 from back in June with minor shifts below that. The sole newcomer is Remnant II immediately at #18 after its strong launch, knocking Marvel’s Spider-Man Miles Morales out of the Top 20.

See below for the month’s and 2023’s full premium charts.

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

  1. Remnant II
  2. Diablo IV
  3. Call of Duty: Modern Warfare 2
  4. Hogwarts Legacy
  5. Final Fantasy XVI
  6. Pikmin 4*
  7. The Legend of Zelda: Tears of the Kingdom*
  8. Street Fighter 6
  9. Elden Ring
  10. MLB The Show 23^
  11. Star Wars Jedi: Survivor
  12. Mario Kart 8*
  13. Call of Duty: Black Ops 2
  14. Minecraft
  15. FIFA 23
  16. Exoprimal
  17. Marvel’s Spider-Man Miles Morales
  18. Marvel’s Spider-Man
  19. Dead Island 2
  20. Call of Duty: Black Ops 3

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. Diablo IV
  4. Call of Duty: Modern Warfare 2
  5. Star Wars Jedi: Survivor
  6. Resident Evil 4 Remake
  7. MLB The Show 23^
  8. Dead Island 2
  9. Final Fantasy XVI
  10. Street Fighter 6
  11. FIFA 23
  12. Dead Space Remake
  13. Elden Ring
  14. Madden NFL 23
  15. Mario Kart 8*
  16. Minecraft
  17. The Last of Us Part 1
  18. Remnant II
  19. God of War: Ragnarök
  20. Pokémon Scarlet & Violet*

As for major categories, Hardware was the only to decline as it moved down 19% to $292 million for the month.

All three major platforms across current gen PlayStation, Nintendo and Xbox experienced declines, even with ample supply. This is partially due to a healthy comp last year when inventories were improving. At the time back in July 2022, console sales were up 12%.

It’s to the point where availability has normalized, plus there weren’t any true system-sellers or multi-platform juggernauts in July whereas past and future months contain more enticing software for buyers.

Still, for 2023 at present, Hardware remains trending way up. It’s showing 17% growth to $2.92 billion, compared to last year’s $2.49 billion across the same time frame. Signs point to last month being an anomaly compared to others, seeing as spending gains are in double digit territory through seven months.

PlayStation 5 repeated, as it has often this entire year, as the month’s best-selling console by both dollars and units sold. In fact, other than May and Switch’s win on the back of a new Zelda, Sony’s big box has led every month of 2023 by dollars generated.

Speaking of Switch, it took home second place in July by both metrics. Then, as usual in what’s become somewhat of a meme for sales folks, Xbox was in third. A boring meme, granted, but one nonetheless!

What this tells me the most is supply has officially returned to where it needed to be, just in time for a potential new Switch successor and perhaps enhanced, juiced up models for the PlayStation and Xbox. July was just a quieter month than usual lately on the demand side of things.

Our final sales grouping is Accessories, which grew 8% last month to $173 million. Within products here, Circana attributed the most growth to game pad spending.

Even with this upward contribution from July, spending on Accessories has turned ever-so-slightly negative for 2023 right now because of a big corresponding month last year. Annual sales are presently at $1.25 billion, or 1% lower than a year back.

The best-selling peripheral last month was again the PlayStation 5 DualSense Edge top-end controller. It’s also 2023’s top seller, bolstered by that premium price point.

As its namesake title returned to the top earners on mobile, and The Pokémon Company launched its Pokémon Sleep app, the Pokémon Go Plus started as last month’s 3rd best-selling accessory. In case you were curious, because I know I was, it’s a literal “hand-held” device that uses Bluetooth to track sleep, launch Pokéballs and snatch up those coveted monsters.

Because we gotta catch ‘em all, even when we’re asleep.

July often proves to be the calm before the big budget side of the industry tends to pick up starting in August and beyond. This past month was a good one from a sales perspective, inching up in the low single digits while showcasing series bests like Remnant and Pikmin in great positions. Sony continues its run in both hardware and accessories, seeing PlayStation 5 snatch win after win, ramping up after too much time being held back by outside forces.

Even something like Exoprimal beat my expectations, low as they were.

Before I go, it’s time to put some predictions down on paper. Or online. You know what I mean.

It’s a massive time incoming with the annual Madden launch kicking off the season, among others. The Buffalo Bills’ Josh Allen graces the cover of Madden NFL 24, a premium title which will be August’s top-selling thus continuing the long-running streak of Electronic Arts winning its launch month.

Then we have a lot of juicy titles that can and will hit the top ranks. First, Larian Studios delayed Baldur’s Gate 3 on PlayStation to September, so it’s only PC sales that will be included next month. Even so, it’s already among the highest concurrent players on Steam of all time, so I’m super upbeat on its prospects here. I’m thinking a Top 5 position.

There’s also a new FromSoftware game hitting market in Armored Core 6: Fires of Rubicon. While I don’t think it will get anywhere near the heights of Elden Ring, the knock-on effect of that title’s success combined with FromSoft’s pedigree will greatly benefit an otherwise niche series. Let’s call it Top 10.

As for new franchises, Electronic Arts has another launch in Immortals of Aveum. The fantasy first-person magic shooter is a real crapshoot, and I’m leaning cautious due to its release window around so many established games. I’m looking at a Top 20 debut.

As for re-releases, I’ll keep my rant about Red Dead Redemption hitting PlayStation 4 and Switch short. Just like the Wild West characters it portrays, this game is robbery being priced at 50 bucks. The only “saving grace” here is that Take-Two Interactive doesn’t share digital sales. I really hope it flops. Putting aside personal politics, I expect it won’t chart, and only would if downloads were included.

Even shorter will be my guess for top-selling hardware: PlayStation 5, yet again.

Separately, Piscatella reiterated his “low single digit percent growth forecast” for 2023 overall. It’s certainly on track, with plenty of heavy hitters left. That includes, as those of you following me on Twitter have known for a while, an annualized Call of Duty sequel with the same name as an earlier game in the franchise Modern Warfare 3 set to launch on November 10th. I fully expect it to be the year’s top earner.

Thanks for stopping by for my latest recap. I recommend Piscatella’s full thread for more. I’m sending all my best to those impacted by the devastating fires in Maui. Here is a good list of resources to send relief. Plus, giving love to those on the West Coast with this weekend’s tropical storm.

Be well, stay cool everyone.

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

*Digital Sales Not Included

^Xbox & Nintendo Switch Digital Sales Not Included

Sources: Circana, Electronic Arts, Gearbox Publishing, Nintendo.

-Dom

PlayStation Generates Record Q1 Revenue in FY 2023 Q1 Despite Slower-Than-Expected PS5 Hardware Shipments

DomsPlaying

As August rolls on, I’m back with my latest and likely last results recap of the season.

Earlier today out of Japan, Sony Corp released its fiscal 2023 first quarter announcement. Both the company at large and the PlayStation business experienced similar dynamics in that revenue grew in the double-digits, yet profitability weakened on higher cost recognition.

Focusing on its largest segment of Game & Network Services (G&NS), it was a gigantic first quarter on the revenue side for the PlayStation business. Quarterly sales reached over $5.6 billion, up 28%, which is a record high. Main contributors to this historic Q1 were better third-party software sales, console growth and exchange rate movement.

Sony saw steady engagement for active users and play hours in the three months ending June. Unfortunately, it no longer reports a key metric on the player side related to subscriptions.

The firm moved 3.3 million PlayStation 5 consoles to retailers in the quarter, pushing lifetime shipments to 41.7 million. That’s 38% higher than last year’s 2.4 million, as supply lines are now shored up and pumping out enough to satiate demand.

While nearly 40% console growth looks great on paper, the company’s management specifically said that PlayStation 5 hardware units came in lower than expected. Which will make working towards its massive annual target a bit harder than originally surmised. Plus, its gap compared to PlayStation 4 sales widened with this latest number.

“We have positioned the accelerated penetration of PlayStation 5 hardware as one of the highest priorities in this fiscal year,” executives wrote in prepared remarks. “And we will try to work steadily to implement necessary measures to achieve our hardware sales target of 25 million units.”

At least yen sales of the hardware segment were among the fastest-growing product categories within this division, behind only that of digital software, as I’ll detail later.

The other main down note for PlayStation during Q1 was profitability. Operating income came in 7% lower than the same time in fiscal 2022 plus it continues to trail one of its main local competitors in Nintendo. While partly due to where each is in their console cycle, it also reflects Sony’s big investment in studios and live services development.

One thing I’ll mention throughout is the impact of the yen’s standing on Sony’s results and my conversions from the local currency into dollars. I’ll point this out when it’s relevant, as there’s a material impact on a global business like this.

See below for more on the individual numbers and a look ahead to the next quarter!

For the overall firm, revenue grew 33% to $16.7 billion. While positive impact came from its gaming and music segments, plus exchange rate, the most substantial bump came from financial services which was affected by an accounting change around its Sony Life insurance business. On the flip side, Sony’s total quarterly operating profit dropped 31% to $1.85 billion, mostly driven by that same financial services segment.

Within the G&NS unit, revenue rose 28% to $5.63 billion. Based on this, gaming currently makes up a third of Sony’s total business. Top-line was bolstered by external partner game sales, additional content buying and improved hardware availability.

Keep in mind, the exchange rate impact was upwards of $300 million. Even accounting for that, PlayStation would boast best-ever Q1 sales. In fact, for more perspective, it’s a sizeable bump from the previous best of first quarter fiscal 2021 when revenue reached $4.5 billion based on the same exchange rate conversion.

Paralleling the overall firm’s scenario, G&NS experienced declining operating profit during the quarter ending June. This number went down 7% to under $360 million, where third party game sales weren’t enough to offset ongoing cost recognition from Bungie and other acquisitions, among other expenses.

I’ll say, for the accounting nerds, this does account for an increase in depreciation and amortization, which impacts traditional operating profit (as opposed to an adjusted figure that Sony reports, which did go up).

Underlying the revenue momentum were double-digit quarterly gains across every single product sub-segment. As you’ll see in the gallery above, somewhat surprisingly, the biggest contributor wasn’t Hardware. It was Add-On Content at 27% of the total, after experiencing a solid 15% growth in revenue. Next was Hardware at 24% of the pie, with sales jumping 42% since last year. Digital Software comprised 20% of the total and had the best year-on-year growth of 52%.

Sony also introduced a new product segment called Other Software, which accounts for first-party titles sold outside of the PlayStation family of devices. Thus, its PC offerings like Horizon Zero Dawn and The Last of Us Part 1. While it’s slight from a slice standpoint, only contributing 2% at present, it grew 17% since Q1 last year.

Right now, annual gaming revenue for Sony is a best-ever $27.83 billion. This is the first time it’s been above $27 billion, no doubt boosted by the yen impact I’ve already mentioned many times. However, annual operating profit is currently $1.8 billion, down from $2.3 billion this time last year. That’s a substantial change in profit margin, from 12% to 6%. Looking at annualized figures intensifies Sony’s predicament of expanding revenue yet deteriorating profit, which I believe is somewhat temporary as the console cycle matures.

How does that annual figure compare across the biggest industry peers? Well, Sony’s last 12 month revenue from gaming leads the pack as reported. Then there’s Tencent, which doesn’t report for a few more weeks, around $26 billion for now. Microsoft has $15.47 billion yet could see over $20 billion or better once the Activision Blizzard deal finalizes in the coming months. Nintendo’s big first quarter bumped it to $13.46 billion at the top-line, yet it has $4.49 billion in annual operating profit versus PlayStation’s $1.8 billion.

New chart alert!

Here I’ve presented launch-aligned unit sales for the last two PlayStation generations. It’s a simple, yet effective in my opinion, way to put PlayStation 5’s quarterly bounce-back in perspective. Notably since the PlayStation 4 is Sony’s fastest-selling console, one of the biggest consoles of all time, and its newest sibling is trying desperately to keep pace amidst a more challenging macro environment.

What stands out immediately is the gap between the two widened this quarter, moving from a 1.8 million divergence to now 2 million. That’s the wrong direction, and I’d bet why management said it missed expectations because it wants to cross that trend-line as soon as possible. Occurring during this fiscal year will be challenging, considering PlayStation 4 had its biggest holiday ever in the corresponding period, with nearly 10 million sold in the October to December period of fiscal 2016 alone. That year’s 20 million was the PlayStation 4’s best result; Sony expects PlayStation 5 to ship 5 million more than that!

Moving on to an even more important hardware metric, PlayStation 5 achieved 40 million in sell-thru to consumers right after the June quarter ended, as of July 16th. Like the above, its predecessor reached that same milestone 2 months faster. I probably sound more negative than I should, because in the broader context of the industry’s history, and its Xbox counterpart, PlayStation 5 is selling quite well.

Supplemental stats shown in the report include full game PlayStation software unit sales increasing from 47.2 million last year to 56.5 million in the three months ending June. First party sales were flat at 6.6 million. Which means third party games were responsible for all of growth, namely the likes of new launches like Diablo IV, Final Fantasy XVI and Street Fighter 6, all of which I covered in my recent piece on June’s U.S. sales report from Circana.

Contribution from digital downloads as a portion of total software sales declined in the quarter, shifting from 79% last year to now 72%. That’s still slightly above fiscal 2022, when downloads made up 67% of the total.

The main engagement metric that PlayStation shares is Monthly Active Users or MAUs. This figure, which is an estimate of how many people used PlayStation Network in the last month of the quarter, came in at 108 million. This is the same as last quarter, and up from the 101 million last year. Essentially, about the same amount of people have been active on the network throughout the first half of the calendar year.

“Total game play time during the quarter was only 2% higher year-on-year,” cited management. “And we see the year-on-year growth in software sales as being driven mainly by a considerable increase in spending per play hour by the expanding PlayStation user base.” This fits with the MAU indicator, in that engagement has been mostly consistent lately without growing substantially.

Here’s where another type if disappointment enters, mainly for those of us that want more transparency from companies. Apparently, this is the first quarter during which Sony won’t be reporting PlayStation Plus memberships anymore. It’s an odd decision to me, considering how much trouble it went thru rebranding the service and how it’s seemingly a core part of its future growth strategy to keep people engaged in its library of games. Hopefully this will be updated on an annual basis, or when it hits a fresh milestone.

Thus, the last number we’ll have for PlayStation Plus subscribers is 47.4 million as of March 2023.

Oh, and there’s no mention of PlayStation VR 2 at all. Not entirely unexpected, I suppose.

Just like last quarter, which ended its 2022 fiscal year, Sony’s latest result was mixed when considering both financial elements and expectations for hardware against what happened through June. The firm is generating staggering growth at the top-line, a ridiculous record first quarter with the bump from external partners launching huge multi-platform or timed exclusives. (Plus, don’t forget about that exchange rate benefit.)

Then there was the solid increase in PlayStation shipments, making up for lost time due to earlier chip shortages and pandemic hurdles. Still, last quarter’s number came in below estimate, and expense recognitions due to M&A and other expense types are hitting the bottom line. Hard.

An aspect that’s exceedingly important for PlayStation, as opposed to say Microsoft’s gaming business, is growth due to new exclusive games. Which, as I mentioned in the software section, was nonexistent this past quarter. While third parties like annual iterations from Madden and NBA 2K annual will drive the quarter ending September, first party will certainly pick up in the holiday quarter.

Here’s a look ahead to forecasts and the near future.

Sony raised annual guidance for full year 2023 revenue, both overall and for the PlayStation business, then maintained other forecasts around profit values.

The firm increased total annual sales forecast 6%, to over $89 billion. Similarly, revenue guidance for its gaming division was bumped up 7%, to roughly $30 billion which would be a record. Even with these, it kept forecasts for operating profit the same, and reiterated the annual PlayStation 5 hardware estimate.

“Although we upwardly revised the sales forecast for third-party software which is performing well, we have incorporated a deterioration in the profitability of PS5 hardware mainly due to changes in promotions by geographic region and the sales channel mix,” management wrote, explaining why it didn’t change the PlayStation profit estimate for now.

While I certainly think the top-line is achievable, I’m more skeptical on profit guidance and think it could miss depending on where expenses go in later months. Then, for console sell-in, I had my estimate at 25 to 25.5 million three months back. I’m shifting towards the lower end, now at 24 million to 24.5 million. Partially because I maintain hesitance on a model refresh happening this year, still targeting Calendar 2025 for a slimmer or more powerful PlayStation 5.

While it’s more relevant for the quarter ending December, I’ll go on record now that Marvel’s Spider-Man 2 will have a super start at market in October. It will outpace the 3.3 million copies at launch for its 2018 predecessor. Though with it only on PlayStation 5, I’m hesitant to claim it becomes the fastest-selling PlayStation exclusive ever, currently held by 2022’s God of War: Ragnarök at 5.1 million. I’m more in the 4 million range, which will beat the 3 million of June’s Final Fantasy XVI for the highest launch of titles exclusive to PlayStation 5 (of which there aren’t many).

How about that internal live services push? Well, it will certainly have an impact on costs and profitability towards the downside because of staffing, investment etc ramping up. I don’t foresee a big impact this fiscal year on revenue, unless perhaps Concord from Firewalk Studios sneaks into the January to March quarter. Even then, it won’t sell like its usual exclusives. The largest, most concrete first party release that we know about might be Destiny 2: The Final Shape, which will be around February 2024.

That brings me to the end of my “big three” recaps for this quarter, covering the main manufacturers across the industry. I recommend heading back to the earnings calendar for more events. Thanks for reading! Be well!

Note: Comparisons are year-over-year unless otherwise noted. Exchange rate is based on reported average conversion: US $1 to ¥137.

Sources: Bloomberg (Image Credit), Company Investor Relations Websites, Sony Interactive Entertainment.

-Dom

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

DomsPlaying

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

Diablo, Final Fantasy & Street Fighter Launch June 2023 U.S. Games Industry Sales to Near Record in Circana Report

DomsPlaying1 Comment

A busy season, featuring earnings calendars and Xbox write-ups, continues here at the site today with another major U.S. sales update. Industry tracking firm Circana (formerly The NPD Group) shared its June monthly report for the domestic games market, signaling the halfway point of 2023.

It was a massive month for consumer buying on games and hardware, nearly hitting an all-time June high.

According to Circana, June monthly sales jumped 9% to $4.73 billion. This is the second biggest June month in tracked history, which dates back to the mid 1990s, behind only 2021 when spending was peaking during the middle of quarantines due to coronavirus.

Last month’s increase also marked the second consecutive month of sales growth, after a couple down periods during springtime. All three segments of Video Game Content, Hardware and Accessories experienced growth, with the latter two boosting up double-digits.

In fact, Hardware had its best June in over a decade!

Premium releases in long-running franchises drove the near monthly record as Diablo IV, Final Fantasy XVI and Street Fighter 6 topped the charts, while additional new releases scattered the remaining software ranks.

These big budget projects also impacted the hardware front, where PlayStation 5 returned to the lead and won June by both revenue and units sold. Square Enix’s flagship Final Fantasy XVI launch had a lot to do with that, since the game is currently exclusive to Sony’s current generation platform.

“Big new premium games drove the market,” said Circana’s Mat Piscatella on Twitter. “Momentum continues to swing away from subscriptions/add-on spend towards big new premium games. Hardware [was] helped a bit by new portable PC gaming hardware, it’s an exciting new-ish segment.”

This one-two combination of blockbuster releases and the best supply we’ve seen since the console cycle began back in 2020, alongside macro elements like easing inflation, proved to be a recipe for commercial success to heat up the start of summer.

Check below for a full rundown of the numbers, then a preview of July kicking off the back half of 2023.

United States Games Industry Sales (May 28th – July 1st, 2023)

As I alluded earlier, total spend on games in the second best June on record rose 9% to over $4.7 billion. Until this excellent result, 2023 sales were looking flat for the year. Now, first half spending gained 2% to $26.56 billion, edging out the $26.11 billion from last year.

It’s a welcome return to growth for the domestic market after a shaky, uncertain 2022. It helps to have AAA titles launching at a time when people can find consoles at retail.

The largest segment of Content, which includes software, game downloads and related services, moved up 7% in June to $4.06 billion. During the first six months of 2023, spending declined ever-so-slightly to $22.79 billion. Content accounted for 86% of both the monthly and 1st half sales, compared to 87% last year.

“Console & PC Digital Premium Download spending in the month increased by more than 50% year-on-year.,” Piscatella said. “An 8% increase in content spending on Console and a slight gain in Non-Mobile Subscription spending were offset by declines in the Mobile and the PC, Cloud and Non-Console VR segments.”

Ongoing weakness for mobile, the source which consistently represents a huge portion of Content sales, continued in June as the report said spending was “relatively flat” without putting a number on it. Top earning mobile titles were Candy Crush Saga, Roblox, Royal Match, Coin Master and Monopoly GO!.

Premium software is where the action took place, where five of the Top 20 were brand new to market, including all of the Top 3.

Diablo IV topped the overall chart in June, just as its predecessor did in May 2012. Blizzard Entertainment’s action role-playing banger, with less than a month of sales under its best, was in third place during 2023’s first six months. Within the publisher’s recent second quarter results, management said Diablo IV was Blizzard’s fastest-selling title in its three decade-plus history, already delivering over $1 billion in net bookings.

Next up was Final Fantasy XVI, coming in second place despite being available on just a single device. As a quick comparison, that’s the same slot as Final Fantasy XV during its launch month of December 2016. The latest mainline Final Fantasy already ranks ninth on the 2023 chart, again with less than a month on record, echoing its early global success of 3 million units shipped and downloaded during its launch week. I expect that to increase when the publisher reports earnings this month.

Rounding out the Top 3 was Street Fighter 6, instantly ranked #10 for 2023’s first half. Capcom’s highly-praised entry sold double what 2016’s Street Fighter 5 did during its launch month domestically, earning the highest spend for a head-to-head fighting game since April 2019’s Mortal Kombat 11. At last count, Street Fighter 6 has achieved 2 million copies sold-in globally.

F1 23 and Story of Seasons: A Wonderful Life both also launched during June, and occupied spots a bit lower on the overall software chart. The former started in 15th, while the latter hit 17th. Then, for older titles, Sony’s pair of Marvel’s Spider-Man and Marvel’s Spider-Man Miles Morales launched back into the monthly Top 10.

Warner Bros’ Hogwarts Legacy was the best-selling title of 2023’s first six months, followed by The Legend of Zelda: Tears of the Kingdom. While we’ll never know, I’d be super curious to see if Zelda might be ahead if downloaded copies were counted, seeing as Nintendo doesn’t share its digital share.

Scroll down for June’s full list, plus the best-selling software of 2023 so far here in the States.

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

  1. Diablo IV
  2. Final Fantasy XVI
  3. Street Fighter 6
  4. The Legend of Zelda: Tears of the Kingdom*
  5. Hogwarts Legacy
  6. Call of Duty: Modern Warfare 2
  7. Star Wars Jedi: Survivor
  8. MLB The Show 23^
  9. Marvel’s Spider-Man Miles Morales
  10. Marvel’s Spider-Man
  11. FIFA 23
  12. Mario Kart 8*
  13. Dead Island 2
  14. Minecraft
  15. F1 23
  16. Elden Ring
  17. Story of Seasons: A Wonderful Life
  18. God of War: Ragnarök
  19. Resident Evil 4 Remake
  20. Super Smash Bros. Ultimate*

Top-Selling Games of 1st Half 2023, U.S., All Platforms (Physical & Digital Dollar Sales):

  1. Hogwarts Legacy
  2. The Legend of Zelda: Tears of the Kingdom*
  3. Diablo IV
  4. Call of Duty: Modern Warfare 2
  5. Star Wars Jedi: Survivor
  6. Resident Evil 4 Remake
  7. MLB The Show 23^
  8. Dead Island 2
  9. Final Fantasy XVI
  10. Street Fighter 6
  11. FIFA 23
  12. Dead Space Remake
  13. Madden NFL 23
  14. Elden Ring
  15. Mario Kart 8*
  16. The Last of Us Part 1
  17. Minecraft
  18. God of War: Ragnarök
  19. Pokémon Scarlet & Violet*
  20. Marvel’s Spider-Man Miles Morales

Fitting perfectly with the strength of this entire report, spending on Hardware increased 22% in June to $454 million. For context, that’s the best June month for the category since June 2008’s $617 million.

You read that correctly. It’s been 15 years since we’ve seen this much money splurged on game consoles during June. And, that month in 2008 was an all-time June record driven by Nintendo Wii, Xbox 360 and PlayStation 3.

Back to present day, even thru May, Hardware was trending way up for the year as supply continued to flood the market and demand kept pace. Across the first half of 2023, people spent $2.61 billion on this category, an increase of 23%.

PlayStation 5 continued its amazing run in 2023, regaining the top spot on the best-selling console list. It won June by both dollars and units after gaining double-digits since last year. That’s because spending on PlayStation overall had its best June on dollar sales since 2008, the same year as mentioned above, and its highest unit sales since June 2010.

Sitting in second place during June was Nintendo Switch, measured by dollars and units. Actually, Circana highlighted that Switch and Xbox Series X|S sales both declined last month. Which makes a lot more sense for the aging Switch, which rumors speculate could have a successors as soon as next year, than the Xbox family which is going the complete wrong direction due to a lack of appealing exclusives and a mismanaged pipeline.

If you want to hear more of my thoughts on Xbox’s hardware approach, or lack thereof, visit my aforementioned recap of Microsoft’s first quarter fiscal 2024 results. PlayStation continued as the premier headliner in the industry, and I’m expecting a monster quarter for Sony’s gaming division when it announces Q1 figures next week.

One thing that caught my eye within Piscatella’s comments was the mention of handheld PC gaming hardware. While Nintendo is the only traditional manufacturer currently investing big in this slice, there are newer portables like Valve with Steam Deck, ROG Ally from ASUS and Logitech’s G Cloud clearly garnering interest, and dollars, from a core yet loud gaming audience. While I don’t expect Sony (which does have its Project Q home streaming device incoming) or Microsoft to put beaucoup dollars behind a native handheld anytime soon, or at all, it’s a worthwhile segment for PC-aligned brands to explore.

Our final area of Accessories jumped up 14% during June, to $214 million. It’s yet another segment that started slow this year, yet it’s managed to trend in a positive direction over recent months. During the 1st half of 2023, spend on peripherals reached $1.15 billion, or 5% higher than last year’s $1.1 billion.

Running in parallel to the exceptional hardware month from Sony, PlayStation controllers occupied the first four spots in this category during June.

The Japanese platform holder’s top-end PlayStation DualSense Edge was last month’s best-selling peripheral. Because of the game pad’s price point and attraction when folks upgrade to a new console, this device also held the top spot during 2023’s initial six months.

While the bread and butter of Accessories continues to be controllers, I believe Virtual Reality headsets will be key for its direction during the year’s back half. Despite a low profile, PlayStation VR 2 is selling better than its predecessor did worldwide. Then, Meta has its Quest 3 scheduled for sometime this Fall. As the follow-up to one of the most popular headsets ever sold, it should provide a noticeable impact.

It seems the games industry is a hot as the weather here in the States, with June proving to be a near record heat wave for consumer spending on all fronts. It’s a blockbuster start to the summer, at a time when school is out and people are ready for fun, especially when air conditioning and a good game can provide much-needed respite from Mother Nature.

Software publishers are capitalizing on beloved franchises, while hardware makers reap the rewards.

While it’s already August on the calendar, there’s still a couple weeks to go before Circana’s next monthly report. That means it’s prediction time! Fair warning: after a better-than-expected result for my June predictions, I’m feeling slightly confident.

July tends to be the calm before August and Madden provide the unofficial kickoff to the commercial season. There’s still plenty to discuss. Plus, titles are evergreen these days and will continue to sell throughout the year, especially as new content hits for some of 2023’s biggest titles.

When it comes to overall spending, I’m expecting a bounce back for this July after 2022’s decline. (Remember MultiVersus? That was last July’s winner.) I can see growth in the low to mid single digits.

The most notable premium releases aren’t necessarily major sellers, with the likes of Nintendo’s Pikmin 4 and Remnant II from Gearbox Publishing containing the most upside. The former will benefit from the Switch effect, as it already has in Japan as the best start in franchise history, and the latter is already at 1 million copies in less than a week. I expect both can achieve Top 10 starts, with upside on the edge of the Top 5.

Then, Capcom launched Exoprimal, and I can’t say I’m that optimistic. I think it misses the Top 20. As for new platforms for older titles, the PC version of Ratchet & Clank: Rift Apart might bring that one back into the Top 20.

I expect an existing title to lead July. Honestly, I’m not sure which will do it, so let’s say Diablo IV repeats just because Final Fantasy XVI is one platform and Tears of the Kingdom doesn’t include digital. It’s going to be a surprising month at the top end.

On the other side, I think July hardware is a foregone conclusion: PlayStation 5 earns and sells the most units.

My time recapping the latest Circana results is now at an end. I recommend reading Piscatella’s thread on social media, even if you rarely visit Twitter or whatever the billionaire baby is calling it this week. It’s worth hanging around just to follow me and like-minded analysts, after all.

Thanks for stopping by. Be well and take care!

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

*Digital Sales Not Included

^Xbox & Nintendo Switch Digital Sales Not Included

Sources: Activision Blizzard, Capcom, Circana, Game Data Library, Gearbox Publishing, Square Enix.

-Dom

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

DomsPlaying

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

DomsPlaying

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

PlayStation 5 Q4 Unit Sales Record Drives All-Time High for Sony’s Gaming Division in 2022 With a Couple Caveats

DomsPlaying

Gamers should be happy, for once, because the PlayStation 5 has finally arrived!

At least that’s according to Sony’s 2022 annual financial results, which proved that any lingering supply issues for the newest console generation are now over.

The Japanese consumer tech giant reported earnings in Japan last week for the fiscal year ending March 2023. Within, its PlayStation division had an exceptional time as hardware inventories returned and people everywhere could buy PlayStations once again. Its Game & Network Services (G&NS) segment produced almost $27 billion in annual sales, an all-time best.

What’s the catch?

Well, a historically weak yen had an outsized impact and was responsible for a substantial portion of revenue growth. Gaming also proved less profitable because of higher development and acquisition expenses. I’ll cover that more later.

Still, that’s not to dampen what Sony is doing with its gaming hardware business emerging out of the height of pandemic times. During January to March, the PlayStation 5 had the best non-holiday quarter for a gaming console ever with 6.3 million units sold. For perspective, it had shipped 3.3 million and 3.9 million in the same quarter during 2020 and 2021, respectively.

This means Sony beat its ambitious fiscal year target of 19 million shipped, reaching 19.1 million. It also drove lifetime shipments to 38.4 million, moving past the 30.75 million for Sega Genesis and Nintendo 64’s 32.93 million.

On the content side for PlayStation, while yearly software unit sales declined, its services and engagement statistics showed progress as PlayStation Plus and Monthly Active Users (MAUs) either remained flat or gained ground.

“Distribution inventories have normalized, and we are now able to deliver PS5 to customers without waiting almost all over the world,” executives said in prepared remarks. “In addition, the positive impact of increased PS5 sell-in has begun to appear in engagement metrics, with dollar-based third-party software sales exceeding the same month of the previous fiscal year in February and March.”

Here’s a closer look at the numbers for 2022, plus a preview of the year ahead with my new predictions.

Starting with Sony overall, its Q4 revenue jumped 35% to $22.6 billion. During fiscal 2022, sales rose 16% to over $85 billion, slightly above its target. This benefited from contributions across a number of business lines, including G&NS in addition to Entertainment, Technology & Services (ET&S) and its Music segment.

On the other hand, quarterly operating profit suffered a 51% decline to $950 million. It was virtually flat for the year, at $8.92 billion, above estimate. Headwinds included currency impact alongside lower contributions from PlayStation and Sony Pictures.

Gaming is a major factor for Sony’s overall performance. Both Q4 and 2022 overall proved to be mixed, with excellent top-line growth yet a weaker profitability outcome. PlayStation revenue between January and March launched 61% higher, to an all-time Q4 record of $7.9 billion. That was over a third of Sony’s sales for the quarter. During 2022, PlayStation sales grew 33% to a record $26.9 billion.

Again, on the flip side was profitability. Fourth quarter operating profit dipped 55% to $287 million. This drove the annual figure down 28% to $1.85 billion.

There’s great top-line movement yet worsening profit tells a totally different tale. Part of the reason behind record sales was massive exchange rate impact. Over the course of 2022, currency effect was upwards of $3.1 billion. That’s 12% of the total! If backing out this portion, for illustration purposes, Sony’s annual revenue would have been virtually flat.

Profitability took a hit mainly due to higher costs associated with making blockbuster first-party games like God of War Ragnarok, which had a reported budget of at least $200 million, plus purchasing Destiny creator Bungie among other smaller studios. Sony is also investing in its services suite and cloud offerings, and rebranded its PlayStation Plus membership structure. And frankly, it costs money to supply more hardware.

A primary growth driver was, naturally, PlayStation 5 hardware shipments. As regional data came in from key markets, indicators pointed to a big quarter. I still didn’t know if it could be this massive. Sony just shipped the most PlayStations in any fiscal Q4. To put this 6.3 million in context, the biggest January to March shipment total was 3.1 million right after its launch in fiscal 2013. Last year, Sony moved a paltry 2 million.

Even more, I bet most if not all stock is selling-thru to customers. The supply and demand equation has equalized, and Sony is clearly making up for lost time.

While this is impressive stuff, the PlayStation 5 continues to lagging its predecessor, which was at 40 million shipped by the end of its third fiscal cycle. That’s currently the fastest-selling console in Sony’s history. We’ll see if PlayStation 5 catches up. (Tease: It should by next year).

This performance was reflected in its product mix, where Hardware made up 35% of the quarter’s sales after more than doubling year-over-year. Next up was 21% via Add-On Content as it benefited from spend on third-party software and downloadable expansions. Digital games comprised 16%, no doubt bolstered by a monumental launch for Warner Bros’ Hogwarts Legacy. And the Others category contributed 13%, moving up 176% since last year. This includes Sony’s games on PC, such as The Last of Us Part 1 which launched in March.

As I did during my Microsoft earnings reaction, here’s a quick rundown of where Sony’s latest annual output fits compared to peers. Tencent’s latest was nearly $26 billion, meaning that if we account for extreme exchange rate fluctuations, Sony’s $26.9 billion would be tops. Backing out that effect, Sony occupies the second spot again at $23.82 billion. This is where Microsoft’s Xbox sales sit at $15.43 billion. Activision Blizzard’s 12-month revenue was $8.14 billion, so the combined firm could be $22 billion to $23 billion, accounting for redundancies and sales overlaps. Nintendo previously produced $12.25 billion, yet the company is reporting more recent results next week.

Sony’s management also shared supplemental statistics, which give insight into the number of folks playing regularly on PlayStation, if those users actively sticking around plus how well are services being received.

To keep it simple, I’ll focus on annual figures. Intriguingly, full game software sales across the PlayStation family took a substantial hit during 2022, moving down 13% to 264.2 million. Out of that, 43.5 million were from first-party titles published by Sony itself. That number is down only marginally from last year’s 43.9 million. In fact, Sony claims that dollar sales of first-party software rose 41%, including the impact from Bungie. The bulk of the unit drop was external games.

Digital represented 67% last year, up slightly from the 66% of fiscal 2021. That means more than two-thirds of games purchased for a PlayStation platform are via download. Digital’s slice didn’t dip below 62% during any quarter over the past two years.

It appears that, for now, the refurbished PlayStation Plus service is attracting and retaining users. There were 47.4 million memberships at the end of March, the same exact figure as the prior year and up 1 million sequentially since the holiday season.

Reflecting a similar engagement theme was active users on PlayStation. MAUs, defined as the “estimated total number of unique accounts that played games or used services on the PlayStation Network during the last month of the quarter” rose from 106 million in March 2022 to 108 million now.

Thus, while software sales declined for Sony this fiscal year, just as many people are subscribing to its catalog of older titles on PlayStation Plus and even more people are active on the ecosystem, which contributed to its elevated financial results.

“The number of monthly active users for PlayStation as a whole increased 2.3 million accounts compared to the same month of the previous fiscal year in March,” management said on its conference call.

There’s two sides to Sony’s story last year, and I’ve fully delved into both. To summarize, it was one of the best years gaming has ever seen. Albeit with the caveat of revenue benefiting greatly from a weak local currency and profit facing hits from big costs. There’s macro elements like supply lines being shored up that greatly benefit, and even though people are buying less games, perhaps partially due to inflation pressure, they are playing the games they bought.

One disappointing element of Sony’s announcement was nothing much on PlayStation VR2, which launched in February. For such a major product launch to receive zero airtime is concerning, and reinforces my viewpoint that its launch isn’t moving the needle for PlayStation or virtual reality as a niche.

Looking ahead, Sony has set a rather ambitious target for its gaming division in fiscal 2023. Namely, it expects the best year ever for PlayStation hardware, even with a single system-selling title on the docket for the upcoming 12 months.

“We are planning to release a major title, Marvel’s Spider-Man 2, this fiscal year, and we aim to continue creating new IP, rolling out catalog titles for PC and strengthening live game service development.”

Starting with hardware guidance, executives anticipate shipping a staggering 25 million PlayStation 5’s between April 2023 and March 2024. That would be the single best year of PlayStation console sales in its three decade history. If this happens, lifetime PlayStation 5 sales would reach 63.4 million, thus blowing past PlayStation 4’s 60 million on a launch-aligned basis.

I believe Sony will in fact meet this mark. I’m forecasting 25 to 25.5 million in annual PlayStation 5 shipments. I don’t expect any sort of new enhanced version, despite what “insiders” claim. Sony doesn’t need one right now. Supply has caught up to demand and it will milk the current devices until there are more games available solely on this generation.

Effectively, I’m targeting calendar 2025 for a PlayStation 5 model refresh.

Unlike Sony’s overall guidance expecting lower results in fiscal 2023, the firm is upbeat on the gaming segment. It anticipates 7% higher revenue and 8% better operating profit for PlayStation, to $28.8 billion and $1.99 billion respectively. The former would be another all-time best.

Will it hit these? I’m hesitant, not because of games or hardware, mainly because of exchange rate uncertainty plus cost upside. I’m expecting a more modest rise in the low single-digits, and operating profit to be flat or down slightly.

I’m expecting a great upcoming 12 months for software on PlayStation. Marvel’s Spider-Man 2 is undoubtedly a system seller. Square Enix’s Final Fantasy XVI and Capcom’s Street Fighter 6 will attract audiences. Activision Blizzard will launch Diablo IV to critical and commercial acclaim, and will have some sort of premium Call of Duty to sell. MLB The Show is a quiet success every year. Even Ubisoft will, allegedly, launch some games.

There’s also the transmedia portion and PC sales, incorporating brands like The Last of Us and Twisted Metal, which can provide upside if costs are kept in check. The great unknown is Sony’s live services push because it’s still in the ramp-up phase, where it generates expenses long before revenues and I remain a skeptic on just how many players will obsess over ongoing games exclusive to a single platform. At least Naughty Dog should share more on The Last of Us multiplayer this year.

I’ve come to the end of another fun rundown, within what’s already been a busy season. Next up will be Nintendo next week. Thanks for hanging out. Until then, take care, and be well everyone!

Note: Comparisons are year-over-year unless otherwise noted. Exchange rate is based on reported average conversion: US $1 to ¥135.4.

Sources: Ariana Ruiz/Picture Alliance (Image Credit), Circana, Company Investor Relations Websites, The Guardian.

-Dom

Microsoft’s Xbox Division Posts Second Best Q3 Sales Ever & U.K. Regulator Blocks Activision Blizzard Deal

DomsPlaying1 Comment

As earnings season officially kicks off, displayed by my quarterly calendar, it’s a big week for Microsoft.

Like many things in life, there’s good and bad.

Yesterday, the Washington-based mega-corp reported its fiscal 2023 third quarter results. This proved to be quite the time for its Xbox division, achieving its second best Q3 ever behind only last year’s all-time highs.

Overall, Xbox revenue declined 4% in the latest three-month period. The Xbox Content & Services sub-segment, which include software and subscriptions, provided a welcome boost as output from hardware sales slumped in the double-digit range.

“We are rapidly executing on our ambition to be the first choice for people to play great games whenever, however, and wherever they want,” said CEO Satya Nadella on the firm’s conference call. “We set third quarter records for monthly active users and monthly active devices.”

Now, less than a day later, we have a huge update around its pending acquisition of Activision Blizzard. The United Kingdom’s Competition & Market Authority (CMA) pushed back against the proposed deal in its final report, citing competition concerns mainly in the cloud gaming space. Thus, the CMA did not approve the acquisition and has blocked it from taking place locally.

At least for now.

“We took the view that the merger would be harmful to competition,” the regulator wrote in its document available here. “And that the best way to address this would be to allow existing drivers of competition to continue to deliver for the benefit of UK consumers.”

This is a major blow to Microsoft’s shot at broadly closing the deal anytime soon, if at all, especially since it has yet to receive approval in the United States or European Union. And it’s a surprising development to me, considering the CMA recently expressed that it didn’t see concerns on the console side which is exponentially larger than the cloud market.

At the start of this year, I predicted that regulatory delays might push the deal to calendar Q4. Now, I’m on the fence as to whether it will even happen!

Understandably, Microsoft executives aid they will be appealing this decision.

Here’s a rundown of the underlying financials from Microsoft’s latest announcement showing a very good quarter for gaming. Then, read on for commentary around where I think the Activision Blizzard deal goes from here.

First let’s talk general gaming numbers. During January to March, Xbox generated $3.61 billion in revenue. That’s down 4% since the same time last year, which was a record $3.74 billion. This is only the second time Q3 Xbox revenue has surpassed $3.6 billion.

Expanding to consider the most recent 12 months, Microsoft’s gaming segment has produced $15.43 billion in sales. You’ll see this comparison over time in the graph above. Compare that to the $16.49 billion generated a year ago, and the current yearly figure is down 6%.

Even so, annualized Xbox sales have been above $15 billion for eight straight quarters.

This illustrates a few important factors impacting the top-line of Microsoft’s Xbox business. Mainly how its subscription business is proving resilient even when there aren’t many major exclusives and hardware isn’t growing.

It reflects a shift of spending for consumers coming out of the heights of coronavirus lock-downs, moving towards different purchasing decisions when it comes to entertainment. There’s also the inflation element, which continues to rear its ugly head at a macro level. Still, it’s lagging where it should be at this point in a new console cycle. If it wasn’t for Xbox Game Pass, the business would look a whole lot different.

While it’s still early in the earnings season, I like to run an annual sales comparison across industry peers whenever we get new results from the biggest players. Tencent is currently the world’s largest gaming company by sales, eclipsing upwards of $25.6 billion in fiscal 2022. Sony’s impressive $22.84 billion from PlayStation is up next, bolstered by an exceptional holiday quarter. This is where Microsoft slots in with $15.43 billion. Note Activision Blizzard reported its fiscal 2023 Q1 results today, wherein its 12-month revenue is $8.14 billion, thus the combined entity could be roughly $22 billion to $23 billion, accounting for redundancies and sales overlaps. Lastly, Nintendo saw $12.25 billion in annual sales.

As I say every time when Microsoft reports, we have limited visibility into profitability for the Xbox brand. The gaming segment is part of the More Personal Computing (MPC) business unit, which experienced a 12% decline in operating profit during Q3. This was mainly driven by 9% lower revenue, since operating expenses declined 5%. It’s impossible to know how gaming contributes, so all we have are metrics from the broader business.

I’ll now break out the performance of each underlying segment within gaming, to illustrate how each contributed to the whole.

Sales from Xbox Content & Services rose 3% in Q3, well above the company’s forecast. This equates to $3.1 billion in sales, or 86% of Xbox’s total, which is a record third quarter dollar amount passing last year’s $3 billion. On an annualized basis, sales from Xbox Content & Services reached $12.06 billion or 78% of the total. The company attributed this upward movement to Xbox Game Pass growth.

As part of this, subscription revenue reached almost $1 billion in Q3 according to Nadella. Thus, 28% of Xbox revenue right now is via Xbox Game Pass and related subscription revenue across its various devices.

Speaking of the service, management still hasn’t shared any new subscriber numbers. The last update was 25 million back in 2021. It seems like every quarter, executives say that Xbox Game Pass is growing and yet we don’t know by how much. I’m still banking that it publicly hits the 30 million mark this fiscal year.

As for other metrics of engagement, I mentioned the quote from Nadella earlier in the piece that said Xbox set Q3 records for monthly active users (MAUs) and “monthly active devices,” whatever that means, without placing actual numbers on either. For reference, last quarter Xbox attracted 120 million MAUs, so it’s probably below this number (I’d imagine he would have said otherwise).

The last random statistic provided by executives was its first party passed 500 million unique users to date. Since the inception of the Xbox brand in 2001, I assume? That’s certainly a lot, albeit inclusive of Bethesda titles which only recently came under the company’s umbrella.

Moving over to Xbox Hardware, revenue declined an astonishing 30% in the quarter ending March to around $507 million. That’s the lowest dollar amount since 1st quarter of fiscal 2021. Annual sales from Xbox’s console business are currently $3.37 billion. Compare that to $3.79 billion around Q3 last year.

This reflects what regional data was saying in recent months, as Microsoft’s peers notched wins in key markets. Management said this was due to “a prior year comparable that benefited from increased console supply.” In that case, why the heck is Sony signalling its best year for PlayStation 5 and crushing it when it comes to inventories? There’s a disconnect between the two current gen manufacturers, and I can’t tell if it’s because of Microsoft’s ideological shift away from consoles and towards services, or if its suppliers aren’t doing as well as peers?

This is one reason why it’s so hard to talk about lifetime hardware shipment comparisons this generation. I had Xbox Series X|S around 21.5 million to 22 million last quarter. Maybe it has passed 23 million by now, which I believe would be lagging even the lackluster Xbox One generation. For comparison, PlayStation 5 is at 32 million and will be even higher when Sony reports its results later this week.

Closing out the Q3 talk, Microsoft’s overall revenue rose 7% to $52.9 billion. Operating income moved up 10% to $22.4 billion. Microsoft Cloud revenue alone jumped 22% to $28.5 billion. The firm beat analyst expectations for both sales and profit.

Really, this past quarter perfectly encapsulates Microsoft’s evolved gaming strategy. Ecosystem and subscription contributing to ongoing revenue, which offsets times when console sales are lackluster or it doesn’t have a big exclusive software launch. I’ve said for years that Microsoft’s biggest exclusive is Xbox Game Pass, not any of its first party brands like Halo or Forza.

The results for Xbox’s subscription offering speak for themselves, at least at the top-line. Whether it’s sustainable over time is another question that’s hard to answer without more transparency. If my prediction of a price hike in the next year or so comes true, that’s another piece of the profitability puzzle.

Looking ahead towards the final quarter of Microsoft’s 2023 fiscal year, the firm expects gaming revenue to grow in the “mid to high single digits.” If I assume 7%, that would be $3.7 billion. Just below the all-time high of Q4 2021’s $3.71 billion.

For Xbox Content & Services, management forecasts an increase in the “low to mid teens.” Assuming it could be around 12% growth, that’s a Q4 result of $3.1 billion which would be the best Q4 for this software sub-segment to date. And while Microsoft doesn’t provide guidance for its Xbox Hardware business, I’m looking at around a 13% decline if the other numbers hold.

This fits with my expectation that 3rd party software will carry the quarter, with the likes of Star Wars Jedi: Survivor, Diablo IV (ironically from Blizzard) and Street Fighter 6 hitting market. Internal studio titles like Minecraft Legends and Redfall will contribute, though I wouldn’t dare call them blockbusters. Either way, I’m expecting Microsoft to meet these forecasts, leaning more towards a slight beat.

That brings me to my reaction to the CMA’s decision to block Microsoft’s intended purchase of Activision Blizzard in its native United Kingdom. While I’m still digesting it, and I’m far from a legal expert, the overall point remains that cloud gaming seemed to be the tipping point for the regulator, and the main reason why it thinks the deal could stymie competition.

I can almost see the CMA’s argument, as Microsoft purchasing all these properties will certainly beef up its already leading market share in cloud. Even as the company threw around 10-year licensing agreements like Oprah does cars. It’s still a ridiculous reason to block the purchase, considering it will continue to be a niche portion of the industry now and in the medium term. To me, King is the real prize of the deal with its exposure to behemoth mobile titles like Candy Crush. There seems to be an outsized focus on cloud services, which will remain a small complement to traditional and mobile gaming for many years to come.

It’s a cop out, I know, yet I’m officially undecided as to when, or even if, the deal will close. Originally I expected it by year-end. With Microsoft appealing the CMA’s decision, plus without approval yet from the United States and European Union, my prediction is this legal ordeal might drag well into 2024.

Apologies to everyone who thought the story would be over sooner than later!

What is over is my first big recap of video game earnings. Check back in the coming days for more games industry coverage, and bounce back to the calendar for a rundown of the schedule for gaming, media and tech companies. Thanks for visiting! Be well, everyone.

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

Sources: Company Investor Relations Websites, The Competition & Markets Authority (CMA).

-Dom

PlayStation 5 Outpaces PlayStation 4 in Circana’s March 2023 U.S. Games Industry Sales Report

DomsPlaying

Can you believe the year is a quarter over? At least it’s beautiful springtime here in the States.

Which means, most importantly of course, it’s time to spring into another monthly sales report!

Industry tracking firm Circana, formerly The NPD Group, recently published its March 2023 games industry report which tracks trends and tidbits on spending habits of domestic gamers.

Both March and the first three months showed common themes, while the PlayStation 5 hit a major milestone compared to its predecessor plus Capcom has another REmarkable hit on its hands.

Overall consumer buying on games and related categories declined 5% in March, leading to a modest 1% drop for the first quarter. Underlying this movement was weakness in mobile and certain software areas, which offset sizeable gains in the hardware segment.

Generally this indicates industry sales normalizing towards pre-pandemic levels, as consumers get back to other forms of entertainment and face certain external pressures like continued inflation. Better hardware supply is providing a much-needed boost, because those looking to buy a current generation box at retail can find one.

Circana’s monthly announcement tells a mixed story on the Content side as mobile and premium software continued downward pressure, even as new launches hit market. Within premium, Capcom’s Resident Evil 4 Remake was the month’s best seller.

On the console front, Sony’s PlayStation 5 has been on market now for 29 months. This is worth mentioning because it’s (finally) outpaced 2013’s PlayStation 4 on a launch-aligned basis. Until now, the recent cycle was lagging its predecessor. In fact, PlayStation 5 also set a new March unit sales record for the brand, a month after it did the same for a February month, implying that Sony might be able to meet its lofty goals towards this the end of its fiscal year.

“PlayStation 5 lifted hardware spending in March,” said Circana’s Mat Piscatella on Twitter. “However this growth was offset by a decline in content spending, where increases in non-mobile subscription as well as digital add-on console content were offset by lower spend across premium games, PC add-on content and mobile.”

Scroll down for more reactions to the commercial standing of the U.S. games industry in Q1.

United States Games Industry Sales (February 26th – April 1st, 2023)

During the last month, total games industry spending moved down 5% to $4.63 billion. This means the first quarter equaled $13.58 billion, down 1% to date.

The largest contributor of Video Game Content made $3.83 billion in March, a decline of 7% as it comprised 83% of the overall figure. In the same month last year, it made up 85% mainly because of softness in hardware at the time. Q1 purchasing on Content this year lowered 4% to $11.51 billion, whereas in 2022 it reached $12 billion by now.

Mobile was a driving force, moving down yet again in March albeit it’s unclear to what extent as Circana doesn’t share specifics. The report still claims mobile spend was “strong” during March, led by the casual sub-category having its best month since a year ago, outpacing even the holiday period. Top mobile earners last month were Candy Crush Saga, Roblox, Royal Match, Coin Master and Pokémon Go.

Circana said premium software also exhibited a year-on-year decline in March, despite a handful of higher profile releases. Keep in mind last year was the first full month of Elden Ring sales, a title which proved to be a bellwether throughout the first quarter and beyond, plus featured launches in the Gran Turismo and Kirby franchises.

The reanimated Resident Evil 4 Remake won March by revenue, making it the 3rd best-selling game of the entire quarter with only a week of sales in consideration. As compared to earlier titles, Resident Evil Village also topped its debut month of May 2021 while Resident Evil 3 Remake started in 6th during April 2020.

This is an impressive beginning for the beloved Resident Evil 4 Remake that parallels its global success, whereby it’s the second fastest-selling franchise game behind only Resident Evil 6 in 2012. Resident Evil 4 Remake moved 3 million copies in its first two days, and has since sold over a million more.

Beneath Hogwarts Legacy at #2 was the next new release in MLB The Show 23, which scored a third place start. The past couple incarnations of Sony San Diego’s multi-platform baseball sim have performed in this range during their debut months, hitting 4th and 1st in 2022 and 2021, respectively. This year’s title is already the 4th best-seller of 2023, made even more impressive by the fact that it only counts digital on select platforms.

The final new title on March’s list was WWE 2K23 at #7. This was a great result for Take-Two’s latest wrestling game, notably because the publisher doesn’t share its download portion. All of this is from physical sales. Its predecessor entered the arena in the same spot in March 2022 after the storied series took a much-needed year off.

Otherwise, last month’s premium ranks were occupied by titles launched in earlier periods. Major movers included Metroid Prime Remastered jumping from #21 to #13 and Lego Star Wars: The Skywalker Saga launching up to 20th from down in 41st.

Across the first three months of 2023, Hogwarts Legacy was the top-selling title followed by Call of Duty: Modern Warfare 2. The two new entries in March bumped Dead Space Remake a bit to 5th. Further down, Octopath Traveler II was probably the most notable, moving from outside the Top 20 into the 17th slot.

Here’s the full rundown of premium software sellers for March and the first quarter.

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

  1. Resident Evil 4 Remake
  2. Hogwarts Legacy
  3. MLB: The Show 23^
  4. Call of Duty: Modern Warfare 2
  5. The Last of Us Part 1
  6. FIFA 23
  7. WWE 2K23*
  8. Elden Ring
  9. Madden NFL 23
  10. Mario Kart 8*
  11. Minecraft
  12. Octopath Traveler II
  13. Metroid Prime Remastered*
  14. Pokémon Scarlet & Violet*
  15. God of War: Ragnarök
  16. Kirby’s Return to Dreamland*
  17. Dead Space Remake
  18. NBA 2K23*
  19. Sonic Frontiers
  20. LEGO Star Wars: The Skywalker Saga

Top-Selling Games of Q1 2023, U.S., All Platforms (Physical & Digital Dollar Sales):

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

Sales within the Video Game Hardware category moved up 10% in the U.S. last month, settling at $566 million, which proved to be a substantial figure in a historical context.

“This is the second highest video game hardware spend for a March month in U.S. history, trailing only the $680 million reached in March 2021,” noted Piscatella.

That sort of near historic momentum drove Q1 sales upwards 21% to $1.5 billion. For comparison, its contribution was $1.2 billion between January and March 2022.

This signals not just a healthy supply of consoles in market, but a better-than-expected amount coming off a challenging 2022. I’ve written about how I was skeptical of Sony’s bullishness on its console business even now that supply lines are shored up. I’m beginning to think executives were onto something.

Why? In addition to PlayStation 5 now selling faster than PlayStation 4 domestically, it also set a new unit sales record last month for the PlayStation brand during a March month. Looking back historically, PlayStation Plus moved 620K units around its first month in 2005. The latest box from Sony outsold this number.

Naturally, PlayStation 5 was the best-selling console of March by both units and revenue as it gained ground compared to last year. It’s unclear if we’re looking at a record first quarter of unit sales after both February and March were both all-time PlayStation records. All Circana did was call year-on-year growth in Q1 “significant.”

Something else that’s significant, even if less so, was how Xbox Series X|S again secured second place during March as measured by dollar sales. This is the second month in a row where Microsoft’s latest console family has outpaced Nintendo on revenue. Still, Nintendo Switch continues to move off shelves in its seventh year as the runner-up during March by unit sales.

Similar to March itself, when considering the first quarter, Switch secured second place on units. Xbox Series X|S is runner-up right now on dollars. Circana tells me that the difference between the two platforms vying for second place is “very close.” Basically, it’s anyone’s game!

Rounding out the spending categories was Video Game Accessories, which didn’t move much in March or Q1 in either direction. Purchasing rose 1% last month to $239 million, making the year-to-date essentially flat at $617 million.

Game pads boosted March’s result, earning more than any other sub-segment in Accessories. Sony’s PlayStation 5 DualSense Edge Wireless controller in black was the month’s top-seller, benefiting from that premium price point.

As for the year-to-date best-seller, I have a question out to Circana to see if they might be able to share it. I’d imagine it’s one of the PlayStation 5 DualSense models, based on how well the corresponding console is doing lately.

Separately, fitting with the broader narrative of a slower start for PlayStation VR2, I asked Circana specifically if they could share anything about the headset’s performance or how it compares to the first iteration back in 2016. They weren’t able to comment. Seeing this segment where it is means that I don’t think virtual reality is moving the needle, even during the first full month of sales for a premier product launch from one of the industry’s biggest players.

While somewhat disappointing, it matches my expectation that virtual reality has niche appeal, both in the past and future, until the technology catches up with where it needs to be and headsets can be standalone. There’s also the high barrier to entry on cost for something that requires a console connection.

While domestic industry sales trended downward during both March and the first quarter, there are plenty of bright spots including hardware, big budget title sales and even accessories moving in a good direction. PlayStation 5 hitting a couple major milestones is reassuring, given where supply has been for most of this generation.

“Engagement is returning to pre-pandemic levels, but spending is holding significantly above,” noted Piscatella.

Mobile is still the unknown, showing weakness for a while now, and Xbox Series X|S continues to lag where it should be against its biggest peer. Perhaps Microsoft isn’t as concerned. Circana did specifically say that subscription spending, like that on Xbox Game Pass, is still growing at this phase, although slower than it has in recent years because of cycle maturation.

I’ll now cover the first month of the new quarter before I go. April is a curious month, continuing with blockbuster releases on the premium side. Plenty of which will help with console demand.

I’m anticipating overall spending to be flat year-on-year, with upside depending on if console inventory holds up and where mobile goes.

Within Content, I’m expecting a massive debut from Star Wars Jedi: Survivor. However, there’s a caveat. The latest from Respawn Entertainment and Electronic Arts launches on April 28th, the day before the April tracking period ends. Even so, I’m betting it’s the month’s best-seller.

Dead Island 2 releases later this week, and it’s a curious one in this context. I can see a Top 10 start, though not a Top 5. EA Sports PGA Tour can be a quiet seller, with Top 15 potential. Minecraft Legends will absolutely have its audience on brand alone, yet I’m not expecting a high chart position because a number of fans will access it via Xbox Game Pass and strategy is more of a focused genre. Lastly, Horizon Forbidden West has its Burning Shores expansion out, so that should reappear in a solid position.

For the console space, it’s impossible to bet against Sony right now. At least until Nintendo’s next Zelda game in May. Expect another win for the PlayStation 5 in April.

Thus officially ends the first quarter, a fun one at that. I greatly appreciate everyone visiting the site. Check out Piscatella’s social media post for further details directly from Circana. Be well, all!

*Digital Sales Not Included

^Xbox & Nintendo Switch Digital Sales Not Included

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

Sources: Bloomberg, Capcom, Circana.

-Dom