PlayStation Sees Record Sales Alongside Profit Declines & Lower Forecasts in Sony’s FY 2023 Q3 Report

February 14, 2024 DomsPlaying1 Comment

It’s already my third major recap of this latest earnings season! Time flies when we’re having fun. And earnings season is the most fun.

Now it’s Sony’s turn. The Japanese consumer tech maker reported fiscal 2023 third quarter results recently and PlayStation set yet another revenue record.

Of course, that’s not the whole story. It’s time to go beyond the “all-time high” headlines to talk about why it’s a really intriguing report and time for Sony’s gaming division, including how profitability is taking a hit even as sales soar, its supplemental material shared some updated stats and executives have again adjusted future expectations.

It’s true Sony’s Gaming & Network Services (G&NS) recorded a best-ever quarterly revenue in the period ending December 2023. Around $10 billion! As it has done a lot recently, driven not just by organic growth due to add-on content and digital downloads, but also continued impact of a weakening yen that works in favor of companies that mainly operate globally.

On the flip side, quarterly operating profit moved down over 25% during the holiday period and is trending towards the worst annual profit of the PlayStation 5 era. There’s both macro and micro reasons for this, including interest rates and high costs alongside weaker internal output and worse hardware losses.

During October to December, Sony shipped 8.7 million PlayStation 5 consoles. While that’s the best single quarter for the console, well above last holiday’s 7.1 million, it’s a million fewer than PlayStation 4 did at the same time and missed estimates enough for them to substantially reduce annual guidance. It’s hard to believe PlayStation 5 is entering the middle phase of its life cycle now trailing its predecessor by a wider margin than even last quarter.

The major story on the software side continues to be Marvel’s Spider-Man 2, which swung above 10 million units sold-through to buyers this month after reaching the 5 million milestone back in October. It carried first-party, and also helped drive Monthly Active Users (MAUs) growth even as PlayStation Plus memberships fell.

These led to management again revising its forecast, this time downward for both revenue and hardware. They even provided a look ahead to next fiscal year, clearly signalling PlayStation 5 annual sales are peaking and will shrink in the back half of its life. As far as games and its tent-pole studios, there are no plans for “major franchise” first-party launches until at least April 2025.

Addressing concerns of profit margins during the company’s conference call, Sony’s President Hiroki Totoki cited at least two reasons: difficulty in cutting prices for hardware and needing to create better opportunities for first-party software on more platforms, including PC.

“How can we, given the situation, put our product lines together to make it affordable, without relying on steep discounts, to reasonably sell them to continue our commercial journey on a sustainable basis?” Totoki said. “I personally think that’s important, and there is an opportunity in that.”

Now into the full rundown of numbers and my current predictions. Buckle up!

Sony’s total revenue moved up 22% in the quarter, to a record amount of $26.19 billion. Operating profit reached $3.24 billion, up 10% and the second highest in its history. Growth here came mainly from Entertainment, Technology & Services (ET&S), Financial Services and G&NS.

Zooming into the gaming division, sales rose 16% to a record $10.1 billion driven by third-party software, downloadable content and exchange rate movement. To illustrate the last point, the impact from yen fluctuation alone was $531 million. This implies “true” dollar sales growth around 10%.

Operating income declined 26% to $602 million because of worsening hardware losses and lower internally-published game sales. Across this most recent three-month period, the PlayStation business represented nearly 40% of Sony’s sales yet under 20% of its profit.

Most product categories within G&NS saw higher quarterly sales, including Hardware up 8% to $3.3 billion or 33% of the total. Add-On Content rose 33% to $2.44 billion, accounting for a 24% slice. Digital Software jumped up 16% to almost $2 billion, at 20% of the total. Physical Software and Other Software both declined, 7% and 30% respectively.

Expanding to the latest annualized numbers gives us a broader sense of where the business is at right now. For revenue, it’s the best it’s ever been at $29.65 billion. Compare that to last year’s $22.62 billion. On the other hand, PlayStation currently has the lowest trailing 12-month profit since Fiscal 2017. It’s at $1.56 billion, compared to well over $2 billion a year back. The size of this deterioration is truly evident when you view the the second chart in the above gallery.

Seeing as the “Big Three” have now all reported this season, it’s a good time to revisit our industry comparison. Using annual numbers, Sony’s massive $29.65 billion is tops across all players, above even Tencent’s $26 billion with the caveat that the Chinese internet conglomerate doesn’t report until next month. Microsoft’s $18.13 billion now includes Activision Blizzard, and Nintendo currently stacks up to roughly $13 billion.

Again I’ll mention that while Sony’s sales are soaring, PlayStation is not nearly as profitable as the likes of Nintendo which has more than twice as much operating profit (over $4 billion) on less than half the sales. And it’s not like this is a recent phenomenon. Even during Switch’s fourth fiscal year, a similar time period, Nintendo’s margins were better.

Want more stats? Well, either way, you’ll get them.

Taking the latest PlayStation 5 hardware shipments into account, its lifetime figure is now at 54.8 million. As you’ll see in the above launch-aligned chart, its predecessor was at 57.3 million at this time in the cycle. Not only that, the gap between the two is widening at the exact time when PlayStation 5 is hitting a plateau.

As for comparisons outside of Sony, the PlayStation 5 is steadily approaching the 58 million lifetime sales territory of Microsoft’s Xbox One and will likely surpass it by this fiscal year’s end in March. Next up will be Nintendo Entertainment System (NES) at almost 62 million, still a fair ways off.

Out of those 54.8 million shipped to market, Sony announced back in December that PlayStation 5 reached 50 million sold-through to consumers.

Unit sales for PlayStation software moved up slightly from 86.5 million this time last year to 89.7 million, an increase of 4%. The skew was much more towards those published externally, given that only 16.2 million or 18% were first-party games this time versus 24%, at 20.8 million, during last year’s fiscal Q3.

Most of first-party’s movement was due to Insomniac’s Marvel’s Spider-Man series, which has now surpassed a healthy 50 million units sold-through in aggregate, inclusive of sales from PC since the first entry back in 2018.

Engagement across PlayStation Network hit an impressive 123 million MAUs in the quarter ending December, an all-time high up from last year’s 112 million. The influx of active users, driven not just by Sony’s titles but also external free-to-play offerings like Fortnite, led to 13% more hours played across the ecosystem.

While the company hasn’t shared PlayStation Plus membership figures since the end of last fiscal year, management’s prepared remarks did point out that subscriptions declined since last year though service revenue did increase.

“Regarding network services, despite the impact of a slight year-on-year decrease in the number of PlayStation Plus subscribers, revenue increased 11% year-on-year,” the remarks said. “Mainly due to the impacts of a further shift to premium services and price revisions.”

Essentially, dollar sales from PlayStation Plus are going up for now because of users going to the premium tiers and the price increases the company has instituted. From my perspective, I would add that’s not necessarily sustainable and I see this as more of a temporary dynamic. It’s known that gaming subscription services are stagnating, and this is one such example.

Another area lacking in the report was any shipment figures for Sony’s latest product launch in PlayStation Portal, which hit market during November 2023. Anecdotally, it seems like supply was highly controlled. While we don’t know specifics, we can infer from category results. The segment called Others, which covers peripherals and PlayStation VR2, jumped up 60% to $698 million in Q3. While still a small slice at 7% of sales, that’s a sizeable bump I’d wager was caused directly by Portal.

When taking the full Q3 report into consideration, it shows PlayStation’s position as one of strength on the sales side, partially due to the yen, and an ongoing struggle for profit growth amidst ballooning development and hardware costs. Yes, there’s general inflation and interest rate impact. It’s also the case that rapid-paced triple-A game development and maintaining hardware pricing as a console ages is not sustainable.

The good news is that software demand and player engagement look healthy. It’s just harder to translate these things into higher margins, especially since attracting players to something like PlayStation Plus requires spending money on partnerships or launching first-party games simultaneously into the service, which Sony is not currently doing. At least management is expanding to platforms beyond console, thus spreading risk and boosting audience reach.

Before closing the books on another quarter, I’ll now looking ahead to the finale of Sony’s fiscal year ending March 2024 and beyond.

In a classic flip flop, after revising annual PlayStation revenue guidance up by 5% last quarter, it now backed that off and reduced it by that same amount. This still translates to an increase of 14% up to $29 billion, which would certainly be a record high and lead the industry. I believe this will happen.

Even with the double-digit decline for operating profit this quarter, management reiterated the annual profit guidance of $1.89 billion or up 7%. In order to get there, management said they are reviewing measures to improve profit. One of those could very well be more layoffs. This time, I’m skeptical and I don’t think it’s going to meet this target.

The holiday period was going to be a huge indicator all along for PlayStation 5 unit figures. Now that it missed, management revised annual guidance down from what I called an unrealistic goal of 25 million to now 21 million. This would still be a million above the PlayStation 4’s best year, and I don’t buy it. It’s at 16.4 million so far, leaving 4.6 million to ship between January and March to get there.

Back when Sony was signalling higher, my forecast was also higher. Now I’m at 19.5 million to 20 million, tops, if it can even replicate its predecessor’s success. the only way to get there is if Sony announces aggressive discounting as soon as possible, which again puts a strain on margins.

Finally, executives acknowledged that this will likely be the best year of PlayStation 5 sales, and it’s all downhill from here!

I know what you’re saying: What? Already?! Well, PlayStation 4 peaked in its fourth fiscal year, and PlayStation 5 will be entering its fifth financial year starting this April.

Software is where uncertainty continues, notably for internal studios. There’s no doubt Marvel’s Spider-Man 2 accomplished an incredible feat. That’s the outlier. Plus, the likes of Marvel’s Wolverine, a Ghost of Tsushima sequel and anything from Naughty Dog are at least a year away, if not multiple years.

While The Last of Us Part II Remastered launched on PC and Helldivers 2 is off to a fantastic start, partly because of Steam, Sony didn’t capitalize on the Palworld craze and has a sparse console calendar incoming. I do expect a live service title or two by March 2025, like Concord and Fairgame$, alongside select PC launches to hold software sales over until seeing heavy hitters again.

Development and marketing are as expensive as ever, and projects require increasingly longer timelines to complete. A steady cadence of blockbuster releases is tough if near impossible. That’s a huge part of why we see the current dynamics underlying Sony’s gaming business, and the team will have to navigate these treacherous waters.

As always, I very much appreciate you stopping by for my ongoing earnings coverage. Check in on social media for more and visit soon for future articles. Be well!

Note: Comparisons are year-over-year unless otherwise noted. Exchange rate is based on reported average conversion: US $1 to ¥143.1

Sources: Company Investor Relations Websites, Sony Interactive Entertainment.

-Dom

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

February 9, 2024 DomsPlaying

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sources: Company Investor Relations Websites, Video Games Chronicle.

-Dom

Microsoft Posts Record Xbox Revenue in Fiscal 2024 Q2 Mostly Due to Acquiring Activision Blizzard

February 2, 2024February 2, 2024 DomsPlaying

As you well know because you’ve seen my handy earnings calendar for this season, Microsoft reported its 2024 second quarter results earlier this week.

Only executives and literally everyone, including when I wrote about this very topic last quarter and predicted the revenue amount, expected the software tech conglomerate to post record gaming sales almost entirely becasue Activision Blizzard numbers are now included since closing the deal in mid-October 2023.

That’s precisely what happened.

Still, as I’ll illustrate shortly, I’d argue massive growth isn’t the whole story. I’m more interested in isolating Xbox’s organic performance, comparing post-acquisition to the sum of both entities before it happened and trying to determine how annual numbers will shake out. In addition, I’ll review the acquisition’s notable hit to profitability for the time being due to its cost and integration.

Essentially: headlines, even mine, never tell the whole story!

There’s also a divide happening right now with Microsoft. Just as the company closed above $3 trillion in market value for the first time, it announced big layoffs in its gaming division. Around 1,900 people across Xbox, Activision Blizzard and Bethesda, or 8% of the gaming workforce, were let go. I know there’s various factors behind this, including macro ones like inflation and interest rates. Plus, stock market valuations are determined by a collective set of investors rather than a company’s management.

Still, the optics and timing are tricky. The fact that job loss after the deal due to redundant roles and function overlap was inevitable doesn’t make it any less painful for the people involved. Especially as the broader company reaches record valuations and reports gaudy numbers.

Moving into those numbers, Xbox revenue totaled over $7 billion in the quarter ending December 2023. That’s up 49%. Within that, Activision Blizzard was responsible for contributing $2 billion. This makes Gaming the third biggest contributor to all of Microsoft’s sales at 11% of the total compared to 9% last year, right now behind only Server and Office.

It’s pretty clear what’s underlying this: Buying a massive third party publisher and integrating it within content and services figures. Even so, there was some organic Xbox growth in Q2. Under 6% to be semi-exact. I was also impressed that hardware was able to deliver solid performance during the holiday season, even if boosted by discounting.

“With our acquisition, we’ve added hundreds of millions of gamers to our ecosystem, as we execute on our ambition to reach more gamers on more platforms,” said Chief Executive Officer (CEO) Satya Nadella. “Great content is key to our growth, and across our portfolio, I’ve never been more excited about our lineup of upcoming games.”

Pretty standard corporate speak from Nadella, and I’d argue Xbox’s line-up this entire generation has been anything but exciting. In fact, management quotes around gaming on the earnings call were generally tame. The team did offer select insights that I’ll cover later, namely on cloud streaming and engagement across platforms including mobile, the latter of which hit record highs after the integration of Activision Blizzard players.

Read on to learn what the numbers truly look like, some estimates from me around a combined historical comparison, my guesses for hardware unit sales and then predictions going forward into 2024.

First thing to note when checking the above slides is Xbox, Bethesda and now Activision Blizzard are all accounted for within Microsoft’s broader More Personal Computing (MPC) segment.

Quarterly gaming revenue rose 49% in the three months ending December, up to an all-time high of $7.11 billion. This was exactly within the firm’s guidance.

What drove it? Well I’ll break that into two categories: Activision Blizzard and pre-acquisition Xbox. Here is where we talk the deal’s impact, which actually cost upwards of $75 billion based on the latest filing. During the second quarter, it contributed $2.1 billion to gaming division sales.

Essentially, Activision Blizzard was responsible for 30% of Microsoft’s second quarter gaming business at the top-line. Still, as I’ll get to in a second, its inclusion put major downward pressure on profit.

Separating that out, the $5 billion “organic” Xbox sales implied a growth rate of 5.7%. Much less than the headline suggests, right. Still, it’s certainly noteworthy for the important holiday time frame, notably while facing what executives called a “tough console market.”

Moving to the latest year, which happens to cover the 2023 calendar months, gaming revenue expanded 17% to rise above $18 billion for the first time ever. This particular figure, mapped out over time in one of the below charts, will only grow over time as more quarters take the acquisition into account.

I’ve also provided a new chart measuring Estimated Combined Gaming Revenue that, full disclosure, pulls in a few different assumptions to form a rough estimate of how annual figures compare when adding in Activision Blizzard’s historical revenue. I’ve summed up the two pre-deal entities going back for a few fiscal years then subtracted $2 billion per year in assumed overlapped sales.

What results is where I think Microsoft gaming sales could be when a year of Activision is considered: almost $22 billion, up a bit from the $21.6 billion a year back. That’s an upward trajectory of 1% as opposed to the 17% I just referenced. Good, yet nowhere near as wild as the headlines indicate.

While Microsoft is the first of the bigger gaming companies to report, I like to gather up a comparison to peers and update throughout the season in my articles. Sony’s latest annual PlayStations sales tracked towards a whopping $28 billion, with notable impact from the yen’s depreciation. Tencent was around $26 billion. This is where the current combined Xbox and Activision Blizzard slots, at $18.13 billion. Nintendo’s latest hit $13 billion. My usual caveat is that Nintendo is operating at higher profitability than at least PlayStation, and likely Xbox as well.

Speaking of profit, Microsoft gave us a bit more than usual this quarter! Partially because it had to illustrate the impact from Activision Blizzard, but I’ll take it. For the MPC group, operating profit jumped up 29% to $4.29 billion. Half of the “gross margin dollars” profit metric, a figure that moved up 34% in Q2, was contributed by Activision Blizzard as it helped up operating expenses at a higher rate of 38%. Focusing strictly on Activision Blizzard, its net impact was $437 million in operating income because of those higher costs. There’s also some accounting nitty gritty that I won’t include, for the sake of brevity.

What does this all mean? Well, record sales were mostly due to Activision Blizzard no longer being a 3rd party partner and becoming first party, however there was single-digit organic Xbox growth during the holiday season. Profit for the segment that includes gaming will take a short-term profit hit while integrating costs and following through with the deal’s financial accounting.

Here’s a quick dive into the two Xbox sub-areas, called Xbox Content & Services (i.e. software and subscriptions) and Xbox Hardware.

For October to December, the vastly larger Content & Services jumped up nearly 70% when measured by revenue. The first figure was above guidance, while the second technically under-performed at least based on what I calculated because Microsoft rarely, if ever, issues formal hardware forecasts.

The reason I say “nearly 70%” is because how Microsoft reported its numbers actually indicates that Content & Services moved up 68% to $5.69 billion, another best ever number, rather than the 61% in its announcement. From what other analysts and I can tell, Microsoft seems to have excluded Activision Blizzard’s eSports sales, for whatever reason.

This leads to my estimate of $16.5 billion for Content & Services over the last 12 month. That itself is above the $15.56 billion for all of Xbox in 2022 Q2. Separately, Hardware generated $3.27 billion in the latest annual period, slightly below the last couple years.

When hearing this numbers and looking at these charts, I’ve assumed all Activision Blizzard revenue is caught in the Content & Services pipeline because it doesn’t have anything to do with console manufacturing.

Underlying the best-ever figures for the software side was another all-time high, this time for engagement. Nadella noted that, now that Activision Blizzard players are included, Microsoft’s gaming division boasts 200 million Monthly Active Users (MAUs) on mobile devices. Prior to this, Xbox’s figure overall was 120 million. Activision had 92 million in September, while Blizzard was 26 million and King totaled 238 million.

Nadella also alluded to a double-digit jump in cloud gaming hours streamed, moving up 44% in the quarter. We don’t have specifics on the actual number of hours played by its active users, only the growth rate. Plus, unfortunately, there’s still no word on Xbox Game Pass subscribers. The last update was 25 million a couple years back, and I estimated recently that it’s likely approaching 30 million though has not eclipsed it. I hope Microsoft offers a new figure this year. Yet I’m not holding my breath.

Xbox’s Hardware segment had a solid holiday, even if the result ended up below my expectations.

Console dollar sales moved up 3% in Q2, to above $1.4 billion. This was spurred on by holiday discounting for the Xbox Series X|S family, and the appeal of something like Bethesda’s Starfield. In terms of number of consoles shipped to market, I believe it slightly increased although those units sold at a lower average selling price.

“In our consumer business, the PC and advertising markets were generally in line with our expectations,” said Chief Financial Officer (CFO) Amy Hood. “PC market volumes continued to stabilize at pre-pandemic levels. The gaming console market was a bit smaller.”

It’s a curious statement. Just because it was challenging doesn’t mean it wasn’t good. Any growth right now for Xbox console revenue, even in the lower single digits, is a positive sign. Echoing my past sentiment, and it’s something gamers need to get accustomed to, is that Xbox’s strategy has officially shifted away from consoles and towards offering services on various devices.

During the last year, Hardware reached $3.27 billion. That’s down 9% from the same time in 2022, though above pre-pandemic figures. Again, this tracks with the general theme.

Since Microsoft doesn’t provide global unit sales like peers do, I have no choice but to guesstimate where they stand. For the holiday quarter alone, I backed into 3.5 million to 4 million shipments for Xbox Series X|S. This would be in-line with last year, albeit below the roughly 4.5 to 5 million that its Xbox One predecessor was doing during its prime.

I put Xbox Series X|S lifetime at 25.5 million or so prior to this latest three month report. Which was below the 26 million of Xbox One. Adding on my estimated holiday shipments for the family, I believe Xbox Series X|S stands currently at 29 million to 29.5 million units lifetime since November 2020. Thus, it remains tracking below Xbox One by upwards of a couple million.

For comparison, Sony’s PlayStation 5 was the best-selling console in key regions during 2023, including the United States as I covered recently. The console reached 50 million units sold to consumers in December 2023, and the shipment figure will be even higher when Sony reports in a couple weeks.

Overall at Microsoft during Q2, revenue jumped 18% to $62 billion. Operating profit rose 33% to $27 billion. Microsoft Cloud grew 24% to 33.7 billion. Executives provided some color around how the Activision Blizzard deal affected the full firm’s financials.

“At a company level, Activision Blizzard contributed approximately 4 points to revenue growth, was a 2 point drag on adjusted operating income growth, and a negative 5 cent impact to earnings per share. This impact includes $1.1 billion from purchase accounting adjustments, integration, and transaction-related costs such as severance-related charges related to last week’s announcement.”

That’s referencing last week’s Xbox group layoff announcement, which came after a year of more than ten thousand people losing their jobs at the broader company.

To wrap up the latest quarter, it’s important to look behind the absurd 49% growth and big figures due to integrating Activision Blizzard. There has to be consideration for what numbers look like when combining the two historically, plus the notable downside profit effect for the time being. Not to mention the painful layoffs that happened mostly because of the deal taking place.

In terms of dynamics and future of the Xbox division, these don’t necessarily change with the latest new acquisition. The numbers are bigger, and the portfolio certainly has more brands especially on the mobile side with the unsung King division, while various challenges remain especially on the hardware front plus with industry-wide service stagnation and general costs rising.

I’m also lamenting the lack of details into Activision Blizzard’s underlying financials. We’ll never see them ever again. Pour one out, fellow business nerds and data transparency advocates.

Here I’ll take the chance to look ahead to the third quarter, and make some predictions on the immediate future of Xbox.

Management expects Xbox division sales growth “in the low 40s,” so between 40% and 44%. Out of that, management signaled 45 points would be due to Activision Blizzard. Yes, this means that Microsoft is saying its non-Activision Blizzard Xbox sales will likely decline in this current quarter.

Assuming say 42% growth, that puts Xbox sales at $5.12 billion in the three months ending March 2024. Which, you guessed it, would be a Q3 record. I believe this will be met, though on the lower end.

For Xbox Content & Services, Hood said to anticipate growth “in the low to mid-50s” i.e. around 50% to 57%. Most, if not all of that, will be Activision Blizzard causing a net impact of 50 points or 50%.

Let’s say it gets to 54%, that would elevate Content & Services to $4.77 billion in Q3. Again, I expect that to be achieved, and I think there’s a good chance it hits the upper end.

Finally, management actually provided Hardware guidance! Well, somewhat. They think it will decline. That will certainly be the case if the other numbers hold. As in, console sales could be down by as much as 30%. Based on how they presented numbers this time, I’m guessing around a 5% to 10% decline for console in Q2 which would equate to around $450 million to $480 million.

The early year release slate for Xbox is a tad light, so I’m thinking evergreen titles and the Call of Duty effect being first party will drive the business to hitting these forecasts. In terms of new games, Sega’s Like a Dragon: Infinite Wealth hit a million units yesterday. Warner Bros’ Suicide Squad Kill the Justice League formally launches today, and I’m skeptical on its commercial upside, just like I am for Ubisoft’s Skull & Bones this month. There’s titles like Tekken 8 from Bandai Namco, which I’m quite upbeat on, and Capcom’s Dragon’s Dogma 2 in March that should attract a cult following.

Will these be the biggest software contributors of the quarter? Nope. It’s Palworld, the surprise console exclusive that’s garnering a lot of attention from consumers and pundits alike. It’s much more than the “Pokémon with Guns” moniker, and has been a near unprecedented sales success. So far, Pocket Pair’s latest reached more than 19 million players, 7 million of those on Xbox alone. It’s the largest third party launch in Game Pass history, beating out 2022’s High on Life, and instantly shot to the top of the service’s most-played chart. I’m on record saying it will end the year as one of the platform’s biggest titles. Frankly, it’s absurd and I love it.

That ends the first massive recap of the latest season. Follow me on social for coverage in between articles, and check back soon for more here at the site. Be well!

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

Sources: Circana, Company Investor Relations Websites, Pocket Pair, Sega.

-Dom

Earnings Calendar Jan & Feb 2024: Gaming, Media & Tech Companies

January 30, 2024 DomsPlaying

Here we go, the first earnings seasons of 2024!

I want to acknowledge my anticipation while also tempering excitement, mainly due to the difficult situation for people working across all industries right now where many people are finding themselves out of work.

It’s been an especially tough time within gaming, media and technology, the exact sectors I cover here at the site. I’m again sending my best to everyone impacted by layoffs and I hope you’ll bounce back soon. Don’t give up on your dream just because of a company’s decision!

That said, we’re here to cover companies and the dates on which they report their latest results. I’ve gathered up my usual quarterly list, now including well over a hundred companies. I do my best to track down individual dates however, as you’ll see, not everything is available at the time of publishing so I’ll give a range based on historical timing.

Note that the dates themselves are added according to each company’s announcement in their local time zone. Say a Japanese company announces results on a Wednesday, it might still be Tuesday in your location.

I recommend saving as a bookmark, copying the image and visiting the link below to track everything during a busy time for tracking trends and performance. Plus, read on for three companies worth watching over the coming weeks. Thanks for stopping by!

Working Casual Earnings Calendar Jan & Feb 2024: Gaming, Media & Tech Companies

Microsoft Corp (MSFT): Tuesday, January 30th

It made the list last quarter, and it’s here this time around because when Microsoft reports its third quarter fiscal 2023 results later today, it will be the first operating period where numbers will account for Activision Blizzard. After laying off tens of thousands last year and starting 2024 with almost 2K jobs lost in the Xbox department, Microsoft has also hit a $3 trillion market capitalization and expects massive double-digit growth for gaming due to the integration. There’s a clear dichotomy between its job situation and ongoing hardware issues, losing in key markets to competitors, compared to expected revenue growth and consumer sentiment on its future slate of titles. I believe its results will fall within forecasts, and that gap between labor and performance will continue, albeit without visibility into profit dynamics or Activision Blizzard’s underlying financials, which is a pity.

Warner Bros. Discovery, Inc. (WBD): Mid February

It was a banner year for Warner Bros’ gaming division, now boasting four billion dollar franchises including Harry Potter, on the strength of last year’s best-selling Hogwarts Legacy, and Mortal Kombat in addition to Game of Thrones and the DC universe. I’m expecting a potential record result when it reports fiscal year 2023 results in mid February, as its gaming success will supplement its various media and content businesses. I also remain incredibly curious about how Suicide Squad Kill the Justice League will start on the commercial side and if we’ll hear anything from executives after a gloomy marketing period and a shaky early access start this week.

Embracer Group (EMBRAC B): Thursday, February 15th

One of the biggest and most disappointing stories in the games industry has been Embracer Group’s over-expansion and restructuring, now resulting in job loss for thousands of employees. The Swedish firm, which reports third quarter 2023 results soon, has shuttered games and laid off people as recently as yesterday with news of a killed Deus Ex project and layoffs at Eidos Montreal. CEO Lars and the executive team is in the midst of a restructuring program that began when it lost a deal where Saudi Arabia’s Savvy Games was going to invest $2 billion, resulting in massive debt and a bloated list of operating groups. I expect we might hear about a divestiture or intellectual property sale around the time of its earnings report, and almost certainly more closures and cancellations unfortunately.

Sources: Company Investor Relations Websites.

-Dom

Circana Reports U.S. Games Industry Sales Growth in 2023 on Strength of Hogwarts Legacy, Monopoly Go & PlayStation 5

January 30, 2024 DomsPlaying

That’s right, it’s the final U.S. sales recap of 2023. A bit late, but here we are!

Earlier this month, Circana announced its December and full-year 2023 report on domestic games industry consumer spending. Both respective time frames showed slight growth, thus ending a shaky 12 months on a positive note.

Within the December holiday month, total sales rose a healthy 4% to $7.9 billion. Which means that overall, U.S. consumers spent more than $57 billion across gaming last year, an increase of 1% compared to 2022.

Two segments in Content and Accessories each moved up in the single digits during the year while Hardware output remained virtually flat.

On the premium software side, while Call of Duty: Modern Warfare 3 did secure the top spot in December, it couldn’t quite sell enough to outpace what ended 2023 as the year’s top seller: Hogwarts Legacy.

This win for Warner Bros marks the first time since Rock Band in 2008 that a game not in Activision Blizzard’s Call of Duty shooter franchise or made by Grand Theft Auto developer Rockstar Games led the yearly list. An exceptional, and mostly unexpected until right up until the final month, result.

A huge portion of the Content category is dictated by mobile where Monopoly Go became the big earner for both December and the year as a whole.

Elsewhere, Sony’s PlayStation 5 generated better supply throughout the year and saw consistent demand plus boasted a system-seller in Marvel’s Spider-Man 2, accelerating the family of consoles to best seller for December and 2023 when measured by both unit sales and dollar revenue.

“A 13% increase in spending on digital premium downloads on console platforms helped offset declines in physical software spending,” wrote Circana’s Mat Piscatella when talking about the year overall. “Growth in PlayStation 5 hardware dollar sales helped offset declines across both Xbox Series and Switch.”

No more time to waste. Read on for my full rundown, numbers and all, then a look ahead to 2024!

United States Games Industry Sales (November 26th to December 30th, 2023)

Across all of gaming during the holiday month, spending rose 4% to $7.91 billion. 2023 sales eclipsed $57.19 billion, up 1%. The largest contributor to growth was full game digital on consoles, highlighting the continued buyer shift towards downloads rather than retail purchases.

The biggest category of Content rose 3% in December to $5.73 billion, or 72% of the total which is slightly below the 73% a year ago. In aggregate across all of 2023, it moved up 1% to $47.97 billion. That’s an 84% contribution, same as 2022.

Mobile generated yet another month of gains, this time seeing spending increase 2.7% over the same time last year. All of the Top 10 earners experienced higher contributions than they did during November. December’s leading games were, in order of revenue, Monopoly Go, Royal Match, Roblox, Candy Crush Saga and Clash of Clans.

The report wasn’t specific about mobile’s contribution to the total 12 month period, however it did outline 2023’s Top 10 games by sales, which I’ve listed in full later in the article. Scopely’s Monopoly Go was the winner, followed by Candy Crush Saga and Roblox.

December’s premium software ranks showcased a number of familiar titles that launched in or before the month, with the only new game being Ubisoft’s Avatar: Frontiers of Pandora debuting in the 6th spot. Which I’d call quite a good start for the year’s last major AAA release.

As expected, Call of Duty: Modern Warfare 3 was the holiday month’s best seller. Next up was Super Mario Bros. Wonder moving up a few spots to 2nd, even without digital sales counted. It’s yet another fantastic showing for Nintendo, just ahead of Electronic Arts’ Madden NFL 24 rounding out the Top 3 as the football season entered its home stretch.

Expanding to 2023 as a whole, winner Hogwarts Legacy was the predominant sales story both domestically and around the globe. In addition to leading the annual U.S. chart, publisher Warner Bros claimed it was the world’s best-selling premium game. It generated well over a billion dollars in its first three months, moved 2 million copies globally in December alone and ending the year at 22 million. It’s now above 24 million.

Activision Blizzard claimed three titles in the Top 7, including two Call of Duty iterations in addition to Diablo IV. While technically a down year for the latest Call of Duty installment, this outcome shows the franchise is still among the top commercial successes, plus reveals that players didn’t need to move to the latest version in order to spend big money.

After Madden NFL 24 in third, Marvel’s Spider-Man 2 and The Legend of Zelda: Tears of the Kingdom, both platform exclusives, rounded out the year’s Top 5. Which makes sense for Insomniac Games’ Spider-Man sequel after its record-breaking start. This was especially impressive for Tears of the Kingdom since it’s based solely on retail. That’s right, it was among the year’s five best sellers considering only boxes sold in stores. When these days digital often accounts for half of a title’s units, if not more, this was a momentous feat for Nintendo.

Another fantastic trend was the commercial success of fighting games as both Mortal Kombat 1 from Warner Bros and Capcom’s Street Fighter 6 charted at #8 and #17 respectively. On the Xbox side, Bethesda’s Starfield, while being on Game Pass and seeing a somewhat soured sentiment since the September launch, landed just outside the Top 10 in 11th place.

In addition to the charts based on revenue, Circana shared the most played games of December by Monthly Active Users (MAUs) from each major platform. Fortnite, Call of Duty and, of course, Grand Theft Auto V led on PlayStation and Xbox while Lethal Company, The Finals and Counter-Strike Go 2 saw the biggest engagement on Steam. Huge movers into the Top 10 included PowerWash Simulator at #9 on PlayStation and Goat Simulator at #7 on Xbox. Apparently, lots of people like doing chores or acting a fool in their spare time!

Check below for December and 2023 best seller lists, including the annual Top 10 mobile earners.

Top-Selling Premium Games of December 2023, U.S. (Physical & Digital Dollar Sales):

Call of Duty: Modern Warfare 3
Super Mario Bros. Wonder*
Madden NFL 24
Hogwarts Legacy
Marvel’s Spider-Man 2
Avatar: Frontiers of Pandora
EA Sports FC 24
Mortal Kombat 1
NBA 2K24*
Mario Kart 8*
Super Mario RPG Remake*
Sonic Superstars
Minecraft
God of War Ragnarök
Star Wars Jedi Survivor
Elden Ring
The Legend of Zelda: Tears of the Kingdom*
Just Dance 2024 Edition
Assassin’s Creed Mirage
UFC 5

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

Hogwarts Legacy
Call of Duty: Modern Warfare 3
Madden NFL 24
Marvel’s Spider-Man 2
The Legend of Zelda: Tears of the Kingdom*
Diablo IV
Call of Duty: Modern Warfare 2
Mortal Kombat 1
Star Wars Jedi Survivor
EA Sports FC 24
Starfield
Super Mario Bros. Wonder*
Resident Evil 4 Remake
MLB The Show 23^
Dead Island 2
Final Fantasy XVI
Street Fighter 6
Elden Ring
Mario Kart 8*
Minecraft

Top-Selling Mobile Games of 2023, U.S. (Revenue):

Monopoly Go
Candy Crush Saga
Roblox
Royal Match
Coin Master
Pokémon Go
Gardenscapes
Jackpot Party Casino Slots
Township
Evony

Swapping over to the Hardware category, this one gained 4% in December to almost $1.6 billion.

Circana’s report pointed out that PlayStation 5 and Xbox Series X|S generated revenue growth during the final month of 2023, while Nintendo Switch saw a double-digit percentage decline. That’s good news for Microsoft’s platform, even if it was spurred on by temporary price reductions. The last part there for Nintendo was mostly anticipated for the aging device, which is long past market saturation.

There’s no indication if the growth for either PlayStation or Xbox was in the double digits, however I’d imagine it was in the single digits since the report probably would have said so otherwise.

Topping the hardware list for December by units and dollars was, yet again, Sony’s PlayStation 5. I believe it won every month of 2023 except for May, when Nintendo Switch led on the heels of Tears of the Kingdom’s launch. In fact, Sony as a manufacturer generated a single month dollar sales all-time high in December, outpacing the prior record holder of December 2022.

Intriguingly, Nintendo Switch secured second place in December by units and revenue despite Xbox’s growth and the below comment from Circana.

“Xbox Series X|S set a new lifetime high in U.S. unit sales during the month of December,” Piscatella said on social media, documenting a new milestone for Microsoft’s latest console family. “The previous unit sales high for Xbox Series X|S was set in December 2021.”

After spending most of the year in the red, the Hardware segment’s solid holiday result moved it up to flat for the year at $6.59 billion in consumer buying.

PlayStation 5 topped the annual list by units and dollars. In fact, it was the only platform that gained ground when compared to 2022. Nintendo Switch was again the runner-up by both measures, as both Switch and Xbox Series X|S experienced declining annual sales.

Fitting with the general theme I’ve outlined in these write-ups before, 2023 was a banner year for PlayStation while Xbox maintained its inconsistency, although the latter did have certain bright spots in Starfield’s launch in September and holiday sales when discounted.

Accessories is up next, the final and fastest-growing of the three categories during both the holiday and 2023 overall.

During December, spending in this area rose 14% to $584 million. That’s a super healthy boost during the final month as people who purchases new generation consoles are now scooping up peripherals, including special editions and high-end controllers.

United States buyers purchased $2.64 billion accessories during the year, an increase of 4%. The report shouted out growth from game pads in particular.

Fitting that theme, Sony’s PlayStation 5 Dual Sense Edge was the top-earning accessory of 2023, after the premium pad won most months. Its continued momentum shows there’s ample demand for premium priced peripherals as the console cycle matures.

From a domestic spend perspective, 2023 was the definition of up and down, at least compared to the prior year. Exactly half of the twelve months showed spending growth, while all others saw lower sales than their 2022 counterparts. Only two months, May and September, produced double-digit gains.

There was a distinct lack of consistency, even with blockbuster launches and Sony’s concerted effort to produce more PlayStations. A return to hardware supply helped, as did mobile’s better contribution. Still, Nintendo Switch is long in the tooth, subscriptions are stagnant and the most recent Call of Duty installment under-performed.

“Subscription growth has flattened,” Piscatella wrote on Twitter. “And subscription services on console and PC platforms accounts for only 10% of total video game content spending in the U.S.”

In a broader historical sense, over a timeline including before COVID, it was still one of the best years of consumer spending in tracked history. Unfortunately, spending remains in stark comparison to the games industry labor market, which suffered a record number of layoffs globally in 2023 and is only accelerating early this year.

Speaking of 2024, it’s now time for my official predictions. I wrote a whole article with my expectations across the global industry, so here I’ll focus on solely what I expect from the domestic Circana reports before signing off.

In general for spending and where it’s going, I’m leaning towards keeping with my global prediction in that I expect the year to be close to flat with slight upside in the low single digits. That does include my assumption that Nintendo will in fact launch a Switch successor in the final calendar quarter.

Premium software is somewhat tricky considering the release slate is up in the air, especially for PlayStation and Nintendo. I think the rumored Call of Duty: Black Ops Gulf War will bring the franchise back to best seller status.

Beyond the sports games that will always appear, Star Wars Outlaws from Ubisoft will compete for a Top 5 spot if it’s out, as will a mainline Super Mario assuming it launches with Super Switch. Final Fantasy VI Rebirth has a good chance at Top 10 even on a single platform, and Tekken 8 will have a strong showing in the Top 15. I’m not expecting Marvel’s Wolverine to be out and don’t know what the heck to think about Suicide Squad Kill the Justice League, so I’ll say that one misses the Top 20. Just like Skull & Bones.

Hardware will be a juicy category. It’s almost a lock that Super Switch will be out in the back half. I’m on record saying I think adoption will start a tad slower than the original, then pick up over time. Considering Sony’s push to produce PlayStation 5 to make up for lost time during the pandemic, and its at least six to eight month head start, my bet is PlayStation 5 will take home hardware for 2023 with Nintendo as a close second, especially on units.

And, of course, I couldn’t leave without mentioning Palworld! I believe January’s big sales surprise, moving 8 million copies on Steam and topping the Xbox Game Pass list during its debut week, will be among 2024’s most-played titles. Especially if it leaves early access and launches on PlayStation.

That’s officially it for 2023. I highly recommend checking out Piscatella’s Twitter thread for the full Circana report, including individual platform charts and more engagement stats.

Be well, and see you soon for more this year!

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

*Digital Sales Not Included

^Xbox & Nintendo Digital Sales Not Included

Sources: Circana, Warner Bros.

-Dom

Seven Major Games Industry Predictions for 2024

January 8, 2024January 9, 2024 DomsPlaying

Now that I’ve looked back with my 2023 Year-in-Review, which I still highly recommend reading to catch up on trends, games and studios you might have missed, it’s officially time to move into the new year!

After a legendary twelve months of game releases amidst a disastrous time for the industry’s labor market, I believe uncertainty and volatility are set to define 2024. There will be challenges, and plenty of them, yet also select opportunities on which to capitalize. I see a future with new hardware, labor issues and new service launches from key players, among other things.

Rather than make general statements, which are far too easy, I try to make my predictions quantifiable somehow, or at least be as specific as I can, to hold myself accountable. Plenty of people make predictions; not many grade themselves. For instance, here’s my results from last year:

Microsoft & Activision Blizzard Deal Closes in Calendar 4th Quarter: Correct.
Nintendo Goes Another Year Without Announcing a Switch Successor: Correct.
Global Games Industry Value Returns to Growth & Passes $188 Billion: Partially Correct.
- It grew, albeit not as much as I expected.
PlayStation 5 Wins Best-Selling Console in the U.S. Yet Misses Sales Targets: Correct.
- Well, so far. I would also argue Sony is tracking below its PlayStation 5 fiscal target.
Xbox Game Pass Price & Subscription Base Increases: Partially Correct.
- Cost to consumer went up, though Microsoft refused to share user base stats.
Special Year of Fighting Game Releases & Announcements: Correct.
Amazon Games Makes Massive Studio Acquisition: Incorrect.
Bonus: Bungie Announces & Launches Destiny Universe Transmedia Property: Incorrect.

Not bad, right! Now, check a look below for seven predictions for 2024 covering the games industry at large. Plus, as usual, a super bold bonus guess mostly for fun.

Happy New Year everyone.

Super Nintendo Switch & New 3D Mario Release in Fourth Quarter

I’ll get an obvious one out of the way. In fact, I’ll make it a bit harder by attempting to guess exact things for what’s inevitably going to be the year of Nintendo’s next hardware launch. The company’s next hardware will be called Super Nintendo Switch. It will again have a hybrid portable and console setup, will launch with one model in October, and cost $400 to start.

Alongside, Nintendo will product a mainline 3D Mario as a launch title. It won’t be a sequel to 2017’s Super Mario Odyssey. It will be an open world with various areas and secret levels. It will be called Super Mario [Something] 3D. In addition to this, I’m guessing a motion game launches day-and-date plus a mainline Animal Crossing and Mario Kart will both be out within its first year. The device will, after a somewhat slower start as adopters move on, end up following a similar trajectory as its predecessor within three years. That’s right, I’m officially done underestimating Nintendo.

Difficult Labor Market Continues as Major Publishers Reduce Workforce

This is absolutely the most painful prediction to write, mainly because it’s a carry-over from last year that I don’t think will stop any time soon. During January to December 2023, Games Industry Layoffs estimated that upwards of 9,000 jobs were cut across the sector. I believe that anyone hoping for a more cheerful 2024 for hiring or even stability will, unfortunately, be disappointed.

After years of low interest rate borrowing, higher-than-usual consumer demand and expansion by many firms, I’m expecting even more layoffs and even studio closures in 2024, especially at the top-end, AAA level. Within the first week of January alone, Surgeon Simulator maker Bossa Studios laid off a third of its employees and further losses were reported at Embracer Group’s 3D Realms and Slipgate Ironworks. I believe we’ll see a further contraction of more than 3,000 to 5,000 jobs, with at least two major publishers announcing 5% to 10% workforce reductions.

Microsoft Xbox Mobile Store & Big Name Activision IP Announcements

Here’s a two-for-one. A natural progression of Microsoft’s service-oriented strategy will be developing a dedicated Xbox mobile distribution platform that integrates Game Pass and cloud offerings. I anticipate it will both reveal and release this sort of storefront in 2024, let’s say between June and December. It will simply be called Xbox Mobile. This move is advantageous from various perspectives, in particular for maximizing platform fees, diversifying its offerings, controlling content flow, appealing to potential partners and expanding its audience base across devices. Can it truly compete with Apple and Google’s market share? Well, you won’t see me betting on that.

That brings me to the second part of the prediction: Now that the Activision Blizzard deal is done, I believe the team will revive certain brands, especially those that can round out the Game Pass portfolio and even crossover to mobile. Within the next 12 months, I’m thinking the team will announce the following: new Skylanders and Tony Hawk’s Pro Skater iterations, both being ongoing platforms and revenue generators. Once the mobile store and larger brand IP are established, Xbox will move into Spyro the Dragon and Phil Spencer’s beloved Hexen, which I don’t expect to be revealed until at least 2025. I’m much more skeptical on others, for instance a Guitar Hero revival.

Sony Launches PlayStation 5 Pro & Spider-Man 2 Expandalone in November

Not to be outdone by Nintendo, I’m thinking fellow Japanese hardware maker Sony kicks off its mid-generation console refresh this year. While it feels like just yesterday the platform holder launched the PlayStation 5, partly because of a global pandemic making the passage of time irrelevant, it’s now over three years into the latest cycle. Thus, I’m expecting a boosted PlayStation 5 Pro announcement sometime in the third quarter and a quick turnaround to release in the beginning of November 2024.

Along these lines, I’m going to say star studio Insomniac Games is cooking up what I call an “expandalone” for its 2023 hit Marvel’s Spider-Man 2, similar to the Miles Morales counterpart to 2018’s Marvel’s Spider-Man. (Mild spoiler warning!) This will be a solid 8 to 10 hour experience, it will hit market on the same exact day as the new console model, boast a range of performance options to show off the fancy tech and feature the webbed buddies facing off against Carnage as the primary villain.

Total Global Games Industry Value Will Remain Virtually Flat

In the last quarter of 2023, NewZoo estimated the global games industry did exhibit growth during the year even with a slew of challenges, moving up under a percent to $184 billion in value. The largest contributor of Mobile accounted for over $90 billion, down 2% as this segment stagnated during the year. It was Console and PC software, including full game digital downloads, driving upward momentum with those segments moving up 5% and 2%, respectively.

This year, I’m leaning towards caution for 2024 and think the global industry will remain virtually flat, with slight downside in potential negative territory. This would be notable as only the second decline of the last 16 years, alongside 2021 to 2022. I am guessing $183 billion to $184 billion for the full year. Partly because of a tough comparison against a stacked release calendar, between the out-performance of Hogwarts Legacy and The Legend of Zelda: Tears of the Kingdom among others. I expect minimal mobile momentum to remain, as well as subscription stagnation and a heavy reliance on a new Nintendo console that could have a slower adoption rate. There is some decent upside if my PlayStation 5 Pro prediction hits, because I do expect a good holiday season for Sony regardless.

AI Usage Ramps as At Least Two Big Titles Embrace Generative Voice & Writing

It’s time for the dreaded buzzword bro: Artificial Intelligence! As much as people don’t like AI, or misuse the term, it’s part of our collective future and is already an integral part of making games. It has been for a while within an industry that blends art and technology, as various notably projects have already used some form of it to assist human developers. Recent examples include Ubisoft writers leveraging it for non-playable character chatter, Squanch Games having AI artwork in High on Life and The Finals from Embark Studios features generative text-to-speech.

I expect this sort of AI-assist development tech to take an even more prominent role in 2024. How will I quantify this prediction? I believe that at least two major publisher titles will heavily feature something like AI-enhanced primary characters or substantially aiding the writing team with main or side quest lines. Candidates include Ubisoft, Square Enix and even PlayStation Studios, the last of which has done great work with accessibility features, a fantastic opportunity area for this exact sort of development workflow enhancement.

M&A Cautiously Continues With Acquisitions by Saudi Arabia’s Savvy Games & Netflix

Last year’s merger and acquisition (M&A) valuation was skewed by Microsoft’s monumental $69 billion takeover of Activision Blizzard. Before that closed in October, companies weren’t as active in terms of deal value through the first nine months of 2023 according to a global report from Drake Star. There were 746 deals valued at $18 billion, down from 626 deals at $51 billion during the same time in 2022. Similar to my sentiment right now, there’s a lot of uncertainty around things like rates and jobs, which is why I believe that 2024’s deal landscape will be selective rather than massive.

Even so, there will always be moves made by key players. I expect a couple of those to be Savvy Games and Netflix. The former is the gaming investment vehicle of Saudi Arabia’s government, which is throwing cash at various sectors including tech, while the latter is hellbent on pushing games to its millions of subscribers. Might a name like CD Projekt be appealing to these kinds of buyers after a stock price decline? (I’d say so.) Might a platform holder named Sony be interested in spending big bucks on a Ubisoft or Capcom? (Eh, I don’t think so.) Finally, which business will Embracer spin off to pay down its debt and which company might subsequently buy them? (I’d wager Gearbox Entertainment or Coffee Stain, or both.)

Bonus & Bold: Bungie Concludes The Final Shape With Destiny 3 Announcement

That’s right, it’s time to finish with a pipe dream! Yes, it’s a mostly absurd one. It’s something I want more than expect to happen. I acknowledge Bungie got rid of a reported 100 folks, or 8% of staff at the time, back in October. It’s making a huge push towards The Final Shape expansion, the huge finale of Destiny’s decade-long saga. A good portion of the team is actively focusing on extraction shooter and likely 2025 launch Marathon.

I’d still wager the talented folks at Bungie are drafting up something more substantial for the future of Destiny that isn’t just the announced periodic episodes once the latest expansion concludes in June. Plus, it’s a bloated game with a reportedly dated development process that drastically needs a reset. Which is why I think the third mainline Destiny franchise title will (realistically probably not) be announced this year, and (is super unlikely to) launch subsequently in 2026!

Note: Comparisons are year-over-year and dollars are in US$ unless otherwise noted.

Sources: Bloomberg, Company Investor & Media Websites, Drake Star, Drexel News Blog (Image Credit), Games Industry Biz, NewZoo, Video Games Chronicle, VideoGameLayoffs.com.

-Dom

2023 Year-in-Review: Dom’s Top 10 Games of the Year

December 31, 2023 DomsPlaying

It’s the final day of 2023, what was a difficult year for the industry yet an incredible time for the games it produced, as you’ll see shortly when I describe my favorite experiences.

In my last post of this latest Year-in-Review series, and of 2023 itself, I’ll run down the ten best games I played then throw in five honorable mentions to celebrate even more developers.

Many folks are calling it the best year in gaming. I even posited if it might be in my 2023 trends recap. While I don’t know about that, since there’s an element of recency bias inherent in that argument, the quality was consistent across various genres at both triple-A and indie levels.

The ranks of my list this year include genres like computer RPG, third-person action, cooking sim, rhythm brawler, vania, soulslike, fishing adventure and survival horror.

For context, by my count I tried over 60 new games during the last 12 months. Whew. Talk about a busy one!

Raise a toast to the winners below, and enjoy your New Year everyone!

Dom’s Top 10 Games of the Year 2023

10. Remnant 2 (Gunfire Games, Gearbox Publishing)

Platforms: PlayStation 5, Xbox Series X|S, PC.

The sequel to 2019’s excellent, often overlooked Remnant from the Ashes went even bigger than its predecessor with its approach to narrative delivery and world-building, offering three bespoke areas to explore and bosses to defeat while keeping the crunchy core mechanics that make the series so enjoyable. Plus, who doesn’t love a game that offers a character class where you have a doggo friend that has skills, bites enemies and revives you?

9. Hi-Fi Rush (Tango Gameworks, Bethesda Softworks)

Platforms: Xbox Series X|S, PC.

The latest from Tango, known better for survival horror than action, came out of nowhere back in January as it stealth dropped on the day it was announced, resulting in a music action game that’s an easy contender for Surprise of the Year. Its characters are endearing while they navigate a syncopated, anti-corporate world that moves to the beat, offering an accessible path to the rhythm genre while incorporating platforming and a competent combat system within Bayonetta-esque battle arenas.

8. Marvel’s Spider-Man 2 (Insomniac Games, Sony Interactive Entertainment)

Platforms: PlayStation 5.

PlayStation owns a number of premier studios and Insomniac is its most prolific, producing a fantastic sequel that tells its own tale of heroes and villains while perfecting the traversal for which the modern Spidey series is now known, notably via its new wing suit. High production value shines in set pieces, visual flair and technical prowess as the team gives equal weight to the relationships, stories and personal moments for Peter and Miles as it does their suite of abilities to fight for their beloved New York City neighborhoods.

7. Alan Wake 2 (Remedy Entertainment, Epic Games Publishing)

Platforms: PlayStation 5, Xbox Series X|S, PC.

Over a decade in the making, Alan Wake 2 elevates beyond the innovative 2010 original to something that truly exists between indie film and brain-bending horror, a celebration of the auteur that forgets any boundaries of what an interactive medium can be. Even if it self-indulges into bonkers territory down the stretch, Remedy produced a gem, featuring at least two of 2023’s best sequences within its “We Sing” and “Old Gods” chapters.

6. Lies of P (Round8 Studio, Neowiz Games)

Platforms: PlayStation 5, PlayStation 4, Xbox Series X|S, Xbox One, PC, Mac.

I was sold on Lies of P since the moment Round8 Studio unveiled the “Pinocchio-souls” concept, and it managed to exceed expectations, moving beyond its inspirations to achieve its own high bar of quality that stands out among pretenders in the space. Its world is gritty, aesthetic is relentless, enemy design is impeccable and its twist on customization, especially being able to swap weapon parts to fit one’s build and change out P’s prosthetic arm, prove it has all the makings of a genre classic that isn’t made by FromSoftware.

5. Dave the Diver (Mintrocket, Nexon)

Platforms: Nintendo Switch, PC, Mac.

It it indie? Is it AAA? As long as you say Dave the Diver amazing, I don’t care what you call it. In a year of standout fishing games, Mintrocket hooked a spot in my Top 5 because it manages to make water levels both engaging to explore and easy to traverse with its fluid controls and nifty ability system, then deftly layers on a restaurant management simulator and a story centered around ecological rejuvenation.

4. Super Mario Bros. Wonder (Nintendo)

Platforms: Nintendo Switch.

The latest Super Mario installment is joyful, quirky and constantly charming while retaining the pinpoint precision of a proper platformer. Nintendo offers a suite of levels from novice to uber challenging, a plethora of playable characters (including kid-friendly ones) and both co-op and online multiplayer. Super Mario Bros. Wonder is a collector’s dream, adding a snazzy badge system with charged up abilities that only enhanced its masterful mechanics, running neck-and-neck with the classics as the franchise’s best 2D effort in over three decades.

3. Cocoon (Geometric Interactive, Annapurna Interactive)

Platforms: Nintendo Switch, PlayStation 5, PlayStation 4, Xbox Series X|S, Xbox One, PC.

Made by one of my indie studios of the year in Geometric Interactive, Cocoon is an instant success in the puzzle space, expertly executing its worlds-within-worlds mechanic while coaxing the player to feel like a genius with the lightest of touches. While its terrific art direction blends organic with robotic, its design smartly and subtly signals where and how to move through levels, the rare puzzler that doesn’t ever require a walkthru and never feels frustrating. My only minor complaint is I wish it had a sprint or dodge button; otherwise, it’s immaculate.

2. The Legend of Zelda: Tears of the Kingdom (Nintendo)

Platforms: Nintendo Switch.

They’ve done it, yet again. Tears of the Kingdom ignores the massive expectations Nintendo itself set with the legendary Breath of the Wild, building on the foundation with a suite of interactive tools that would break a lesser game. Nintendo offers a chance to combine almost any item to form something new, build out massive machines, teleport through geometry and jump from the sky to depths in one fell swoop. The result is hilarious failure and constant fun.

Tears of the Kingdom is more about dominating a well-trodden map and familiar mechanics as Link gathers a team and connects a world to fight another imminent threat from his eternal rival. There’s an entire underground that mirrors the surface world, ramping up the survival aspects, plus a myriad of sky islands and cave systems to loot. The latest Zelda boasts some of the series best moments between its “Guidance from Ages Past” quest-line and an epic, emotional Master Sword set piece. The essence of adventure is at its best in this superb sequel that might top this list if it came out any other year.

Baldur’s Gate 3 (Larian Studios)

Platforms: PlayStation 5, Xbox Series X|S, PC, Mac.

The industry never ceases to amaze and astonish, as I never thought I’d ever write this: Baldur’s Gate 3 is my Game of the Year. That’s saying something, and tells you just how special it is. I’ve never played Dungeons & Dragons in my life. I’m not the target audience of this kind of crunchy, turn-based role-playing game. What drew me in, and what made it my favorite game of 2023, is the writing, characters, world and exploration. It entranced me, as if under a spell, weaving its tendrils into my very soul.

Very few experiences have the sort of lasting effect, and I still haven’t even finished its last act!

The sheer size and breadth is breathtaking, without being bloated. Every part has been developed with intention. Baldur’s Gate 3 rewards consideration of every action, every relationship, every decision with the utmost care, as much as Larian Studios itself put into making a game of this miraculous scope and, frankly, absurd depth. I can’t begin to calculate the permutations, how every playthru will be personal yet all will have a similar level of quality.

For instance, my paladin rolls with tiefling barbarian Karlach, who is also my romantic partner, high elf rogue Astarion and half-elf cleric Shadowheart, alternating in the druid Halsin or fighter Lae’zel. I’ve heard of people turning these characters away, even killing them, all equally valid ways to progress! It’s not one of those games that pretends decisions mean something. It’s not Mass Effect with paragon versus renegade. It’s fluid. Dialogue and storylines react. Choice is everything.

I will say, it’s not perfect. The first act is the most polished, and there’s been plenty of bugs and save issues documented where Larian continues to issue patches fixing technical issues. Still, the fact that the story of this game is so positive even with these hiccups is a testament to its status as a masterpiece.

Similar to my 2018 winner Red Dead Redemption 2, it’s the exquisite attention to detail, the care put into every interaction, the nooks and crannies of the map that have their own stories, all of these and plenty more elevated Baldur’s Gate 3 to the top of this list, eternally cementing its place in history.

Honorable Mentions (Alphabetical):

Armored Cored VI: Fires of Rubicon (FromSoftware, Bandai Namco)

Platforms: PlayStation 5, PlayStation 4, Xbox Series X|S, Xbox One, PC.

Chants of Sennaar (Rundisc, Focus Entertainment)

Platforms: Nintendo Switch, PlayStation 4, Xbox One, PC.

Dredge (Black Salt Games, Team17)

Platforms: Nintendo Switch, PlayStation 5, PlayStation 4, Xbox Series X|S, Xbox One, PC.

Tchia (Awaceb, Kepler Interactive)

Platforms: PlayStation 5, PlayStation 4, PC.

Thirsty Suitors (Outerloop Games, Annapurna Interactive)

Platforms: Nintendo Switch, PlayStation 5, PlayStation 4, Xbox Series X|S, Xbox One.

Sources: Company Media Websites.

-Dom

2023 Year-in-Review: Independent Game Studios of the Year

December 30, 2023 DomsPlaying

The next category in my prominent and distinguished 2023 Year-in-Review series is ready!

It’s a personal favorite, and an honor to share: Independent Game Studios of the Year.

First off, I don’t set an explicit definition of what’s indie and what isn’t. That’s an exercise in futility, and driven by semantics. I know an indie when I see it.

For instance, as awesome as Dave the Diver is, it won’t be among these ranks. The studios and projects celebrated here are (usually) not owned by a mega publisher, tend to be smaller in scope, team size, budget or all of the above plus feature an aesthetic or design that’s alternative to the traditional AAA space.

That’s my criteria and I’m sticking to it.

It’s exceptionally difficult to whittle this list. After all, there’s a metric ton of incredible indie teams that put out a myriad of games in a given year. Which means I do however many I want. It’s my site. Plus, rules are mostly arbitrary anyway.

For this year’s installment, I’ve shouted out 12 developers from 8 different countries that excelled within the indie space. One for each month, I suppose.

On to the winners, in alphabetical order!

Awaceb (Canada)

This studio of a dozen or so people based out of Montreal was started back in 2016 by Phil Crifo and Thierry Boura. This year, its wholesome and inspired open world adventure Tchia tells a great local story based on the founders’ home nation of New Caledonia, has moved over 1 million units and secured the Games for Impact award at December’s The Game Awards.

Black Salt Games (New Zealand)

This team made up of four Kiwi collaborators in Joel Mason, Nadia Thorne, Alex Ritchie and Michael Bastiaens kicked off making their debut title Dredge in 2020. It’s a twisted take on an open world water tale, merging cosmic horror with nifty fishing mechanics, standing out as one of 2023’s premier, and eternally spooky, experiences while cruising past the million copy sold milestone.

Enhance Games (United States)

Back in 2014, industry veteran Tetsuya Mizuguchi founded Enhance, a creative studio that melds various forms of reality gaming and sensory experiences to make titles like Rez Infinite and Tetris Effect. This year it launched Humanity, a dreamy flow-of-consciousness in which a spirit pup leads human souls to complete puzzles, expanding its already impressive and unique portfolio.

Geometric Interactive (Denmark)

Based out of Copenhagen, Geometric is a focused group led by Jeppe Carlsen and Jakob Schmid, both formerly of Playdead (Limbo and Inside) and it shows with their first effort Cocoon. Remember this world-bending environmental puzzler, which took home Best Debut Indie Game at The Game Awards among other accolades, as it will certainly show up again in my Game of the Year article.

Kinmoku (Germany)

Among my favorite things is shouting out single developer studios, and that’s the case here with Lucy Blundell aka Kinmoku who left AAA publishing in 2015 to pursue an indie career. After launching One Night Stand in 2016, they found an even bigger audience recently with Videoverse, a nostalgic, narrative homage to online communities of yesteryear distinguished by its striking visual style.

Mojiken Studio (Indonesia)

This prolific, tight-knit squad is based out of Surabaya and defines its work using a pixelated approach that’s comforting and aesthetically pleasing. 2023’s gem A Space for the Unbound is set in its native Indonesia and expands on its ethos, offering a heartfelt story about teenage love and spiritual growth layered on a supernatural backdrop.

Outerloop Games (United States)

Co-founder Chandana Ekanayake is the creative lead behind the fully distributed and minority led Outerloop Games, previously best known for 2019’s Falcon Age. The group’s fantastic 2023 title Thirsty Suitors is a highlight of inclusivity and culture, both dramatic and romantic, with its snappy animations, wonderful writing and a sublime coexistence of narrative and mechanics.

Rundisc (France)

This team located in Toulouse now has a couple releases under its belt, launching Varion in 2018 and the exceptional Chants of Sennaar back in September in what showcased their immense talent. It’s a miraculous entanglement of peoples and politics told through deciphering of language, showing there’s always a path towards mending fractured relationships even amidst all the challenges that inevitably present themselves.

Sabotage Studio (Canada)

Thierry Boulanger and Martin Brouard formally spawned Sabotage back in 2016 after painstakingly prototyping what would become 2018’s action platformer The Messenger. The team grew in size over time then went a different route with this year’s Sea of Stars, a magical turn-based title that keeps the tradition of retro RPGs alive while enhancing the formula with modern trappings, attracting 4 million players along the way.

Sad Owl Studios (Scotland)

This team’s first effort Viewfinder was initially started by Matt Stark back in 2019, after which his studio Robot Teddy was purchased by Thunderful then renamed Sad Owl Studios. The level-based first-person walker features perhaps the most innovative concept in gaming this year, whereby the player takes pictures that shape the environment in a mesmerizing display that truly has to be experienced to be believed.

Tour de Pizza (United States)

This is a fun one, considering its studio name and cartoonish creation are based on the most perfect food ever created by humans. A group of folks including online personas McPig and Sertif spent five years making what’s probably the goofiest entry here in Pizza Tower, a sharp, sometimes masochistic, high-paced platformer featuring main character Peppino Spaghetti that keeps speed-runners and pain lovers alike salivating similar to its namesake.

Visai Games (Canada)

The final entry also prominently features food, albeit in a much more familial and familiar setting, cooked up by the intimate team at Visai Games out of Toronto. Led by art director Sam Elkana and writer slash producer Shahrin Khan, the delightful Venba is about the ups and downs of an Indian family living in Canada and centers around meals, identity and maturing in a place that isn’t necessarily home, yet can be over enough time.

Sources: Studio Media Relations Websites, Gamatomic (Image Credit), Game Informer (Image Credit).

-Dom

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

December 29, 2023December 29, 2023 DomsPlaying

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

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

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

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

Here’s the full list, in alphabetical order!

Capcom (Japan)

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

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

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

Insomniac Games (United States)

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

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

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

Larian Studios (Belgium)

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

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

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

Nintendo (Japan)

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

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

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

Remedy Entertainment (Finland)

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

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

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

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

-Dom

2023 Year-in-Review: Biggest Trends in Gaming, Tech & Media

December 27, 2023 DomsPlaying

As I mentioned in my recent Year-in-Review megapost, it’s time to run down and wrap up the year that was 2023.

First up is a recap of the biggest trends across gaming, technology and media that guided the story during the last 12 months, and will have a major impact on the future of these sectors. Better or worse, it was a busy time for those within and following these industries.

Below I’ll go through six of the biggest trends then a bonus for fellow games industry enthusiasts out there. It wasn’t all pretty. In fact, I’d argue it was overall a tough year especially for folks whose livelihoods depend on working in and around technology.

Without further delay, I’ll move right into it. There’s a whole lot of ground to cover after all!

Labor Market, Layoffs, Strikes & Return to Office

One of the main, and disheartening, things that people will remember about 2023 was a broadly decaying labor market. After the pandemic period of easy money and hiring bursts, a correct came this past year as a laundry list of industry-driving companies suffered layoffs or business unit closures. Microsoft, Google, Zoom, Twitter, Yahoo, Vimeo, Hasbro and Tik Tok owner ByteDance cut their respective workforces, some by double-digits. Meta Platforms, Amazon, Spotify and LinkedIn all had two rounds of job cuts. Walt Disney had three.

It’s estimated the tech industry lost a staggering 240K jobs, or 50% more than 2022. The games industry cut almost 10 thousand. It was a painful indication of what can happen when companies over-expand, mismanage or aren’t able to adjust, with lower tier employees suffering more than their C-suite overlords. Plus, those that did remain were forced back to the office, as only 26% of American households have someone working remotely, down from almost 40% in 2021. Roughly 66% of U.S. workers are back to the office full time, up from 41% a year ago. Upside being that unionizing and collective action can work, with the major examples being Writers Guild of America and SAG-AFTRA pressing film and TV execs, a bright spot amidst a difficult year for workers.

Consolidation Continues as Activision Blizzard Joins Microsoft

Merger and acquisition activity heated up this past year, with the global volume of deals jumping 27% to almost $2 trillion in value through just the first three quarters. This came even amidst rising interest rates and volatility in global markets. Within my covered sectors here, there was Broadcom and VMWare, Savvy Games and Scopely, Sega Sammy and Rovio, Oracle and Cerner, Opentext and Micro Focus plus ServiceNow and Era Software.

Then, the corporate saga I’ve been tracking the most closely ended as Microsoft finally closed its purchase of Activision Blizzard in October. It was the finale of a two year-long fiasco of regulatory hurdles, market pressures and data leaks. The nearly $70 billion deal was the largest ever for the games industry, whereby a massive third party software publisher became part of a platform holder, bringing the likes of Call of Duty, World of Warcraft and, quite importantly, mobile titles like Candy Crush into Microsoft’s possession to bolster its Game Pass and cloud services. Best of all, the closure means scummy industry villain Bobby Kotick will no longer run Activision Blizzard, a total win for its employees and culture.

Coming Out Party for So-Called Artificial Intelligence

Artificial Intelligence, shortened to AI, is a phrase used so commonly to describe many things that aren’t actually it, and 2023 was the year where usage of adjacent services or products truly ramped up in the mainstream, moving beyond the dreams of start-up nerds and angel investors. Wikipedia said it was one of the most viewed topics of its online database. Investment flooded into companies specializing in the space, futurists talked of its melding with humanity and governments scrambled to catch up to the pace of progression.

While this partially happened to due to deep fake videos, robo-news stories and computerized music, the real reason was large language models (LLMs). Namely, the chatbot called ChatGPT. Made by OpenAI, a firm mired in controversy that only helped to popularize it, the service accumulated a staggering 100 million users per week this past year. It became a popular tool for students and email writers alike, blasting Open AI’s annual revenue past $1 billion compared to under $30 million in 2022. Everyone is trying to get in on the action, with competitors including Google’s Bard, Meta’s Llama 2 and Bing AI via Microsoft. It’s the easiest entry point for the public to see what certain types of “intelligence” are capable of while projecting a variety of potential futures, some of them dark for the course of humanity.

Rising Streaming Costs & Media Subscription Changes

This could be a recurring category as companies adapt content delivery methods to squeeze consumers for dollars. While moderate inflation, or when prices are generally increasing over time, isn’t necessarily news, 2023 saw outsized “streamflation” in that plenty of major services jacked up rates, some of them multiple times. Netflix, Disney+, Hulu, ESPN+ Spotify and Xbox Game Pass all became more expensive. Apple raised the cost of AppleTV, twice. Amazon reiterated that starting in the new year, Prime Video will have ads and charge a fee for ad-free viewing. Cost savings from cord-cutting just ain’t what it used to be.

Then there’s companies moving to rename, restructure or reorganize their services, adding or consolidating levels such that no one can ever truly keep up. Warner Bros Discovery combined HBO Max and others into Max starting mid-year. Sony wholly rebranded its PlayStation Plus membership system around that time as well. Paramount Global recently announced Paramount+ With Showtime. It’s enough to make your head spin, and your bank account hurt.

Companies & Governments Battle in Court

While I’m not a legal expert, I tend to track certain courtroom tussles that impact major companies because it can dictate the direction of vast industries, the people who work in them and those that spend money on them. Global regulators, especially the U.S. Federal Trade Commission (FTC) and the United Kingdom’s Competition & Markets Authority (CMA) heated up scrutiny, namely around antitrust and merger activity. There was the aforementioned Microsoft and Activision Blizzard deal, plus Meta buying up virtual reality firm Within Unlimited, both of which moved forward despite governmental pressures. Meta also settled anti-privacy lawsuits in 2023, agreeing to pay $725 million yet maintaining claims of no wrongdoing.

Then there’s the historic U.S. antitrust suit against Google alleging a monopoly in online search, which closed arguments in November and has a verdict due likely in the first quarter of 2024. As for companies fighting each other, Epic Games won its recent case against Google where the jury ruled that Google’s app policy is monopolistic in certain aspects. Which is intriguing, considering a couple years back, the Fortnite maker mostly lost to Apple in a very similar suit. That’s law for ya.

Best Year (Maybe) Ever for Game Releases

In a bout of more positive news, the last 12 months was pound-for-pound one of the top times for game releases. Fans of various genres were not just eating well, but chowing down a lot. Even if, woefully, many people that made them aren’t properly recognized or no longer have jobs. As I’ll cover in later Year-in-Review posts, the quality was consistent and outstanding. Baldur’s Gate 3. The Legend of Zelda: Tears of the Kingdom. Super Mario Bros Wonder. Marvel’s Spider-Man 2. Final Fantasy XVI. Alan Wake 2. Diablo IV. Star Wars: Jedi Survivor. Hogwarts Legacy. Lies of P. Dave the Diver. Hi-Fi Rush. Starfield (love or hate it). Street Fighter 6. Mortal Kombat 1.

Not to mention, 2023 saw multiple indie contenders like Chants of Sennaar, Cocoon, Dredge, Pizza Tower, Tchia and Sea of Stars alongside mobile joints like Monster Hunter Now and Honkai Star Rail. This was supplemented by remakes or reissues of legacy titles like Dead Space, Resident Evil 4 and Metroid Prime. Even one of the highest rated virtual reality experiences ever in Asgard’s Wrath 2. Sure, it also produced stinkers like Redfall, The Lord of the Rings: Gollum, Skull Island: Rise of Kong and the campaign in Call of Duty: Modern Warfare 3. No year is perfect. In aggregate, it’s been mostly a legendary run that stands with the best of them.

Bonus: Embarrassing & Epic Embracer Group Fail

On the flip side, the biggest games industry fail of 2023 goes to Embracer Group and its management, led by Founder and Chief Executive Officer Lars Wingefors. Executives have misguided the bloated Swedish conglomerate, which owns a bunch of operating groups and employed nearly 17 thousand people at its height, making poor decision after poor decision in a frankly shameful display of ineptitude that ultimately affected the lives of thousands of employees.

This started during the pandemic, when Wingefors and crew decided to spend easy cash on scooping up dozens upon dozens of studios and intellectual property rights, expand into tabletop via Asmodee and pursue comics via Dark Horse, attempting to capitalize on volume rather than quality. Once interest rates rose and debt piled up, management tried to secure a deal worth $2 billion with an unknown partner, now reported to be Saudi Arabia’s Savvy Games, which ultimately didn’t happen. This led to a disastrous 2023 of layoffs, project cancellations and business unit closures, with teams like Volition Games closing its doors and Gearbox Entertainment supposedly being shopped around for sale. The pain isn’t over as Embracer’s restructuring will continue into next year and beyond, all as a result of repeatedly bad calls by those at the top.

Sources: CNBC, Company Media & Investor Websites, LinkedIn (Image Credit), Marvin Meyer (Image Credit), NPR (Image Credit), Skadden, TechCrunch.

-Dom

Working Casual

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Category: Working Casual

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