FIFA 23 & PS5 Score During 11th Straight Month of Declines for U.S. Games Industry in September 2022 NPD Report

DomsPlaying

The third quarter has come to an end, and with it brings the latest monthly report from The NPD Group on how spending on the U.S. games industry is faring.

Fittingly for a September, there’s all sorts of football happening this Fall. American or otherwise.

The latest FIFA title launched in this time frame, during which overall consumer spending across Video Game Content, Hardware and Accessories declined for the 11th straight month. Good news is last year was a record high for the industry and this September was only 4% lower, a better result than certain double-digit dips during the past several months.

As shown in a chart later, even if these spending declines are happening in succession, the trend-line is turning positive. Plus, 2021 is proving to be more an outlier during which pandemic-fueled spending peaked amidst low inflation and fewer general economic pressures.

Content spending, that on software and related sources like mobile and subscriptions, was the only category to decline last month. Mobile weakness had a lot to do with that, as did its outsized impact on the overall number because it’s the largest segment by a wide margin.

“Content performance was driven by a double-digit percentage gain in non-mobile video game subscription spending,” said The NPD Group’s Mat Piscatella on Twitter. “Which was offset by declines across other content segments.”

A bevy of new premium titles dotted the month’s best-sellers list. There were six new releases within the Top 8, to be exact. Many of them were sports titles, sequels or reissues. Among these, Electronic Arts’ FIFA 23 scored the software win in September, knocking its football counterpart of Madden NFL 23 down to second place.

Buying in the Hardware category continued to be a boon as this segment experienced double-digit growth now for three consecutive months. Catapulting this was PlayStation 5 as the top-selling device in September by both units and dollars. As I wrote during July and August, individual data points don’t constitute a reassuring trend. This latest month is starting to make me a believer that supply conditions are getting to where they need to be.

Now, general spending numbers from the first three quarters is still trending down overall as all three categories are currently showing declines. During 2022 to date, people have spent less on gaming than the year prior. This reflects both the historic run a year ago, people seeking entertainment in other areas in addition to macro effects such as inflation and the labor market.

Despite the gloomy headline, fitting for the impending spooky season, September’s report showed multiple reasons for optimism. See below for a full rundown of the numbers then a preview of next month’s action.

United States Games Industry Sales (August 27th, 2022 – October 1st, 2022)

In total, people in the U.S. spent just over $4 billion on gaming last month. That’s down a modest 4% compared to an all-time September high last year. Check the second chart above, in particular the green line showing year-on-year percentage changes, and it’s mostly looking up.

During the first three quarters of 2022, spending declined 8% to $38.4 billion. This movement was driven mainly by contractions in Content and Accessories categories against high comparables last year.

Content spending moved down 7% last month, the only category that wasn’t flat or higher. Its dollar amount reached $3.41 billion or roughly 84% of September’s total. This was mainly attributed to weakness in sources other than non-mobile subscription spending.

Mobile, the sub-category that dictates Content performance, continued to under-perform in September as spending dipped 5% according to Sensor Tower’s portion of the report. Underlying this movement was a worse-than-expected drop in “hypercasual” game installs, declining 40% year-on-year. Overall new installs were 3% lower than last September, marking the worst monthly output since February 2019.

There proved to be more positivity around premium software, as the launch calendar picked up during September due to annualized series. Unfortunately, there wasn’t much in the way of dollar comparisons so I’ll rely on historical rankings for at least some context.

As I mentioned earlier, FIFA 23 finished in first place during its debut month. The last soccer game from Electronic Arts to feature the FIFA branding before it switches to EA Sports FC landed one spot above its predecessor, which started at #2 in September 2021. Both titles had only a few days on sale, making the win for FIFA 23 even more impressive. Recently the publisher said this year’s title was the franchise’s largest global launch ever.

Just below August’s winner and September’s runner-up Madden NFL 23 was NBA 2K23 rounding out the Top 3, even without counting digital contribution because publisher Take-Two Interactive no longer shares it. This is the same position as NBA 2K22, which lost to the same two aforementioned sports series. Take-Two Interactive will certainly share more insight into this year’s launch during its earnings presentation in November, where I expect a potential record start.

Nintendo Switch exclusive Splatoon 3 showed up next, splashing its way to the 4th spot. It’s another title that doesn’t include digital, which means upside could be even higher. The last game launched back in July 2017, when it debuted atop the software list. Albeit during a less competitive window. If the latest game’s absolutely massive Japanese launch sales are any indication, I’m anticipating a record global launch for the franchise and one of the fastest-selling Switch games in its near six years on market.

Completing the slate of new entries on the software chart were The Last of Us Part 1, Teenage Mutant Ninja Turtles: The Cowabunga Collection and JoJo’s Bizarre Adventure: All Star Battle at 5th, 6th and 8th, respectively. While I expected a solid start for Sony’s “remake” of the legendary The Last of Us, the other two proved to be pleasant surprises. Especially JoJo’s Bizarre Adventure, a series mostly localized to Eastern markets.

Looking at the list of best-sellers during the first nine months of 2022, it’s mostly unchanged since August’s result. Madden NFL 23 boosts into the Top 3 from its Top 5 debut. FIFA 23 enters the year’s best-sellers list at #11 while, further down, Saints Row 2022 jumps a few spots into the Top 15.

Check the full lists below for September and 2022 so far.

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

  1. FIFA 23
  2. Madden NFL 23
  3. NBA 2K23*
  4. Splatoon 3*
  5. The Last of Us: Part 1
  6. Teenage Mutant Ninja Turtles: The Cowabunga Collection
  7. Saints Row 2022
  8. JoJo’s Bizarre Adventure: All Star Battle
  9. Elden Ring
  10. Mario Kart 8*
  11. Minecraft
  12. Marvel’s Spider-Man
  13. Lego Star Wars: The Skywalker Saga
  14. Super Smash Bros. Ultimate*
  15. Call of Duty: Black Ops Cold War
  16. Horizon Forbidden West
  17. Call of Duty: Vanguard
  18. Assassin’s Creed Valhalla
  19. MLB: The Show 22^
  20. Dragon Ball Z: Kakarot

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

  1. Elden Ring
  2. Lego Star Wars: The Skywalker Saga
  3. Madden NFL 23
  4. Pokémon Legends: Arceus*
  5. Horizon Forbidden West
  6. MLB: The Show 22^
  7. Call of Duty: Vanguard
  8. Gran Turismo 7
  9. Kirby and The Forgotten Land*
  10. Mario Kart 8*
  11. FIFA 23
  12. Minecraft
  13. Nintendo Switch Sports*
  14. Madden NFL 22
  15. Saints Row 2022
  16. FIFA 22
  17. Super Smash Bros. Ultimate*
  18. Marvel’s Spider-Man: Miles Morales
  19. Animal Crossing: New Horizons*
  20. Monster Hunter Rise

Here’s the shining bright spot in September’s announcement: Hardware purchasing, which rose a fantastic 19% to $490 million. Clearly heading in the right direction after July’s 12% move and August’s 14% jump, now boasting a steady three months straight of double-digit gains. Both PlayStation 5 and Xbox Series X|S families experienced similar double-digit growth.

Because of this recent spurt, Hardware was nearly flat during the first three quarters of 2022. Spending eclipsed $3.36 billion, just under the $3.41 billion in the same period last year.

This recent move is a great signal for supply easing. There are more consoles being produced, which is leading to better inventories at retail. Demand is holding up its end as well, which should continue throughout the fourth quarter holiday season and into next year.

PlayStation 5 led the pack in September by both units sold and revenue generated, same as it did in August, proving that Sony’s family is consistently improving in output leading into the back stretch of 2022. Nintendo Switch came in second place by units, while Xbox Series X|S generated the second highest dollar sales.

What’s important about this upward momentum in Hardware is how it’s happening in light of various headwinds for consumers. While inflation is somewhat easing in light of a hawkish Federal Reserve increasing interest rates, it’s still quite high. Indicators had shown discretionary spending shifting towards non-gaming activities, though console acquisition is bucking that trend. My read is that’s mainly due to pent up demand for new generation boxes.

Plus, easing inflation will have a positive impact on both sides of the equation; Better buying power and lower input costs. I expect the impending earnings season will reveal similar improvements for console manufacturers. (Check back soon for my full calendar!)

Another encouraging sign from last month’s announcement was spending on Accessories, coming in flat year-on-year at $174 million. This smaller segment is showing signs of life! Or at least stabilization, given how it’s the best monthly performance in almost a year.

“This is the first month since October 2021 in which Accessories spending did not experience a year-on-year decline,” Piscatella noted.

The NPD Group dug a bit into the fundamentals here, stating that Game Pad buying was up in September, which rose enough to offset slower Headsets/Headphones output. Backing this up, the base model Xbox Wireless Controller in carbon black was the month’s top-earning peripheral.

Still, year-to-date spend on Accessories was still down in the double-digit range because of how poorly it performed in earlier months. First nine month spend dipped 13% to $1.55 billion. While the report didn’t state it outright, I assume the year’s best-seller remained Microsoft’s Xbox Elite Series 2 Wireless Controller.

Taking this past month as a whole, there’s a lot more to like than not with the domestic sales report. Even given the headline of 11 straight months of declines. Since the trend is improving, especially for Hardware and new premium launches, the bright spots are mounting. Supply has been the story, and that narrative is slowly getting better.

How did my predictions from August go? I thought Madden NFL 23 and Splatoon 3 would fare better, mainly underestimating the upside of FIFA 23. I also got PlayStation 5 winning on dollar sales correct, although I thought Nintendo Switch could lead on units. We’ll call that a half-win!

October is the start of the fourth quarter push, and always a great time to be a sales analyst.

Of course, Call of Duty: Modern Warfare 2 is the bellwether as it launches this week. It will be the month’s best-seller, even with just a couple days on market. In a clear marketing stunt to drive early buying, pre-orders now have early access to its campaign mode.

October will also be highlighted by a couple new Switch exclusives in Mario + Rabbids: Sparks of Hope and Bayonetta 3. Both of these will benefit from the Switch effect, likely landing in the Top 7. Overwatch 2 had a massive start after shifting to its free-to-play early access model, attracting a whopping 25 million players within ten days, so I’m curious to see how this translates on the charts. A Top 3 finish isn’t out of the question, depending on purchasing of its Watchpoint Pack.

PGA Tour 2K23 can be a quiet success, though without digital I’m cautious on a Top 10 start. Gotham Knights will be shaky at best, its commercial lack of success paralleling its tepid critical reception. A Plague Tale: Requiem launched into Xbox Game Pass, so I’m not sure of its upside on the premium charts. I remain upbeat on the sports titles from recent months, especially Madden NFL 23 as the football season progresses.

If PlayStation 5 supply continues, and I expect it to happen, I’m betting it leads on units and revenue again. Partially due to Sony’s marketing deal with Activision Blizzard for Call of Duty.

And how about a rare prediction for Accessories! Microsoft continues to pump out Xbox controllers, highlighted by its more cost-friendly Xbox Elite Controller Series 2 Core starting in September. Then there’s Meta Platforms launching its high-end Meta Quest Pro headset in October. I’m quite upbeat on the category, and think it could show mid single-digit growth.

“Things are definitely moving in the right direction,” Piscatella said. “Looking forward to 2023, I’m optimistic.”

I tend to agree! We’ll see everyone back soon for my earnings calendar extravaganza and more articles focused on the industry. In the meantime, I recommend Piscatella’s detailed thread here.

Thanks for visiting! Be well, all.

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

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

Sources: Electronic Arts, Gizmodo (Image Credit), Nintendo, The NPD Group, Meta Platforms.

-Dom

10th Straight Month of Declines for U.S. Games Industry in August 2022 NPD Report Features Wins for Madden NFL & PlayStation 5

DomsPlaying

Apparently, because we can’t stop time, Summer’s close to its end here in the Northern Hemisphere. I hope you’ll take a brief moment to embrace the cool air that hits this time of year while watching your favorite football squad and reading through this latest blog of sales updates!

As it does every month, The NPD Group shared its report on consumer spending across the games industry earlier in the week. This time, it’s for August, which proved to be another down month fitting with a recent trend. Still, compared to the all-time record high of last year and considering various headwinds, it’s actually a really good result.

Spending across the three major categories of Video Game Content, Video Game Hardware and Video Game Accessories declined for the tenth consecutive month in a row, albeit a modest 5% dip to $4.1 billion. Compare that to over $4.3 billion in August 2021, and I believe this was the second best August result in tracked history. Not bad, right? Essentially, domestic sales are still in the midst of reversion towards pre-pandemic levels, and last month was slightly above this same time in 2020.

The Content segment’s contribution was down, which had an outsized impact because software and the like make up such a large portion of the domestic total. Even a hard-hitter like Madden NFL 23, which was predictably August’s best-selling premium title, and a Saints Row reboot couldn’t offset losses elsewhere, most notably in mobile.

Hardware was the standout in August, proving to be the brightest spot and yet another indication that availability is slowly improving. Especially for the latest generation of consoles. PlayStation 5 was August’s best-seller by both dollars and units. Importantly, both PlayStation 5 and the Xbox Series X|S family experienced double-digit gains compared to prior year, just as they did during July.

Now, one data point doesn’t make a trend. Neither does two. It’s still quite reassuring to see retail inventories going up for both Sony and Microsoft when all we’ve been hearing the past couple years is about supply issues.

Making sure to keep everything in perspective, gaming sales for 2022 are down 9%, with two of its categories in Content and Accessories showing double-digit drops. Again, we’re comparing against strong numbers this time last year. Plus, the industry is still facing pressure from inflation and spending on other entertainment verticals. This sort of stagnation was generally expected this year, and there’s still huge commercial success stories like Elden Ring even during a downturn.

“This is a huge positive shift in the previous market trend,” said The NPD Group’s Mat Piscatella to GameDaily. “Of course, this has been helped by the improved supply of new console hardware. And that’s really the key question going into the holiday.”

Now I’ll take a closer look at August’s numbers, starting first with the overall figures then diving into each category. Also see below for a complete list of the month’s best-selling games.

United States Games Industry Sales (July 31st, 2022 – August 26th, 2022)

During the month of August, consumers spent upwards of $4.1 billion across the games industry, down 5% versus the same time last year. This was mainly attributed to a slowing in software, mobile and related sales, since hardware was the sole area of gains.

Spanning 2022 to date, total sales are currently $34.6 billion. This is tracking 9% lower than the same eight months in 2021, when it was over $38 billion.

Content represented the largest portion, earning $3.59 billion in August or 87.5% of overall spending. This number was down 6% year-on-year and occurred despite a major release in the Madden NFL franchise, a perennial top-seller here in the States.

That’s because mobile continued as the biggest factor, facing its second consecutive month of double-digit declines. Mobile sales dipped 10% in August, highlighting how people aren’t spending as much time or money on mobile platforms right now. This spending dip was felt by both major stores as Google Play sales dropped 22% while Apple’s App Store experienced a more modest 1% decline. The NPD Group didn’t share the top-earning mobile titles.

The big story for premium games was yet another great start for football. And no, I’m not talking about the New York Football Giants being undefeated early in the season. It’s how Madden NFL 23 debuted as August’s number one. That marks a staggering 23 straight years that Electronic Arts’ pigskin series has kicked off its debut month with a win. Talk about a long run! This hot start makes it immediately the 5th best-selling game of 2022 so far.

Below that was an under-the-radar Saints Row reboot, ranking second in August. Intriguingly, this open world crime series from Volition is used to being the bridesmaid: August 2013’s Saints Row IV began in second during its first month, also behind that year’s Madden NFL title. Before that, Saints Row: The Third achieved 8th place in November 2011. This year’s game wasn’t well-received from a critical standpoint and had a lot of technical issues, though clearly benefited from its release window for a solid start.

2018’s Marvel’s Spider-Man jumped up the chart as the month’s biggest mover, leaping to third place from its prior rank of #84. Why? Well, because Sony is finally, slowly, opening its exclusive portfolio to PC players. The game’s remastered version hit PC storefronts last month. It was the top-selling game on Steam among those tracked by The NPD Group. Even Horizon Zero Dawn went from 28th up to #12, proving that the more platforms, the better for buyers.

In terms of new releases for August, the remaining best-seller was Soul Hackers 2 slotting in at #15. Which is a solid position for Atlus’ stylish role-playing game, appealing to a broader audience in the West. When a port for its predecessor hit Nintendo 3DS back in 2013, it understandably didn’t chart.

Taking a look at the 2022 rankings thus far, the only updates were caused by Madden NFL 23 kicking certain titles down the list. The Top 4 remain untouched: Elden Ring, Lego Star Wars: The Skywalker Saga, Pokémon Legends: Arceus and Horizon Forbidden West. At present, there are two franchises both with two titles among the Top 20: Call of Duty and Madden NFL. Familiar faces, indeed.

Check below for the full lists then further down for console performance and peripheral sales in August.

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

  1. Madden NFL 23
  2. Saints Row 2022
  3. Marvel’s Spider-Man
  4. Elden Ring
  5. MultiVersus #
  6. Mario Kart 8*
  7. Minecraft
  8. LEGO Star Wars: The Skywalker Saga
  9. MLB The Show 22^
  10. Xenoblade Chronicles 3*
  11. Digimon Survive
  12. Horizon Forbidden West
  13. Call of Duty: Vanguard
  14. Far Cry 6
  15. Soul Hackers 2
  16. Super Smash Bros. Ultimate*
  17. Gran Turismo 7
  18. Kirby and the Forgotten Land*
  19. The Elder Scrolls V: Skyrim
  20. Pokémon Legends: Arceus*

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

  1. Elden Ring
  2. Lego Star Wars: The Skywalker Saga
  3. Pokémon Legends: Arceus*
  4. Horizon Forbidden West
  5. Madden NFL 23
  6. MLB The Show 22^
  7. Call of Duty: Vanguard
  8. Gran Turismo 7
  9. Kirby and the Forgotten Land*
  10. Mario Kart 8*
  11. Minecraft
  12. Madden NFL 22
  13. Nintendo Switch Sports*
  14. FIFA 22
  15. Marvel’s Spider-Man: Miles Morales
  16. Super Smash Bros. Ultimate*
  17. Monster Hunter Rise
  18. Animal Crossing: New Horizons*
  19. Call of Duty: Black Ops Cold War
  20. Mario Party Superstars*

I’m happy to report prospects for Hardware are looking up. Which is especially hopeful for those in the market for a shiny new console trying to beat the holiday rush.

Hardware was the only main category that grew during August, generating $375 million in sales or 14% higher than a year ago. Which tends to happen when people can actually buy consoles. Signs point to better inventories and the demand being there to meet it.

“Supply for PlayStation 5 and Xbox Series consoles has been improving in recent weeks,” said Piscatella. “However, we still aren’t seeing full distribution, so there is still some latent demand to be met. It’s very difficult for me to say whether or not we’re seeing the end of supply constraints or a temporary respite before we move into the holiday period and seasonal demand starts to play a role.”

That’s the question, right. Are these temporary upticks that will fade once higher input costs impact manufacturers? Have suppliers shored up the supply chain enough to keep retail stock consistent? Will we see enough PlayStations and Xboxes for Americans to buy in the fourth quarter?

For now, we use the data available and try to project. PlayStation 5 took home the top spot in August by both dollar sales and units. As a reminder, while PlayStation 5 topped July by revenue, Nintendo Switch led by units. This indicates that the latest monthly win for Sony wasn’t just a result of higher average selling price; it’s a byproduct of better general availability.

Going further, that stat of how both PlayStation 5 and Xbox Series X|S displayed double-digit year-on-year growth in August is key. It’s happened now for the second month in a row. When it’s occurring not just for one manufacturer, and not just for one month, we can maybe start to project out an improved supply scenario.

Between this, rumors of Sony potentially updating the PlayStation 5 hardware soon, Valve continuing to produce its Steam Deck handheld at a more rapid pace than expected and Microsoft’s CEO Satya Nadella talking about how Xbox Series X|S is outpacing every prior Xbox generation, there’s evidence mounting that manufacturers and their suppliers are finally ramping up output.

However, it’s nowhere near the end of supply-side concerns. Hardware as a category is still down in spending for 2022 right now, off 4% to $2.87 billion as of August. PlayStation 5 keeps its lead as the year’s top-selling platform by dollars, while Nintendo Switch is still on top when measured by units. There’s plenty to look forward to here, while also acknowledging the risks still in the market, especially when it comes to inflationary pressure and semiconductor shortages.

Rounding out the big segments is Accessories, which experienced the largest spending drop of the bunch in August. Purchasing on peripherals and related products declined 18% last month, to $138 million.

The NPD Group report attributed these losses to slowdowns for both game pad and headset sales. Sony’s PlayStation 5 DualSense Controller in Midnight Black was the top-selling accessory, same as July.

In aggregate for 2022, spending on Accessories is down 14% to $1.38 billion. Microsoft’s Xbox Elite Series 2 Wireless Controller tops the year’s list to date, which the premium game pad has done for quite some time now.

Really, it’s been somewhat of a lull for new product launches within this segment. That will change here in the near future, as both Sony and Microsoft announced upcoming controllers. Sony debuted its PlayStation DualSense Edge around a month ago as a premium offering to go along with its base DualSense model. No word yet on release date.

Then, in early September, Microsoft revealed a couple new products in its Elite series: The “Core” model in white, which is a lower-priced entry in the premium space. Not only that, Microsoft shared that it will open up its Design Lab controller customization options to its Elite series of premium game pads starting later this year.

Both of these product lines should provide a noticeable boon for Accessories in the coming months, and I’m extremely upbeat on the DualSense Edge in particular.

Even with the multiple months of declines lately for U.S. games industry spend, there’s a lot to like about The NPD Group’s most recent report. August 2021 was a historic time for the domestic industry, recording an all-time sales high. This time around, it was only the second best August ever.

Content, notably mobile, is still stacked up against high comparables. I was more upbeat on mobile than I probably should have been, and recent results prove that it’s not immune to slowdowns. Especially as people see other places to spend on entertainment.

What’s most reassuring is the continued evidence of an upturn in console supply. Plus, there are still plenty of folks who haven’t upgraded to the newest generation, either because they couldn’t find one or didn’t want to do so. The fact that there’s better availability is a promising sign going into the back stretch of 2022.

Speaking of, why not close out with some September predictions?

Within premium software, there’s a good amount of potential best-sellers from the list of new launches: The Last of Us Part 1, Splatoon 3, NBA 2K23 and FIFA 23 chief among them.

If Take-Two Interactive was still sharing digital split, I’d bet the house on NBA 2K23 scoring September’s win. Nintendo also doesn’t share downloads, so I’m shaky on Splatoon 3 even considering its tremendous start in Japan of 3.45 million units in three days.

Then there’s FIFA 23, representing the secondary form of football around these parts. Last year, FIFA 22 outranked NBA 2K22 during their first month on sale. Could there be a repeat?

Well, I’m actually thinking Madden NFL 23 goes back-to-back and scores September’s top slot. Then, Splatoon 3 will be right behind it followed by a combination of FIFA 23 and NBA 2K23. PlayStation’s The Last of Us Part 1 will be in the Top 7, I’m just hesitant on its upside.

What this all really means is September will be a fun one for software sales nerds!

Within consoles, I’m guessing PlayStation 5 earns top marks on revenue and Nintendo Switch sells the most units. Primarily because Splatoon 3 is the closest thing the Switch has had to a “system seller” in years.

That brings an end to August’s recap and September’s predictions. I’d point you to Piscatella’s Twitter thread for more information about the report.

I’ll be on vacation soon, though happy to reply to any questions or comments here or on social media in the meantime. Thanks all for hanging out, and be well!

*Digital Sales Not Included, ^Xbox & Nintendo Switch Digital Sales Not Included, #Founder’s Pack Edition Sales Only

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

Sources: GameDaily, Nikkei Asia (Image Credit), Nintendo, The NPD Group.

-Dom

MultiVersus Fights to Victory During 9th Straight Month of Sales Declines for U.S. Games Industry in July 2022 NPD Report

DomsPlaying

Summer is trending towards its end here in the States, and spending on video games is showing similar signs of laziness.

As I’ve written about recently, publishers and developers are generally seeing declines from highs of the last couple years when they benefited from more restrictive quarantine measures. This is reflected in today’s monthly sales report from The NPD Group, which showed another period of lower spending by consumers across all of gaming.

With an almost double-digit decline in total spend during July, the games industry experienced its ninth consecutive month of contraction. It’s worth keeping in mind that last year was an all-time high for July spending, so it’s nowhere near a doomsday scenario.

This is attributed to a variety of factors, namely a normalization towards pre-pandemic levels and leaning towards other entertainment options. Purchasing on subscriptions like Xbox Game Pass and PlayStation Plus, continues to be the lone bright spot. Losses elsewhere, notably mobile experiencing its worst decline of 2022 to date, prove to be weighing down the results.

Out of Video Game Content, Hardware and Accessories segments, only Hardware was able to generate any sort of monthly growth.

In what I’d call the surprise upset of the year, character fighter MultiVersus emerged victorious for overall software sales. This free-to-play game from Warner Bros managed to snag the top spot away from 2022 heavyweights like Elden Ring and Lego Star Wars: The Skywalker Saga solely due to people purchasing its founder pack.

Positive signs on the console front continued for Sony’s PlayStation 5 as it led hardware ranks last month when measured by dollar sales, bolstered by improved stock at retail. Which is reassuring, even if temporary, given global chip cost is still increasing and supply chain disruptions are still rearing their ugly head.

The NPD Group’s Mat Piscatella shouted out a couple items of note on Twitter, namely the aforementioned improving supply for hardware and an “impressive” start for Xenoblade Chronicles 3 on Nintendo Switch which debuted in fourth place on the software list.

Look below the fold, so to speak, for a full recap of July’s monthly sales report.

United States Games Industry Sales (July 3rd, 2022 – July 30th, 2022)

When compared to the record $4.57 billion in monthly earnings this time last year, total consumer spending on gaming dipped 9% in July to $4.18 billion. The gallery above displays a handful of handy images digging into the specifics. I’d point attention to the trend chart showing the past few years, clearly displaying this latest amount is nearly identical to that of July 2020.

Expanding to an annual figure for more context, aggregated 2022 sales are currently down 10% to $30.46 billion. This was upwards of $33.86 billion in the seven months ending July 2021.

The biggest contributor was Video Game Content, which counts software and related purchasing, hitting $3.67 billion during July. That’s roughly 88% of overall spending for the month. It’s also off 10% from last year’s $4.1 billion.

Mobile is traditionally the main factor within Content. Unfortunately, mobile just experienced its worst monthly decline of the year to date. This was vast under-performance, considering historical seasonality indicates this is when mobile spend should actually be doing well. While the report didn’t share an exact dollar or percentage movement, I’d call it a yellow flag that’s worth monitoring as we move more into the back half of 2022. Top mobile performers, in order, were Candy Crush Saga, Roblox, Coin Master, Pokémon Go and Evony: The King’s Return.

Also a part of Content, premium games boasted three newer releases within the top eight of July’s best-sellers.

The shocker here again being July’s leader in MultiVersus, which hit open beta with only days left in the tracking period plus was the best-selling title on the Xbox platform list. It’s reminiscent of 2017’s Fortnite Battle Royale, which started its reign in beta form and remained that way for a while. The reason a free-to-play game like MultiVersus was even on the list, let alone led, was the strength of its Founder’s Pack offering things like characters and in-game currency. Combine a low barrier to entry with solid gameplay and optional monetization for an estimated 12 million players right now and that’s a recipe for solid earnings.

This also means Warner Bros published two of the Top 3 titles within the premium ranks, seeing as Lego Star Wars: The Skywalker Saga moved down one spot to third place. The sheer consistency of this 3D action adventure is notable, maintaining a strong position since starting out back in April.

Sandwiched between those as July’s runner-up was, of course, Elden Ring. Which has been, and will be, a constant force on the U.S. charts. Just yesterday, publisher Bandai Namco shared how From Software’s latest surpassed yet another sales milestone, reaching 16.6 million units sold globally as of June. That’s up 3.2 million since March’s 13.4 million total. I expect it to achieve 20 million next quarter as it will compete with Call of Duty: Modern Warfare 2 for this year’s domestic chart-topper.

The second new release to chart in July was Xenoblade Chronicles 3, making it to #4 even without its digital sales counted. That’s the best start for any title in the series from a ranking standpoint. Its predecessor Xenoblade Chronicles 2 ranked #16 back during a heavy holiday month of December 2017, plus the original didn’t make the Top 10 back in April 2012 when it launched in North America. This year’s entry was also Switch’s best-seller during July.

Digimon Survive was the only other new entry on the overall chart, achieving eighth place to start. This is quite the accomplishment for the visual novel slash tactical RPG also published by Bandai Namco, considering it went on sale with only a couple days left in the July tracking period.

As for other movers, Electronic Arts’ F1 22 stood out as passing other titles into the Top 10 during its first full month of sales. Overwatch and Nintendo Switch Sports dropped outside the Top 10 while two older Call of Duty titles in Black Ops Cold War and 2015’s Black Ops 3 shuffled into the Top 20, showing a clear consumer appetite ahead of mid-September’s showcase for this year’s military shooter.

With respect to 2022 so far, the Top 10 list was unchanged as Elden Ring, Lego Star Wars: The Skywalker Saga and Pokémon Legends: Arceus remain as best-sellers. I expect that to change in August. Without a doubt.

Here’s a full rundown of the best-selling software during July and 2022 right now.

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

  1. MultiVersus
  2. Elden Ring
  3. Lego Star Wars: The Skywalker Saga
  4. Xenoblade Chronicles 3*
  5. Call of Duty: Vanguard
  6. MLB: The Show 22^
  7. Mario Kart 8*
  8. Digimon Survive
  9. Minecraft
  10. F1 22
  11. Kirby and the Forgotten Land*
  12. Super Smash Bros. Ultimate*
  13. Animal Crossing: New Horizons*
  14. Overwatch
  15. Pokémon Legends: Arceus*
  16. Nintendo Switch Sports*
  17. Call of Duty: Black Ops Cold War
  18. Far Cry 6
  19. Call of Duty: Black Ops 3
  20. Monster Hunter Rise

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

  1. Elden Ring
  2. Lego Star Wars: The Skywalker Saga
  3. Pokémon Legends: Arceus*
  4. Horizon Forbidden West
  5. MLB The Show 22^
  6. Call of Duty: Vanguard
  7. Gran Turismo 7
  8. Kirby and the Forgotten Land*
  9. Mario Kart 8*
  10. Madden NFL 22
  11. Minecraft
  12. Nintendo Switch Sports*
  13. FIFA 22
  14. Marvel’s Spider-Man Miles Morales
  15. Monster Hunter Rise
  16. Super Smash Bros. Ultimate*
  17. Animal Crossing: New Horizons*
  18. Call of Duty: Black Ops Cold War
  19. Mario Party Superstars*
  20. Dying Light 2: Stay Human*

The only large segment to gain in July was Video Game Hardware, moving up a solid 12% to $362 million in consumer spend. I believe this is the best result since way back in July 2008, when it reached almost $450 million during the height of Nintendo Wii fever.

Funny what can happen when people can find boxes at retail!

Consoles sales are still currently down year-to-date, albeit Hardware is the only category to remain in single-digit decline territory. During the first seven months of 2022, spending totaled $2.5 billion or 7% lower than the $2.67 billion at this point last year.

Just as it did back in June, PlayStation 5 generated the highest amount of dollar sales compared to all other competitors. Xbox Series X|S came in second place, as I confirmed with The NPD Group directly. Both families generated double-digit gains in revenue compared to July 2021, which is reassuring at this stage in the cycle given where supply has been the past two years.

This is great sign for these manufacturers individually and the general potential of the domestic industry here in 2022, implying better inventories and ongoing demand. The economic equation has been out of whack for too long, leading some to believe that scarcity was leading to increased levels of buyer interest. Personally, I maintained the demand side has been consistently high since late 2020. It’s just time for supply to catch up, hopefully over a longer time frame rather than a temporary boost.

If measured by unit sales, Nintendo Switch topped the category again during July. Similarly, PlayStation 5 was the runner-up by this metric. Same as June, in both regards.

The major takeaway for those that track these things closely is supply constraints might very well be easing. Slowly. Or the refrain could be temporary. With the semiconductor situation globally where experts are still projecting 10 to 15% price increases, I’m hesitant to be too optimistic in this area. What’s great is the supply chain seems to be firming up. That’s on display with PlayStation’s results here plus something like Valve increasing production of its Steam Deck handheld. Consumer electronics are hitting the market.

Along these lines, Sony is quite upbeat on the remainder of this year into early next year for PlayStation 5, which recently hit nearly 22 million in lifetime shipments. It recently reiterated what I think is an ambitious 18 million units sales target for the fiscal year ending in March 2023. Right now, the current generation of hardware is lagging its predecessor, though executives are signaling strength to the market. I hope that turns out to be true, even if my forecast is in the 15 to 16 million range. As a reference, Sony shipped 2.4 million units during April to June which is up slightly from 2.3 million a year back.

Nintendo is more conservative on its aging Switch hybrid as compared to prior years, setting an achievable target of 21 million for its fiscal year ending at the same time. Granted it’s at over 110 million units lifetime, with only a couple years left before its successor in my opinion as I don’t expect another mid-generation refresh or any sort of “Switch Pro XL HD” version.

The remaining category of Video Game Accessories moved down the most during the month, dipping 22% to just under $150 million. Now, everything in perspective. This is against another record-high for a July month last year when it reached $190 million. Thus, while it’s more than a 20% decline, the comparable period last year was the strongest ever.

When accounting for the year to date, Accessories spend is now just above $1.2 billion. That’s also showing the most precipitous decline of the three categories at 15% lower than last year’s $1.41 billion.

Running in parallel to the Hardware segment during July, a PlayStation product led the charge. The PlayStation 5 DualSense Midnight Black edition was the top-selling accessory, retaining its monthly lead from June. Sony’s controllers, both current generation DualSense and DualShock 4, have been consistently winning the past few months.

Still, the Xbox Elite Series 2 controller maintains its stranglehold on the annual period so far based on generating more revenue per unit because of its premium price tag. It’s been leading year-to-date for a while now.

Accessories isn’t the most glamorous of topics, I’m wondering when we’ll get a virtual reality headset check-in from NPD Group any time soon. In particular, the Meta Quest price increase kicked in earlier this month. Which, even with a dip in demand, might cause dollar sales to rise. I’d still expect a game pad to lead, mainly because of negative reaction from consumers to any sort of price bump in an inflationary environment.

For those of us tracking the U.S. games industry closely, the themes of 2022 were well intact during July: normalization, inflation, supply challenges and lighter spending compared to strong comparables. The release calendar was still quite light, even with a surprise like MultiVersus and a solid start for more niche titles in the West like Xenoblade Chronicles and a Digimon visual novel.

Now, August is when things will really pick up on the premium software side. It’s the perennial start of the games industry’s commercial swell before pushing into the pre-holiday competition.

As it does every year, a new Madden game will kick off the late summer sales rush. Madden NFL 23 fully launches today from Electronic Arts, featuring the late great John Madden on its cover. Regardless of its reviews and reception, this franchise will always be a commercial juggernaut leading into the football season. I’m expecting it to lead August’s ranks, and easily at that.

The other brand new AAA launch for August is Saints Row incoming next week on a multitude of platforms. Volition’s latest in the long-running open world franchise is a reboot this time, so it’s somewhat of a wild card when it comes to sales. I think it’s releasing at the perfect time, with no Ubisoft or Rockstar open world debuting alongside, which will provide a noticeable commercial benefit. Published by Deep Silver, I see Saints Row starting in the Top 5 on August’s overall software list.

Otherwise, Nintendo’s slate is light as a feather without any major games of note. Soul Hackers 2 from Atlus will be out soon, and I could see an appearance in the Top 15. PlayStation also launched its Marvel’s Spider-Man Remastered on PC, which could very well fling back onto the charts.

Considering how stock might go, I’m forecasting another PlayStation 5 dollar sales lead in August. July’s numbers and anecdotal evidence all show a continually improving supply situation for Sony and its peers. Plus, a major multi-platform sports title like Madden hitting market means there’s going to be more casual folks yearning for the hottest new generation console. That said, I’ll wager Nintendo Switch keeps its unit sales win streak alive even without any first party bangers.

That’s a wrap on this past month’s analysis. I highly recommend checking out Piscatella’s thread on social media here because he highlights more on the platform side and various details. As always, thanks for visiting. Be safe and healthy out there!

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

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

Sources: Bandai Namco, Sony Corp, The NPD Group.

-Dom

Nintendo Announces Switch Lifetime Hardware Sales Pass 110 Million as Revenue & Profit Dip in 1st Quarter 2023

DomsPlaying

First it was Microsoft. Then it was Sony. Now it’s time for Nintendo to get in on the action, reporting its first quarter fiscal 2023 (already!) financial results out of Japan today.

Like trends seen at other console manufacturers, Nintendo’s numbers were mixed with a sprinkling of positive highlights and major milestones. The Kyoto-based manufacturer and publisher is experiencing normalization back towards pre-pandemic levels, facing the impact of a high comparable last year, hardware supply challenges, inflationary pressure plus a lighter lineup of summer blockbusters.

During the three months ending June, Switch passed a major milestone in terms of its global unit sales. It’s now become only the third home console ever to surpass the 110 million units shipped threshold, sharing such rarefied air with Sony’s PlayStation 2 and PlayStation 4. Even amidst chip shortages going into its sixth year on market, the Switch is persevering.

Even so, Nintendo’s financials proved to be weaker than the same time last year. Both revenue and operating profit experienced declines, the latter in the double-digit range. Gains due to a weaker yen and Switch OLED’s higher contribution couldn’t outweigh pressure from chip shortages and people returning to experiential spending elsewhere. It’s also important to keep in mind how the last two years have been outliers, in many respects.

“Positive factors included the depreciation of the yen and the addition of Nintendo Switch OLED Model with its high unit price to the hardware lineup,” executives shared in the company’s presentation. “But hardware production was impacted by factors such as the global shortage of semiconductor components, resulting in a decrease in hardware shipments and subsequent decline in overall sales.”

This is partially due to lower software unit sales, as Switch saw less than half as many “million-sellers” in this year’s fiscal Q1. New releases centered on casual sports, as both Nintendo Switch Sports and Mario Strikers: Battle League hit during this window, and both became million-sellers. Kirby and the Forgotten Land continues its excellent performance, becoming the best-selling game ever in the mainline Kirby franchise. Like usual, Nintendo’s software results were bolstered by ongoing momentum from the likes of Mario Kart 8, Animal Crossing: New Horizons and the healthy Ring Fit Adventure.

Nintendo, and I, expected this sort of movement from last year’s highs based on things like the general release slate and various macroeconomic factors. Which is why the company reaffirmed annual guidance around sales, profitability, hardware and software units. I’ll write a bit later about my own forecasts given this framework.

There’s not a moment to waste! It’s time to slide right into the numbers. Get ready for two whole galleries of images, the first from Nintendo’s presentation and the second a grouping of my own charts displaying key financial indicators.

During this April to June time frame, Nintendo generated around $2.37 billion in revenue or 5% lower than last year when measured in local currency. Operating profit totaled $784 million, representing a 15% drop on rising expenses mainly associated with Switch marketing and game development.

It’s a classic mean reversion I’ve written about for similar results recently, a dip towards more normalized spending after two years of substantial boosts from the pandemic. While COVID and its variants are still present, there are more people vaccinated which means they are turning to other types of entertainment outside the house. That is, when they can afford it. People’s hard-earned cash isn’t going as far lately as many countries suffer from the worst inflation in decades.

There’s also the more technical element of yen depreciation, which ends up hurting Japanese companies whose primary business is conducted overseas. This leads into Nintendo’s latest regional breakout which saw 44% from The Americas, a number consistent with last year’s split. Then it’s Europe at 26%, up from 24%. It follows that Japan now represents only 20% of Nintendo’s business, down from 22%. This means that only one-fifth of its revenue is gained locally, meaning a weaker yen has a significant effect on its sales.

Now I’ll dig into product categories underlying Nintendo’s quarterly output. Software and related content comprised 56% of Q1 revenue, up from 53%. It follows that Switch hardware made up the remaining 44%, down compared to the 47% a year ago. What this indicates is hardware is losing ground at a more rapid pace than software, as the latter benefits greatly from ongoing events or downloadable content for legacy titles. If it wasn’t for the Switch OLED model, this skew would be even more towards software.

There are two charts in the below gallery showing the trend of quarterly revenue and profit, where we see the declined compared to recent years however still trending above that from fiscal 2019. Then there’s the two charts which smooth out these results by showing trailing 12-month figures, as I add up the latest four quarters. Trailing annual revenue is right near $13 billion for Nintendo, severely hampered by the yen weakness when converted to dollars. Operating income over the last year is $4.43 billion. This helps keep the overall business in context, rather than focusing strictly on shorter-term movement.

Using these recent annual figures, I’d like to compare Nintendo’s results to industry peers in Tencent, Sony and Microsoft. I will preface this by saying the conversion from yen is really taking a toll on Nintendo and Sony right now. Tencent’s $33 billion in annual gaming revenue is untouchable, though it’s the only one of these that hasn’t reported this quarter and I expect it could decline. Sony’s $21 billion from PlayStation is up next, then Microsoft’s Xbox revenue of $16.22 billion comes in third. If Microsoft’s accounted for Activision Blizzard, which it won’t until next year, it would rival Sony’s output. Which means Nintendo’s revenue is on the lower end at $13 billion. However, Nintendo’s $4.43 billion in operating profit over the last 12 months is higher than PlayStation’s $2.44 billion.

Focusing now on Nintendo’s console business, Switch shipped 3.43 million units globally during the quarter. That’s down 23% from the 4.45 million in Q1 of fiscal 2022. It’s the lowest number of Switch hardware shipments since 3.28 million in January to March 2020.

The base model felt the most precipitous drop, moving down 60% to 1.32 million of the quarterly total. Switch Lite posted a 48% dip, shipping 590K. Which means the Switch OLED model was the best-selling in the family during the last three months, moving 1.52 million boxes. That brings the lifetime total of just Switch OLED to 7.32 million since October 2021. This was precisely Nintendo’s intention, to shift buyers towards the fancy, higher-priced OLED.

Overall, Switch lifetime shipments now total 111.08 million. Compare that to lifetime sales of 89 million at this same time in calendar 2021. In an ironic twist, Switch is now the third home console AND the third portable device to pass the 110 million mark. PlayStation 2 and PlayStation 4 reached 155 million and 117 million, respectively. Separately, on the handheld side, Nintendo’s own Nintendo DS achieved 154 million while Game Boy/Game Boy Color settled at almost 119 million. For now, the PlayStation 4 is in the Switch’s sights, especially since Sony stopped reporting its prior generation hardware figures just this quarter.

As referenced in an earlier slide, sell-through to consumers for the quarter ending June declined for the second year in a row. While the company didn’t specify the exact amount, the trend-line is clear at this point in the life cycle. Especially given the tremendous impact from Animal Crossing: New Horizons back in March 2020, when sell-through of Switch consoles peaked.

Even amidst lower global hardware sales, Switch is still holding up among its counterparts in its biggest market. That’s according to the Q2 2022 report from industry tracking firm The NPD Group, an often cited source here at the site. Switch was the best-selling console in the U.S. during April to June when measured by units, and is still the year’s best-seller by this metric as I wrote earlier in the month. This dynamic makes sense given the Switch’s more attractive pricing and consistent availability at retail, plus supply challenges having an outsized effect on new generation consoles.

Switching over to Nintendo’s software sales for the quarter, it’s a bit brighter than its hardware counterpart. In that it didn’t see as big a decline from a unit standpoint.

Total game shipments in the period ending June declined to 41.4 million, down 9% from the prior year’s 45.29 million. Namely because it was a quiet time for those million-sellers: only four games sold this amount in the period alone, and none of them were from third parties. Compare that to 9 this time a year ago, 7 from Nintendo and the remainder from external partners. So, while there are select titles hitting this threshold, there were less of them amidst a sparse release calendar.

Because of this, lifetime software unit sales for Switch reached 863.59 million. That’s up from 892.18 million back in March, and 587.12 million back in June 2021. Might it cross 900 million by September? (Yes.)

Nintendo decided to kick off the summer with two sports titles during the three months ending June, launching both Nintendo Switch Sports and Mario Strikers: Battle League.

Nintendo Switch Sports scored 4.84 million shipments in its debut quarter. It’s tricky to compare this to prior mainline Sports releases, the last major one being Wii Sports Club in 2014, itself a remake of the original 2006 Wii Sports which launched alongside the ever-popular Wii console. There’s also Wii Sports Resort that released in 2009 at 1.61 million. We could also compare to Wii Fit, which started at 3.6 million. Any way you slice it, it’s a strong start to a title Nintendo expects could keep up momentum over time as more content rolls out.

Mario Strikers: Battle League spent less time on sale after its mid-June launch, shipping 1.91 million copies since. It’s the first mainline Mario Strikers title in 15 years, back when Mario Strikers Charged accumulated 1.71 million in its first quarter. That puts this latest game slightly higher than its predecessor’s initial sales.

The last flagship Switch game of the quarter was Fire Emblem Warriors: Three Hopes. This one hit market during the final week of June and is co-published by Koei Tecmo. Nintendo hasn’t publicly shared any results for it just yet.

As for earlier games, Kirby and the Forgotten Land continues its expansion, which is natural for Kirby. It’s scooping up sales left and right, amassing 4.53 million units to date after selling-in another 1.88 million in fiscal Q1. During its first 15 weeks on sale, it’s already sold-through over 4 million copies. That’s the best cumulative sales to consumers ever for the series, already outpacing the lifetime total of 2018’s Kirby Star Allies.

The best-selling first party Switch game list is unchanged at the top. Mario Kart 8, of course, somehow sold another 1.48 million to bring its lifetime total past the 46 million mark, settling at 46.82 million. Animal Crossing: New Horizons is at 39.38 million, while Super Smash Bros. Ultimate fought up to 28.82 million.

Fan favorite Ring Fit Adventure remains in the Top 10 best-selling on the platform, moving 450K units up to 14.54 million. It’s creeping up on a couple Pokémon games, I’d wager it can move into 8th place on the lifetime Switch sellers list by year-end.

Speaking of Pokémon, for 2022 to date in the U.S., Pokémon: Legends Arceus remains on the best-selling premium list, currently catching the third spot as of June. That’s according to The NPD Group, and it doesn’t even include the game’s digital portion. The aforementioned Kirby and the Forgotten Land and Mario Kart 8 are presently 8th and 9th, respectively.

Another growth avenue for Nintendo last quarter was digital sales of software, rising 16% to $679 million. That comes out to roughly 29% of its total revenue. Nintendo also shared that more than half of software sales are now digital, at 53% of the total. This is up from 47% last year, partially due to downloadable content like Animal Crossing: New Horizons Happy Home Paradise and the Nintendo Switch Online + Expansion Pack offering.

Unfortunately, there’s no new data on Nintendo Switch Online subscription count. The most recent update from the company was 32 million in September 2021. Management did state that sales from this online service are “showing growth,” just didn’t indicate by how much.

And as we’ve seen many times before, Nintendo’s engagement stats are lacking. Its “Annual Playing Users” metric is now up to 104 million, compared to 102 million last quarter. To me, this doesn’t mean much other than people that buy a Switch turn it on at least once in the last 12 months. Not the most descriptive of metrics.

It’s a decent start to the new fiscal year for Nintendo, seeing drops where expected on the hardware side and maintaining solid results for both new games and ongoing software spending. It’s too early for the forecast to change, even given the amount of uncertainty that exists on the supply side plus game release dates moving around soon.

“Due to delays in the procurement of components such as semiconductors this year, we have not been able to conduct production as planned.” management said. “However, we expect procurement to gradually improve from late summer towards autumn, giving us a clearer outlook regarding production for the remaining calendar year. In preparation for the holiday season, we will leverage appropriate means of shipment, and work to deliver as many Nintendo Switch systems as possible to
consumers in every region.”

As a quick reminder on its guidance, Nintendo anticipates sales will decline in the single digits this fiscal year to roughly $12.34 billion at the current exchange rate, a figure in dollars that could improve if the yen improves. Operating profit is expected to take a bigger hit, dipping 16% to under $3.9 billion. Which would be the lowest result since the pandemic begin, yet still above levels prior to that point.

It’s on the conservative side, which is where I’m at as well. When there’s this many unknowns, both at a macro level and within the games industry, I tend to be cautious. I think it’s prudent for executives to do the same, especially for a company like Nintendo which isn’t as diversified as other consumer technology peers.

I continue to believe there won’t be any substantial new Switch iterations over the next few quarters. Instead, Nintendo should be working more on a successor than a model change. As for units, I’m reiterating my forecast of 20 million to 21 million which is a bit lower than Nintendo’s 21 million guidance. Right now, I’m slightly more bearish than management.

Another portion that Nintendo left unchanged is the guidance of 210 million software units selling in the year ending March 2023. Nintendo reiterated that stance, which I lean towards being a bit high unless a couple key titles hit market in this time frame.

Short term Xenoblade Chronicles 3 launch a few days back. Kirby’s Dream Buffet is a smaller title slated sometime this summer. Next up, there’s a pair of “third in the series” entries in Splatoon 3 and Bayonetta 3, launching in September and October respectively. Out of these, I’m way upbeat on the latter, the first mainline Bayonetta game since 2014.

I expect Pokémon Scarlet and Pokémon Violet, which are introducing all new pocket monsters, could potentially break records for early sales for the franchise on Switch and overall upon debuting in November. Granted, there’s been a lot of Pokémon lately. That won’t stop the series from selling, especially when there’s a new generation to collect.

The Legend of Zelda is the proverbial, hm.. wild card of the bunch. Will there be a new version of something like Windwaker soon? Might Nintendo put out a Switch version of Twilight Princess? That would be well and good, and certainly attract demand. It really comes down to whether the fabled Breath of the Wild sequel hits by March 2023. At least for now, it remains listed as Spring 2023 in Nintendo’s reporting. If I was to guess, I’m mildly confident it’s out this fiscal year.

Finally, there’s also Advance Wars 1+2: Re-Boot Camp and Metroid Prime 4. Both stayed as to-be-announced in Nintendo’s presentation. If anything, I’d wager the former has a better chance of hitting this fiscal year because it was scheduled to be out already. I don’t see the latter until the back half of calendar 2023, the earliest.

With its latest hardware sales milestone and a lot of good games before its life cycle ends, it’s still an exciting time to be a Switch owner. Especially for fans of JRPGs, sports games and Pokémon. Investors may be wearier, though shouldn’t let declines from all-time highs distract from Nintendo still being in its best financial shape since the Wii era.

Thanks for visiting the site and checking out this analysis. Feel free to drop a comment here or on social media. Enjoy the remainder of earnings season everyone!

Note: Comparisons are year-over-year unless otherwise mentioned. Exchange rate is based on reported average conversion: US $1 to ¥129.66.

Sources: Company Investor Relations Websites, The NPD Group.

-Dom

PlayStation 5 Lifetime Shipments Total 21.7 Million As Sony’s Gaming Business Sales & Forecast Decline in First Quarter 2022

DomsPlaying2 Comments

After writing about Microsoft’s earnings earlier in the week, it’s now time to recap Sony’s fiscal year 2022 first quarter results.

Mixed as they were. Overall sales and profit grew for Sony overall, in part due to a weaker yen and boosts from the likes of Pictures and Music. However, sales within its PlayStation business declined amidst a variety of factors. This was mostly expected based on a high comparable last year, a limited suite of first-party exclusive games plus signs of a broader slowdown in discretionary spending.

Sony’s Game & Network Services (G&NS) segment sales declined in the low single digits over the last 3-month period, marking the lowest Q1 output since fiscal year 2019. Profitability took an even bigger hit, moving down almost 40%, due to general weakness in software plus increased spending on its pending projects.

Hardware proved to be the main bright spot, experiencing a double-digit revenue rise as PlayStation 5 reached 21.7 million in lifetime units shipped. That’s after selling-in 2.4 million boxes in the April to June period, up ever so slightly from last year’s 2.3 million.

Sony also reduced its financial forecast for the PlayStation business, revising downward both revenue and profit metrics while highlighting it expects a bigger decline in 3rd-party software sales. Profit will also be impacted by closing the purchase of Bungie, which went effective a couple weeks back.

Somewhat surprisingly, management reiterated its PlayStation 5 hardware shipment target at 18 million consoles for full year. I tend to disagree, personally. I believe Sony’s management is exceptionally bullish in the face of continued pressure from multiple angles, including supply chain and broader price pressure. I expect reduced guidance within the next two quarters unless input costs drastically improve.

“At this point in time, we have made no change to our 18 million unit sales forecast for PlayStation hardware in FY22,” said executives in the company’s prepared remarks. “But since we are seeing a recovery from the impact of the lockdown in Shanghai and a significant improvement in the supply of components, we are working to bring-forward more supply into the year-end holiday selling season.”

Time to move forward into recapping the underlying financials and make some fun predictions of my own!

First referencing the slides from Sony in the above gallery, these display how it generated $17.86 billion in revenue during the quarter which is up 2%. Operating profit rose 3% to $2.37 billion.

Both these set all-time highs for a first quarter, when measured in local currency. I’m using an average exchange rate to convert into dollars.

Given the environment these are very good, even if slight, gains. Granted, it’s worth reiterating how a weak yen will help top-line growth for global consumer companies like Sony.

That currency impact is on display within the PlayStation business, where its top-line would have been even worse if the exchange rate impact wasn’t as robust. Sony’s gaming division saw revenue dip 2% to $4.67 billion. With higher costs recently, operating profit declined a precipitous 37% to $408 million.

As the G&NS segment slide shows, the top-line revenue includes a substantial foreign exchange rate impact. It also accounts for a decline in both 1st and 3rd party software, a trend consistent with Xbox’s quarter as well. Compared to this time in 2021, people simply aren’t spending as much time or money on software and related content, even if they still have demand for hardware.

This exact dynamic is reflected in the product category slide from its supplemental information and the colorful chart I’ve compiled. Sales from Physical Software, Digital Software and Add-On Content all fell double-digits in the quarter. Hardware and Others, which includes peripherals and first-party game sales not on PlayStation platforms, boosted 12% and 28% respectively. Network Services is also proving to be resilient right now, moving up a modest 4%.

The two additional charts provided expand Sony’s reporting over the latest 12-month period, a method I use to smooth out results and provide better perspective on how companies are performing. It smooths seasonality and considers the last four quarters in aggregate. On the revenue side, PlayStation revenue topped $21 billion. Which is up compared to this time last year when it was $20.6 billion. Operating profit is also up year-on-year, from $2.33 billion in the 12 months ending June 2021 to $2.44 billion now.

What does that mean? Well, in the scope of recent years, these quarterly drops aren’t as damaging as they seem because the last few quarters have been abnormally high for the games industry. It’s that normalization I’ve written about before, as things like global inflation and folks seeking other forms of entertainment enter the picture.

In comparison to industry peers like Tencent, Microsoft and Nintendo, Sony’s current gaming output is near the top. Tencent’s recent annual figure is roughly $33 billion, continuing its reign as the biggest gaming company in the world by sales. Then Sony slots in next at $21 billion, which is lighter lately because it’s converted from a currency in free fall. Microsoft recently reported $16.22 billion, while Nintendo’s latest from last quarter is around $15 billion. The last two years have been a healthy time for the biggest publishers, manufacturers and developers, given all that’s happened, so some headwinds now are natural.

In addition to the financial metrics I love to highlight, Sony shared a variety of additional figures on software sales, digital contribution, services and engagement factors. All very important in gauging the well-being of PlayStation as a business.

First, I’ll talk software sales, the bread and butter of any gaming ecosystem. We already know that revenue from these sources declined in the double-digits, which is reflected in unit sales as well. Full game software on PlayStation platforms dipped 26% to 47.1 million units. Within that, first party titles (those published by PlayStation) lowered even further, down 39% to 6.4 million.

This period includes the second quarter for titles like Horizon Forbidden West, Gran Turismo 7 and MLB The Show 22. It could mean sales a few weeks out from launch are lower because people are playing less, which they are, or potential buyers are waiting until discounts because many new generation titles now start at a higher price point. Which extends the length of a title’s sales trajectory, though earns Sony less per unit sold over time.

Those gamers that are buying software for PlayStation platforms are doing so via its digital storefront more than ever. The number of digital game units sold compared to the total reached 79%, which ties an all-time high set back during the quarter between January and March 2020. To say it another way, fiscal Q1 had the same digital proportion as around the beginning of major quarantines during the early parts of the pandemic.

With respect to player count and engagement, it’s another mixed bag. PlayStation Plus memberships rose 1 million compared to last year’s number, currently reaching 47.3 million subscribers. It’s almost the same number as last quarter, down only around 100K. On the other hand, the key metric of Monthly Active Users (MAUs) showed weakness, going down from 105 million last year to 102 million now.

Sony’s explanation is that hours spent on the platform came in below estimates. Which fits with my expectation, given the release slate and other entertainment options.

“Total gameplay time for PlayStation users declined 15% year-on-year in Q1,” management said in its remarks. “Gameplay time in the month of June improved 3% compared with May and was down only 10% versus June 2021, but this is a much lower level of engagement than we anticipated in our previous forecast.”

This report also marks a bittersweet milestone, as Sony no longer reports hardware sales for the PlayStation 4. The 2013 console ends its historic run around 117 million units sold globally. That’s enough to be the second best-selling home console of all time behind only the PlayStation 2. Where does PlayStation 5 stack up against its predecessor right now? Well, PlayStation 4 had shipped 25.4 million by its seventh quarter on market, meaning PlayStation 5 is lagging by almost 4 million units. Congrats to everyone behind the PlayStation 4, one of the highest-selling devices across the history of gaming.

Stepping back to take it all in, Sony’s fiscal first quarter results were mildly impressive overall while expected temporary weakness hit the PlayStation segment. Three months ago, I wrote about being more cautious than Sony’s management on its gaming prospects for the coming fiscal year. So, this sort of decline fits with that hypothesis, which I’m continuing here.

“The results forecast we announced in May incorporated an outlook for the growth of the global economy developed in January as well as major risks contemplated at the time of the forecast such as the direct impact of the situation in Ukraine and the impact of COVID-19 in China,” executives noted in the company’s prepared remarks.

The highest profile aspect of guidance is PlayStation 5 hardware, where Sony stubbornly kept the 18 million unit sales target for the year ending March 2023. While the next couple quarters will feature software titles that can be system-sellers, my problem is how chip prices could rise in the double-digits over the remainder of this year, and shutdowns or lockdowns will continue to impact part suppliers in the pipeline. My current target is between 15 to 16 million sold this fiscal year for PlayStation 5, implying it still has upwards of 13 to 13.5 million to go.

I also want to address a question that arose during today’s earnings call. Per a transcription from Video Games Chronicle, executives were asked about the potential for a price increase for PlayStation 5. That’s right, an increase! In fairness, Sony has recently bumped up prices for certain items in its local Japanese market plus Meta increased the cost of its Quest 2 virtual reality headset by US$ 100.

Even given the challenges faced by electronic manufacturers right now, I think it’s potential product suicide to drastically raise prices on consumers that are already cash-strained. Especially when it comes to the PlayStation 5, which already sees inflated secondhand prices amidst rampant scalping and limited inventories. Thankfully, Sony Chief Financial Officer (CFO) Hiroki Totoki agrees, for now, and dismissed the question.

On the financial forecast side for the remainder of this fiscal year, Sony raised its sales estimate by 1% while simultaneously reducing its operating income projection by 4%. For PlayStation alone, it revised revenue and profit downward by 1% and 16% respectively. That PlayStation profit reduction stands out the most, factoring increased costs associated with closing Bungie and Haven Studios acquisitions.

I’d say I’m cautiously bullish on this update. Even with big blockbusters like Madden 2023, FIFA 2023 and the highly-anticipated God of War Ragnarök on the horizon in the coming months, I’m worried about those diminishing engagement hours, lower spend on ongoing content and, of course, stagnating hardware production. Uncertainty is the enemy of those who make predictions, so I’ll keep my tentative outlook and say I think we might see lower results.

One wildcard in this scenario is PlayStation VR2, which has a launch roadmap that’s apparently in full swing according to PlayStation Blog. I continue to be shocked by how soon Sony is showing the device, which I didn’t expect for at least another year or more. It seems like it’s been in development for a long while, though release has been pushed back given the difficulties of supplying PlayStation 5, which is necessary to run the headset.

I don’t know if it’s a wise decision to spend on making and marketing both PlayStation 5 and PlayStation VR2 during a holiday season where costs are moving up across the board, and consumers can barely find the console at retail. Does Sony intend to launch the peripheral before March 2023 to meet that fiscal year deadline? Can it match the US$ 400 price tag I think it needs to be attractive? Based on where it’s at in development, I can see it. Even if I don’t necessarily agree with the move.

Thus concludes another recap session during this busy earnings season. Hop over to my full calendar for more on when other companies are reporting in the coming weeks, and thanks for taking the time to visit the site! Be safe, friends.

Note: Comparisons are year-over-year unless otherwise mentioned. Exchange rate is based on reported average conversion: US $1 to ¥129.4.

Sources: Company Investor Relations Websites, Getty Images (Photo Credit), Meta, PlayStation Blog, Video Games Chronicle.

-Dom

Microsoft’s Xbox Sales Reach New Fiscal Year High in 2022 Despite Fourth Quarter Declines in Content & Hardware

DomsPlaying4 Comments

It’s here. My first big recap article of this latest earnings season!

In case it wasn’t clear from my recent calendar post, late July signals the start of that season. Let’s kick it off with Microsoft’s fourth quarter fiscal 2022 results, which means I’ll cover both quarterly and annual figures. The more, the better!

This latest 3-month period featured somewhat mixed results that capped off a historic year for the company’s gaming division, where it achieved the best ever fiscal revenue for Xbox as a brand.

As anticipated, gaming revenue declined in the quarter ending June 2022, dipping 7% to roughly $3.45 billion. Like many results lately in the industry, it sounds a lot worse than it was. This number is the second best Q4 in Xbox history, trailing behind only last year’s massive $3.71 billion spike.

It’s one of those “good enough” scenarios, falling perfectly in-line with the company’s, and my, expectations of a mid-to-high single digit decline. Either a big beat or epic miss would have been much more newsworthy.

What’s important is the impact on fiscal year revenue from Xbox, which moved past $16 billion for the first time ever. That’s yet another all-time year for gaming at Microsoft. It’s the sixth straight fiscal year where Xbox has achieved record sales.

Underlying this growth was upward movement in Content and Services, which houses software sales along with the likes of Xbox Game Pass and cloud offerings. A constant here has been claims from management that Xbox Game Pass subscriptions have been steadily increasing, although the team still hasn’t shared an updated sub figure since the 25 million I wrote about back in January.

On the other hand, Xbox hardware sales have stagnated over the latest 12 months which resulted in a double-digit decline during the year. Which is curious, considering comments from Chief Executive Officer (CEO) Satya Nadella indicate the family of devices is selling better than ever.

“We’ve sold more consoles life-to-date than any previous generation of Xbox and have been the market leader in North America for three quarters in a row among next gen consoles,” Nadella said in his prepared remarks on the earnings conference call.

The declining revenue along with high unit sales indicate a major talking point to me: There’s a high proportion of unit sales coming from the lower-priced Xbox Series S. Which fits with mounting evidence and anecdotes that these are much easier to find and plays from a manufacturing cost standpoint because they are less expensive to make. Plainly, Microsoft and its suppliers can’t produce enough high-end Xbox Series X boxes to grow hardware revenue. I expect high input costs to continue, thus this trend will keep up into the new fiscal year.

Now I’ll dig into the underlying numbers and highlight key trends from this report.

Peeking first at the above slides from Microsoft, they show that 7% decline in quarterly gaming revenue which gets us to that $3.45 billion figure. Not bad considering Xbox achieved a best-ever Q4 result this time last year!

The main reasons for lower sales proved to be people spending less time and money on the platform over those 3 months, which impacted purchasing of both first-party and third-party software. The main bright spot was growth in Xbox Game Pass subscriptions. I’ll go more into these segments in a bit.

Expanding to a longer time frame is my chart, which shows 12-month trailing sales figures for the Xbox business unit. This shows a couple major points.

First, if we focus strictly on each fourth quarter, it displays that record high fiscal year from Xbox: $16.22 billion between July 2021 to June 2022 compared to the prior record holder of fiscal 2021 at $15.37 billion.

Subsequently, the full chart illustrates last quarter was the first decline for trailing annual gaming sales since back in Q2 of fiscal 2020. That initial rise back then corresponds to quarters leading into the start of quarantines during the pandemic, and the figure has since leveled off right around $16 billion lately. Still, it’s only a 2% decline from last quarter’s all-time best. Which is something I’ve expected given the strong prior years and macroeconomic forces at play, including inflation.

Note: These dollar totals are based on growth rates over the prior year. Microsoft has yet to publish its 10K filing, I’m confident the math will be very close.

Where does this put Xbox sales right now in comparison to major peers in the games industry?

Since Microsoft is the first to report, I’ll use the latest annual figures for the likes of Tencent, Sony and Nintendo. Tencent is the clear leader of the pack, aggregating to annual sales of $33 billion. Sony is up next, reaching $24.4 billion. That number will refresh later this week when the company reports on Friday. That leads into Microsoft’s $16.22 billion, which will increase when the Activision Blizzard deal closes to somewhere between $23 to $24 billion depending on redundancies and cost-savings. Lastly, Nintendo is close to Microsoft’s current figure, hitting $15 billion in yearly sales.

The main caveat I’ll note when comparing across the industry is how revenue is one of many metrics used to gauge financial strength. I’d prefer profitability when available, however Microsoft does not report this granularity for Xbox alone.

That doesn’t mean we can’t glean anything on Xbox’s profit contribution from this recent report. The broader segment of More Personal Computing (MPC) experienced an operating income decline of 5% as expenses rose 8%. Microsoft called out Windows, Search and news advertising as main drivers of this weakening profit dynamic, which indicates that gaming’s contribution likely remained consistent. Which I’d say is good news, especially for the cost of making consoles.

For the quarter ending June 2022, both of Xbox’s main segments of Xbox Content & Services and Xbox Hardware suffered declines. Although the latter was more precipitous, neither was very concerning to me because of where we are in the broader cycle plus supply conditions being nowhere near normal.

Starting with Content & Services, this segment contributed 6% lower sales than a year ago. Which, like total Xbox revenue, was in-line with the company’s guidance and my own expectations. This equates to $2.77 billion in Q4, implying it contributed around 80% of the total. Another way to consider this is 4 out of every 5 dollars spent on Xbox was on software, downloadable content, subscriptions and non-hardware purchasing.

In fact, the latest annual contribution from Content & Services is a big positive for the Xbox brand. It’s now above $12.5 billion, or 77% of the total, a dollar figure which is actually up 3% compared to the prior year. That means despite weakness in the fourth quarter, Content & Services had its best fiscal year in reported history.

The main factor, of course, is Xbox Game Pass momentum and its proven impact on spending habits for ongoing subscribers. While executives refuse to share anything beyond the 25 million figure, I estimate it’s closer to 30 million by now. I’d wager it hasn’t breached that milestone. Because otherwise Microsoft would have said so!

There’s also the element of offerings like Xbox Cloud Gaming plus recent partnerships with companies like Epic Games and Samsung. Microsoft is benefiting from rounding out its ecosystem play and expanding how and where people play, which has a tangible effect on revenue growth even as individual title sales may slow.

“We’ve partnered with Epic Games to make Fortnite available for free via browser,” noted Nadella in an example of this strategy. “Over 4 million people have streamed the game to date, including over 1 million who were new to our ecosystem.”

Hardware is proving to be the more challenging business line for Xbox, declining 11% in the quarter to under $680 million. That’s the second lowest output in the past seven quarters, no doubt impacted by higher margins and continuously low availability of the premium Xbox Series X version.

Along the lines of its counterpart, the annual numbers are more reassuring. Microsoft generated $3.7 billion from Xbox console sales in fiscal 2022, which is up from $3.2 billion previously. That’s a gain of nearly 16%. This is mainly due to excellent performance during the initial stages of this fiscal year, meaning hardware has trailed off recently.

That’s not to say demand isn’t there. It’s mainly that Xbox is selling its lower-priced SKU, which doesn’t boost the top-line as much. Last quarter, I posited that lifetime unit sales of Xbox Series X|S could be between 14 million and 14.5 million. After this latest period, I’m estimating it at 16 million to 16.5 million.

It’s unfortunate we don’t know for sure, especially since Sony and Nintendo are more transparent.

The last numbers I’ll cover before wrapping up are for Microsoft as a whole. The firm generated $51.9 billion in revenue, up 12%. Operating profit reached $20.5 billion, or an increase of 8%. Quarterly sales from Microsoft Cloud moved past $25 billion for the first time ever, jumping 28% year-on-year.

Focusing on the More Personal Computing (MPC) business unit, it was responsible for $14.4 billion in sales. This means Xbox, at $3.45 billion, made up almost a quarter of the segment’s total.

These results are quite staggering as the company benefited greatly from hybrid working models and enterprise cloud usage. Still, quarterly revenue and earnings both missed analyst consensus estimates.

During the full fiscal year, Microsoft posted $198 billion in revenue and $83 billion in operating profit. It’s hard to even understand these numbers!

Now to look ahead, let’s focus on gaming within the broader company.

According to Chief Financial Officer (CFO) Amy Hood, here’s the rundown of guidance for the first quarter of fiscal year 2023, which runs from this July to September. Note this does not include any impact from the Activision Blizzard deal, which it still expects to close by June 2023.

Gaming revenue is forecasted to decline in the “low to mid single digits” driven by a drop in first party software. Content & Services has that same exact guidance. Though the management team does anticipate Xbox Game Pass subscriptions will grow again and thinks Hardware will rise as well, albeit didn’t provide any more specifics.

Let’s assume “low to mid single digits” means a dip of 3%, that should be a good barometer. This implies total quarterly revenue from Xbox of around $3.48 billion, or the second best Q1 on record. Then, for both Content & Services to decline and Hardware to increase, the former must decline 4% or more. Which would follow that Hardware can increase a percent or two and the math still works out.

Personally, I do expect a slight decline in total Xbox sales during the current quarter. There’s a handful of major 3rd party titles, including a new Madden game in August, and Xbox Game Pass will certainly have a few great additions. It’s just last year’s high was powerful, it remains a tough comparison. I’m not so sure about Hardware gains, that’s where I’m skeptical. I’m expecting flat to slightly negative contribution there unless something changes with the split of Xbox Series S to Xbox Series X.

On a bit longer of a timeline, where’s the growth other than the traditional means? There’s the clear upside of bringing Xbox Cloud Gaming to other television brands outside of Samsung. Then the substantiated plus rumors of the team developing a dongle-like device like a Google Chromecast or Amazon Fire TV Stick. And, of course, people calling for Xbox to make a handheld now that both Nintendo and Valve have active portable gaming devices.

“As announced last year, we’ve been working on a game-streaming device, codename Keystone, that could be connected to any TV or monitor without the need for a console,” a Microsoft spokesperson said to Windows Central, who first reported on the cloud stick’s development.

“We are constantly evaluating our efforts, reviewing our learnings, and ensuring we are bringing value to our customers. We have made the decision to pivot away from the current iteration of the Keystone device. We will take our learnings and refocus our efforts on a new approach that will allow us to deliver Xbox Cloud Gaming to more players around the world in the future.”

So, I’m a believer in the expansion of cloud and whatever this Project Keystone turns out to be. I don’t expect the dongle to hit market this fiscal year, so that will impact future time frames. And I really don’t think an Xbox handheld fits with its direction, for a multitude of reasons that I’ll probably write about at some point! What I do expect is for Xbox Game Studios to ramp up its output in 2023, featuring titles like Starfield and Redfall plus some surprises too.

That concludes Xbox’s results this quarter. I’ll be back soon with articles on other major gaming companies, and updates on social media throughout the coming weeks. Thanks for reading and be safe all!

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

Sources: Company Investor Relations Websites, Windows Central.

-Dom

Earnings Calendar Jul & Aug 2022: Gaming, Media & Tech Companies

DomsPlaying2 Comments

What’s the best way to cool off when global warming has you melting?

Well, it’s probably being in the shade, staying hydrated, sitting in front of a fan or pumping up that air conditioner.

Personally, I’d add checking out the latest calendar here because the latest earnings season is underway!

As long-time fans of the site know, every quarter companies gear up to report their latest results and host conference calls with analysts. It’s going to be an eventful one for gaming, media and technology as consumer spending habits are shifting lately in light of rampant inflation and higher interest rates.

I expect to see mixed results and significant headwinds, especially among those companies with focused revenue streams. The past couple years brought substantial growth in these spaces and it’s time for mean reversion to take over. Though a general movement towards subscriptions and ongoing content will soften the blow of weaker product sales and supply constraints.

Going forward, I’ll have some articles up the next couple weeks summarizing results for select companies in these sectors. For now, see the above image or the Google Sheets link below for a rundown of earnings dates for 100 companies. I’ve also quickly highlighted three companies to watch in this current environment.

Note that for international firms, days are displayed in local time zones based on investor relations announcements. Stay cool and be safe everyone!

Working Casual Earnings Calendar Jul & Aug 2022: Gaming, Media & Tech Companies

Apple Inc (AAPL): Thursday, July 28th

The world’s largest consumer electronics company is always a barometer for spending habits, and it reports third quarter fiscal 2022 results this week. This is a major moment to see how much inflation has affected buying and upgrading of Apple products, namely its flagship iPhone line. Analysts expect upwards of $82 billion in quarterly revenue, an increase from $81.4 billion, however earnings-per-share could decline from $1.30 to $1.16. Executives told the market last quarter to expect anywhere between a $4 billion to $8 billion hit on revenue due to supply challenges and China lock-downs. It still sounds like demand for its main products are keeping up, plus other areas like services will boost contributions. I’m usually upbeat that Apple will report better-than-expected profitability, and that’s no different this time around. Which would signal some resilience in consumer buying in what might already be a recession for certain economics, including the United States.

Unity Software Inc (U): Tuesday, August 9th

Gaming engine maker Unity reports fiscal 2022 second quarter results in early August, and has been in the news a lot lately. Not for the best reasons, I might add. It’s been very active in the merger and acquisition department for a while now. Last year alone, it purchased Parsec and Weta Digital. This year, Ziva Dynamics. Then its biggest deal is a controversial one in that it’s merging with digital app monetization company ironSource as announced two weeks back. This deal values ironSource, which has an infamous reputation for software with a history of being flagged as malware, at $4.4 billion. As part of the interview circuit alongside this deal announcement, CEO John Riccitiello had some choice words for developers making games without also considering how to monetize, calling them “f***ing idiots.” He has since apologized, of course, but the original sentiment expressed by the person who runs this company is likely to cause hesitation among those creators using Unity as a platform after the merger occurs. Not to mention, the company isn’t profitable right now so this is an important time from a financial standpoint as well.

NetEase Inc (NTES): Mid August

Mobile publisher and internet tech giant NetEase hasn’t reported a specific date yet, though it will announce 2nd quarter of fiscal 2022 release around the middle of next month. The massive Chinese is making key moves lately, notably expanding into the West by creating its first U.S. studio in Jackalope Games along with a development team called Jar of Sparks out of Seattle. It’s also partnered with the likes of Warner Bros, Microsoft and Blizzard on experiences targeting audiences around the globe. Battle royale slasher Naraka: Bladepoint launched in late June. And although it’s after the latest quarter’s close, it brought Blizzard’s Diablo Immortal mobile title to China just this week, a game that exceeded 20 million downloads before even entering this massive market. It’s also been operating locally in a more constrained environment for releases, though will benefit from the government’s easing restrictions. As some other companies saw declines, NetEase generated double-digit revenue and profit growth last quarter, driven by online game sales.

Sources: Company Investor Relations Websites.

-Dom

Elden Ring Retains Top Spot for Software as Total Spending Declines Again in June 2022 U.S. Games Industry Sales Report

DomsPlaying

The first half of 2022 is in the books, and the year’s best-selling premium game Elden Ring has repeated as the top software amidst another downward slide in consumer spending.

Based on today’s monthly sales report from tracking firm The NPD Group, FromSoftware’s masterpiece has led the premium ranks every month since launch in February except for one.

This sort of early success, even for the premium soulslike developer, is truly remarkable. Plus, it’s mostly unpredictable even for the most bullish of analysts. Including me!

Speaking generally on the industry, while June wasn’t as quiet as May, it’s still been a chill start to the summer. Overall spend dipped double-digits again in June, marking eight consecutive months of declines. Subscription growth couldn’t outpace headwinds from most other categories. The first half of 2022 was no different for total market spending, coming in 10% lower than last year.

Two of the major segments, Content and Accessories, also declined double-digits. Hardware performed the best from a percentage standpoint, even if still down. Better PlayStation 5 inventories and the lower cost Switch helped stabilize a bit. Perhaps even the Steam Deck?

As I’ve said in recent articles, these reversions to more normalized spending are expected this year as we exit quarantine highs and suffer from the worst inflation in decades. It’s eroding buying power, which hurts when combined with limited supply on the hardware front and fewer premium launches.

Within the broadest category of Content, mobile spending fell albeit at a slower pace than May. Earlier titles Elden Ring and Lego Star Wars: The Skywalker Saga led the premium charts, while Mario Strikers Battle League debuted in the Top 3. There were five new entries among the Top 20 best-selling games.

There was a flip in Hardware that’s actually quite noteworthy. PlayStation 5 took the reigns in June as the best-selling console by dollar sales. Not only that, it also led first half of 2022 by this metric, stealing it away from the Xbox Series X|S family which was in the lead until now. This indicates Sony secured enough production to satiate more demand, not to mention its premium price point boosting that monthly revenue figure.

Speaking of the first half, the biggest factors right now for domestic spending on games are mean reversion from earlier parts of the pandemic, rampant inflation, availability of hardware at retail plus minimal premium games. Subscriptions and ongoing content aren’t enough to push spending towards growth. It’s a cooling off period compared to recent history for this variety of reasons, as the broader economy signals a looming recession. In fact, we might already be there.

What about the numbers behind these trends? It’s time to look deeper into June’s report.

United States Games Industry Sales (May 29th, 2022 – July 2nd, 2022)

Overall sales in June across all gaming categories settled at $4.34 billion, or 11% behind the same month in 2021. This figure is off 10% when expanding to the first six months of 2022, aggregating to $26.27 billion against last year’s $29.29 billion.

Underlying the decrease was lower spending in all segments during both time frames, as displayed in the gallery above. Silver lining is June’s lack of growth wasn’t as bad as March or May, when it shrunk 15% and 19% respectively.

Spending on Content (i.e. software, subscriptions, mobile and related areas) in June saw a similar 11% reduction, to $3.79 billion. During the first six months of 2022, Content spend declined 10% to $23 billion. Which means it comprised 87% of the monthly total and 88% of 2022 to date.

The bright spot here of subscription growth was bolstered by Sony’s PlayStation Plus rebranding attracting users to sign-up or upgrade existing plans. It displays the importance of subscriptions like this and Xbox Game Pass in propping up lulls in mobile and other content offerings.

Last month, mobile decreased nearly 11% which actually improved from the 13% dip in May. Google Play is driving this sub-segment downward, while App Store spending actually rose slightly for the first time since back in February. Very slightly, at 0.16%. Hey, it’s still growth!

This contraction in mobile is backed up by a recent report from Sensor Tower, a tracking firm that collaborates with The NPD Group for these monthly data drops, that global spending on mobile is trending down 7% so far.

Premium title activity picked up in June with some new arrivals. Still, the highest positions were occupied by familiar faces.

Namely Elden Ring, which continues its phenomenal first few months. It topped June’s overall software list, meaning it’s led every month since release except for April. The Bandai Namco-published game continues as best-seller for both 2022 and the latest 12-month period. The legs on this game are ridiculous. It’s maiden them a lot of money!

After Lego Star Wars: The Skywalker Saga in second, we see the Switch in full effect. Mario Strikers Battle League kicked off its placing in 3rd during its initial month on sale, and led the Switch platform list. In fact, Nintendo published 4 of the Top 8 best-sellers on June’s combined list as recent titles like Nintendo Switch Sports and Kirby and the Forgotten Land stuck around. And might have been higher if Nintendo included digital sales.

A number of June releases settled outside the Top 10. F1 22, Fire Emblem Warriors: Three Hopes, Sonic Origins and The Quarry all started in this range.

Then there’s a couple legacy titles re-entering the Top 10 as Overwatch captured the 5th slot and Final Fantasy 7 Remake grabbed #9, impacted by sequel news for both franchises. These worked to push Call of Duty: Vanguard out of the Top 10, a rare sight for the series published by Activision Blizzard whose top executives fostered an environment of misconduct and harassment for years yet still haven’t been punished for it. (They probably never will.)

“In my opinion, it’s the lack of compelling new content that is holding back premium sales right now,” said The NPD Group’s Mat Piscatella on Twitter. “New games that reach market are doing very well, there are just fewer of them. We also had the PlayStation Plus relaunch in June, which gave a nice kick to overall subscription spend in the month.”

As for the 2022 overall chart, there was no movement within the Top 10. Elden Ring, Lego Star Wars: The Skywalker Saga and Pokémon Legends: Arceus continue as the year’s biggest commercial successes.

See below for a full rundown of June and 2022 software rankings.

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

  1. Elden Ring
  2. Lego Star Wars: The Skywalker Saga
  3. Mario Strikers Battle League*
  4. MLB The Show 22^
  5. Overwatch
  6. Mario Kart 8*
  7. Nintendo Switch Sports*
  8. Kirby and the Forgotten Land*
  9. Final Fantasy 7: Remake
  10. Minecraft
  11. Call of Duty: Vanguard
  12. F1 22
  13. Monster Hunter Rise
  14. Demon Slayer: Kimetsu no Yaiba: The Hinokami Chronicles
  15. Super Smash Bros. Ultimate*
  16. Fire Emblem Warriors: Three Hopes*
  17. Sonic Origins
  18. Pokémon Legends: Arceus*
  19. The Quarry*
  20. Marvel’s Spider-Man: Miles Morales

Top-Selling Games of 1st Half of 2022, U.S., All Platforms (Physical & Digital Dollar Sales):

  1. Elden Ring
  2. Lego Star Wars: The Skywalker Saga
  3. Pokémon Legends: Arceus*
  4. Horizon Forbidden West
  5. MLB The Show 22^
  6. Call of Duty: Vanguard
  7. Gran Turismo 7
  8. Kirby and the Forgotten Land*
  9. Mario Kart 8*
  10. Madden NFL 22
  11. Nintendo Switch Sports*
  12. Minecraft
  13. FIFA 22
  14. Marvel’s Spider-Man: Miles Morales
  15. Monster Hunter Rise
  16. Animal Crossing: New Horizons*
  17. Super Smash Bros. Ultimate*
  18. Mario Party Superstars*
  19. Call of Duty: Black Ops Cold War
  20. Dying Light 2: Stay Human*

As for the category with the best year-on-year performance in June, or should I say the least severe decline, Hardware moved down 8% to $371 million. That means first half of 2022 spending on consoles totaled $2.13 billion, or 9% lower than last year’s result of $2.36 billion.

We’ve talked supply to death, and that’s certainly the driver here in addition to some other points I mentioned earlier. There is some good news, in particular for Sony, in that inventories are popping up here and there on both manufacturer storefronts and retailer shops alike. Nintendo Switch availability looks consistent as well.

Sony’s increased production led to PlayStation 5 taking the lead on dollar sales in June as it benefited from a double-digit spending increase. While a month doesn’t make a trend, this sort of data point is positive in this environment. And we’ll certainly take what we can get these days. For the month, Nintendo Switch came in second place by revenue.

Increased availability bumped Sony’s current generation box to win the first half of 2022 by dollar sales. Microsoft’s Xbox Series X|S family, which was leading up until last month, is currently the runner-up.

When using unit sales as the benchmark, Nintendo Switch won June followed by PlayStation 5. Switch also leads units for the year to date, with Xbox Series X|S next up.

Got all that? Hah. I know it’s a lot to sort out when looking at hardware from these multiple angles. I wrote last month that the data points to PlayStation 5 and Xbox Series X|S being very close when using revenue as the indicator, which is supported by Sony taking home June and moving into pole position for 2022. I’d imagine the gap is quite minimal in the scheme of things, and can turn based on whose supplies are producing more because both of these have premium price points.

Switch is consistently competing on units, though generating less revenue than its counterparts which is the logical outcome. It, like PlayStation really, also relies on major first-party titles more because they aren’t available anywhere else. Much less so than Xbox Series X|S which continues Microsoft’s mission of subscriptions and services.

Pushing into Accessories, this felt the worst hit of lower discretionary income and normalizing of buying on the consumer side as it experienced the worst declines of the three major categories.

Spending here on game pads, headphones and similar peripherals lowered 15% in June to $176 million. It saw a 14% decline during the year’s first half, totaling just over $1 billion compared to $1.22 billion during 2021 H1.

After Sony’s DualShock 4 led at least a couple months, the current generation PlayStation 5 DualSense is back as the month’s top-seller. This time, it’s the Midnight Black iteration of the DualSense that took home first place.

Expanding further, Microsoft’s Xbox Elite Series 2 Wireless Controller continued as the best-selling accessory of 2022 currently. Which has been the case most of the year because of the higher relative cost per unit.

The domestic games industry bounced back a bit in June after a two-year spending low in May, showing occasional bright spots in areas like subscriptions, newer premium titles and a current hardware cycle that’s fighting the best it can against supply push-back.

Subscription spending is showing strength. Elden Ring can’t be stopped and five new games on the overall chart are propping up Content amidst softening areas like mobile. Even if the new games aren’t the biggest of commercial hits.

It does feel like the market is yearning for massive new AAA titles in this year of so many game delays, a sentiment echoed by Piscatella’s earlier comments. Game development is difficult in any environment, and teams are still adjusting to the new normal of hybrid working. Not to mention there are still coronavirus variants impacting many countries, plus people are contracting the virus for the second time. It’s a precarious situation, and I give developers credit for hanging in there right now.

Considering this, the calendar is now shaping up for the back half of 2022.

PlayStation seemingly locked in The Last of Us Part 1 remake for September plus God of War Ragnarök for its early November slot. Ubisoft’s collabo with Nintendo in Mario + Rabbids: Sparks of Hope is October, while the French publisher’s Skull and Bones is slated for November as well. Nintendo has Splatoon 3, Bayonetta 3 and Pokémon re-imaginings all before the holiday season. Gotham Knights, Saints Row reboot and, of course, the second Call of Duty: Modern Warfare 2 have been positioned later in the year for a while now.

Before then, July is going to continue as a mostly dry summer month on the premium side. F1 22 will have a full month of sales on record. Stray is an intriguing indie title from Annapurrrrrna Interactive (had to do it), also hitting PlayStation Plus simultaneously next week. As Dusk Falls is a narrative adventure and Xbox console exclusive. Baldur’s Gate: Dark Alliance 2 is out soon on all major platforms, while Live a Live finally reaches the States via Switch. The month’s biggest drop is probably Xenoblade Chronicles 3 also on Switch, though it will only have two days in the period.

With this light of a schedule, I’ll stand behind Elden Ring as July’s top earner again. I can see Xenoblade establishing a Top 5 finish.

Within the Hardware segment, I’m upbeat on PlayStation 5 after its June performance and seeing more stock via anecdotes and retailers online. I think it takes the first month of 2022’s back half on revenue, while Switch stays atop the console charts on units.

July also brings the start of my favorite time of the quarter: earnings season! Before we reconvene for the next monthly NPD sales report, I’ll have articles covering the earnings calendar and major company results.

In the meantime, shout out to Piscatella’s thread on Twitter covering today’s report. I hope everyone has a great rest of the month, feel free to send a comment here or on social media. Be safe and well!

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

Comparisons are year-over-year unless otherwise noted.

Sources: GameDaily.Biz, The NPD Group, Venson Chou (Image Credit).

-Dom

May 2022 U.S. Games Industry Spend Falls to Lowest Monthly Total in Over Two Years Based on Latest NPD Group Report

DomsPlaying

Even if seasonal gaming announcements are heating up lately with Summer Game Fest and the Xbox & Bethesda showcase, consumer spending here in the States is cooling off. Considerably.

That’s according to the latest monthly U.S. video game sales report from tracking firm The NPD Group. While this made sense based on where we are in post-lockdown times, supply challenges on the hardware side plus a low number of new software titles, the impact on May’s result was greater-than-expected.

Total spending declined almost 20% last month to $3.68 billion. That’s the lowest monthly amount since the early parts of the pandemic back in February 2020. All major categories of Video Game Content, Hardware and Accessories experienced drops, the first two by double-digits.

This marks seven consecutive months of sales declines.

Now almost at the halfway mark, 2022 is proving to be an off year for big budget spending on games. I predicted more game delays due to the knock-on effect of making them in a pandemic, and that’s having a significant impact on spending even when publishers have more ongoing or evergreen titles than ever.

There’s the reversion towards normalized spending down from quarantine highs, weakness in mobile, lacking inventories for consoles and a dearth of AAA games. Plus, I believe rampant domestic inflation is clearly impacting discretionary spending. When a gallon of gas here jumps above 5 bucks and the Consumer Price Index rises at its fastest pace in four decades, people tend to spend less on entertainment.

The largest segment of Content dipped 19% in May, weighed down by a lower mobile contribution and no blockbuster releases. Evil Dead: The Game was the only debut among the Top *50* best-selling titles, starting at an impressive fourth place on the overall chart. Compare this to even as recently as March when five of the Top 10 were new to market.

Within Hardware, a category that declined 11% in May, Nintendo Switch continued its consistency this time as the top-selling box by both dollars spent and units purchased. Nintendo’s hybrid console is 2022’s best-seller by units, though Xbox Series X|S is still in pole position when measured by revenue. Notably bolstered by its premium price and occasionally better availability as of late.

“We have a very light new release slate, we have a return to experiential spending, and we have higher pricing in everyday spending categories like fuel, groceries, and dining,” NPD Group’s Mat Piscatella said to GameDaily. “Each of these factors may be playing a role in the declines we’re seeing right now.”

Even on an off month, we dig into the numbers. Because it’s fun! Read on for more.

United States Games Industry Sales (May 1st, 2022 – May 28th, 2022)

Across the full domestic market of games, consumers spent that $3.68 billion in May overall or 19% lower than a year prior. This leads to a year-to-date figure of almost $22 billion, which is down 10% from the $24.4 billion during the first five months of 2021.

It’s important to keep in mind the annual chart above showing movement in recent years, displaying the trajectory compared to pandemic months. During early months, 2022 was trending above those except for last year’s historic highs. Now, it’s reverting back towards where it was in mid-2019. It’s proving to be a challenging second quarter, no doubt exacerbated by software delays out of this period and publishers still feeling the effect of remote working.

The largest category of Content covers mobile, software and various additional add-on purchases. It experienced the same 19% dip in May, falling to $3.33 billion from over $4.13 billion due to downward mobile pressure and softness in premium. It made up 91% of the total during both time frames.

Expanding to the current annual figure, Content has generated $19.3 billion in sales through May which is down 10% year-on-year from $21.45 billion.

Focusing on mobile first as the segment’s primary indicator, this is at least the third straight month of declines. Google Play revenue in particular is having a rough go, dipping 23% in May, while Apple’s App Store lowered less than 3%. At least the Top 10 sellers rose in contribution, adding 1% to the total. So there’s some silver lining in the current cloud of dreariness.

Elden Ring regained the top spot on the premium best-sellers list for May, boosted by topping Xbox and Steam platform charts, flipping spots with Lego Star Wars: The Skywalker Saga which moved to second place. This means FromSoftware’s Elden Ring has led each month since its launch except one. It’s still the best-selling title during both 2022 and the latest trailing 12-month period.

As I alluded to before, Evil Dead: The Game was the sole new title to chart, ranking fourth overall. It snatched up third place on both PlayStation and Xbox individual lists. Publisher Saber Interactive’s parent company Embracer Group said recently the title accumulated over 500K units sold during its first five days on market, echoing its early success here.

Otherwise, it’s admittedly somewhat of a snooze-fest amidst this pre-summer lull. Even without digital, Nintendo Switch Sports and Kirby and the Forgotten Land both moved up a couple spots to #3 and #6, respectively. There’s now three Call of Duty titles in the Top 20 as publisher Activision Blizzard tried to pump up interest by revealing trailers for second Modern Warfare 2. Keep in mind this is the publisher that Microsoft is acquiring and has a management team, led by a CEO in Bobby Kotick who still hasn’t lost his job, that fostered sexual harassment and mistreatment of marginalized groups for years.

Then there’s the games that just don’t quit. People are, somehow, still buying enough copies of Minecraft every month to keep it around the Top 10, this time holding ground at #11. And I assume in light of hype around Bethesda’s upcoming space odyssey Starfield maybe combined with discounting, folks are picking up The Elder Scrolls V: Skyrim enough to land it back in the Top 20 for the first time in almost five years.

Checking out the 2022 to date chart, it’s virtually the same as April. Elden Ring, Call of Duty: Vanguard plus Madden NFL 22 make up the Top 3. Lego Star Wars: The Skywalker Saga edges up into the Top 3, and of course Mario Kart 8 re-enters the Top 10.

Here’s a full look at the May and 2022 premium software lists.

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

  1. Elden Ring
  2. Lego Star Wars: The Skywalker Saga
  3. Nintendo Switch Sports*
  4. Evil Dead: The Game
  5. MLB: The Show 22^
  6. Kirby and the Forgotten Land*
  7. Call of Duty: Vanguard
  8. Mario Kart 8*
  9. Gran Turismo 7
  10. Pokémon Legends: Arceus*
  11. Minecraft
  12. Horizon Forbidden West
  13. Animal Crossing: New Horizons*
  14. Super Smash Bros. Ultimate*
  15. Call of Duty: Black Ops Cold War
  16. FIFA 22
  17. Mario Party Superstars*
  18. Pokémon Brilliant Diamond & Shining Pearl*
  19. Call of Duty: Modern Warfare 2019
  20. The Elder Scrolls V: Skyrim

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

  1. Elden Ring
  2. Lego Star Wars: The Skywalker Saga
  3. Pokémon Legends: Arceus*
  4. Horizon Forbidden West
  5. MLB The Show 22^
  6. Call of Duty: Vanguard
  7. Gran Turismo 7
  8. Kirby and the Forgotten Land*
  9. Mario Kart 8*
  10. Madden NFL 22
  11. FIFA 22
  12. Minecraft
  13. Nintendo Switch Sports*
  14. Marvel’s Spider-Man Miles Morales
  15. Monster Hunter Rise
  16. Dying Light 2: Stay Human*
  17. Animal Crossing: New Horizons*
  18. Mario Party Superstars*
  19. Super Smash Bros. Ultimate
  20. Call of Duty: Black Ops Cold War

Sales of Hardware moved in a similar direction as Content, though its drop wasn’t quite as severe. This category moved down 11% in May to $216 million. Which means annual sales to date are 9% lower than the same period last year, or $1.76 billion.

The story remains market inventory with current generation boxes, as manufacturers and their suppliers wrestle with higher costs and limited part availability. At this point in the cycle, even with a good comparable last year, spending should be stronger.

That said, Nintendo was able to maintain enough stock to lead May hardware results by both dollars and units. By my count, that’s three straight months now where it’s led by unit sales after April’s milestone of passing PlayStation 4 on the all-time best-sellers list in the States.

When taking the first five months of 2022 together, Nintendo Switch has the best result so far by units sold driven by a lower cost to buy on average. Xbox Series X|S is best by revenue, followed by Sony’s PlayStation 5. Which is an intriguing stat. The volume of Switch sales on the year hasn’t been enough to earn more than its peers. To me, that signals the Xbox and PlayStation families aren’t far behind on units. (We don’t know for sure as NPD Group doesn’t share more detailed figures publicly.)

In addition to the struggles of supply that have plagued the industry since at least late 2020, I’m curious if a lack of so-called “system-seller” titles is also contributing to hardware performance. This is traditionally a major reason for folks to upgrade to a new console like PlayStation 5 or Xbox Series X|S, when they can find them, so it certainly doesn’t help in a slower part of the cycle.

“The industry needs more new games!” said Piscatella. “And the pressures that we’re seeing from other areas of the market, such as higher prices on everyday spending categories, and having more entertainment options available for folks, sure seem likely to be having an impact.”

While it’s the smallest segment by dollars, Accessories didn’t drop as much as its counterparts did last month. Sales here totaled $131 million, down 7%. However, a weak early portion of the year means it’s still experiencing the worst performance of 2022 as spending is off 15% through May to $743 million.

Intriguingly, last generation’s PlayStation DualShock 4 Wireless Controller Black again leads the monthly Accessories group, same as April. If people can’t find a PlayStation 5, they are playing its predecessor which benefits sales of corresponding game pads.

Even so, Microsoft’s Xbox Elite Series 2 Wireless Controller retains its position as the top seller of 2022 right now. That premium price is paying off.

I wrote last month that I expected a quiet one in May. That it was, and then some, with the lowest output in quite a long time.

Taking its report as a whole, it was an off month at the big budget level for sure. This tends to happen when there’s limited retail inventory, mobile drag, minimal major game releases and significant inflationary pressure impacting buying power.

“The market had been trending under pandemic highs,” said Piscatella. “But May 2022 brought a bigger dip, at least partially driven by the very light new release slate in the month.”

There’s also something I’ve been saying for a while that I think is overlooked: there’s a longer tail from the impact of shifting to hybrid and remote working. And it will continue in the near term, for years to come. I don’t think anyone should be surprised by delays, dry spells and lower spending on games this year.

On this subject briefly, there are also development studios in and around Russia suffering from the country’s invasion of Ukraine. In an especially heartfelt video this week, STALKER 2 developer GSC Game World shared a harrowing diary on how its team was transplanted. There are even employees fighting on the war’s front lines or supporting relief efforts. It’s a difficult yet important reminder of how the geopolitical landscape affects our beloved industry.

Going forward towards June, the good news for Content is there’s a couple notable titles. Nintendo’s Mario Strikers Battle League and Fire Emblem Warriors: Three Hopes will both benefit from the Switch effect. Take-Two Interactive published The Quarry, a campy horror title that may be a cult favorite. There’s even something like Fall Guys hitting new platforms and Diablo Immortal on the mobile side, albeit with pretty rough users reviews with its questionable monetization model. Not to mention downloadable content for Cuphead, Monster Hunter Rise and Outriders among others.

The bad news is sales during June the past couple years has been abnormally high, so I still expect a retraction overall.

What about the winners for Content and Hardware? Well, Elden Ring has a legitimate chance of winning again because of its ridiculous legs. I’ll take a chance and say it’s the new entry from Mario Strikers.

Subsequently, betting on Nintendo Switch in hardware is probably the safest for June. If I can even describe it as “safe.” I’ll wager Xbox Series X|S continues as top dog by dollars for 2022.

Until then, I recommend reading Piscatella’s thread here for further details. Thanks for stopping by. Have a safe rest of the month!

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

Comparisons are year-over-year unless otherwise noted.

Sources: GameDaily.Biz, The NPD Group, Embracer Group.

-Dom

Lego Star Wars: The Skywalker Saga Leads U.S. Game Sales & Nintendo Switch Reaches New Milestone in April 2022 NPD Group Report

DomsPlaying

It feels like I just posted my March recap, and here’s April! Time flies when you’re having fun, or getting old.

Existential dread aside, this morning The NPD Group was back with its latest monthly games sales report documenting consumer trends in the United States. While folks are spending less on the games industry compared to last year, there’s still plenty of successes to highlight.

Total sales across Video Game Content, Hardware and Accessories categories dipped 8% during April, which means spending has lowered year-on-year for six consecutive months. This is also the second straight April month with lower sales after last year’s 2% decline. Hardware was the only category exhibiting growth, while Content and Accessories both experienced double-digit dips.

Within the largest category of Content, mobile saw worse-than-expected negative momentum mainly due to softness in Google Play activity. On the premium side, Lego Star Wars: The Skywalker Saga led the aggregate chart. It’s the first game to dethrone Elden Ring since February, which remained at the second spot just ahead of MLB The Show 22. As opposed to last month’s bevy of new games hitting the charts, April’s overall software list only featured two new entries.

Performance within the Hardware segment was split depending on the metric being used. Nintendo Switch topped April’s console sales when using units, a metric by which it’s also the year’s best-seller so far. Just like back in March. As a result of this consistency, Switch passed PlayStation 4 on the all-time best-selling home console list. It’s now in fourth place behind only PlayStation 2, Xbox 360 and Nintendo’s own Wii.

However when using dollar sales as the measure, PlayStation 5 took home the win in April. Sony was finally able to secure enough inventory to move up the ranks, though Xbox Series X|S is still 2022’s top-selling hardware by dollars right now.

“Despite a nice hardware bump, the market couldn’t get back to growth as content and accessories lagged,” said The NPD Group’s Mat Piscatella. “Perhaps we’ll see some benefit from that hardware lift next month. In any case, [the] market remains well above pre-pandemic baseline.”

Long-time readers know I like to maintain perspective when writing about monthly or even quarterly sales. Seeing a decline since prior year isn’t necessarily substantial news or a sky-is-falling scenario. The consecutive months on this negative trajectory are representative of a few things, then of course there’s those pockets of positivity for individual games and consoles.

First, quarantining bolstered sales substantially the past couple years. Easing restrictions and some semblance of normalcy means a certain level of reversion is expected. Then there’s retail supply, still hampered by a semiconductor shortage and manufacturing woes. Finally there’s the distressing and growing impact from inflation, which is painful for most folks and can hamstring discretionary purchasing decisions.

Keeping this context in mind, I’ll move into my complete analysis and a detailed rundown of April’s results.

United States Games Industry Sales (April 3rd, 2022 – April 30th, 2022)

As displayed in the above gallery, total consumer spending during April fell 8% to $4.34 billion. That means annual spend to date is also down 8%, to $18.26 billion.

I think the most telling graphic here is the line chart showing spending over time for each of the past four years. It gives clear context on pandemic impact and how the current level compares to earlier periods. For instance, until last month, each month of 2022 was trending above the corresponding one during these years except 2021. This past April’s spending is the lowest April has been in three years, but not by much.

The largest category of Content includes software, add-on, mobile and subscriptions. Spending here lowered 10% to $3.84 billion. That means it comprised more than 88% of April’s total.

The key driver within this part is mobile, which has been in a downward trajectory for months. Normally the report says when it exceeds $2 billion, and it didn’t this time. So I assume it’s below that threshold. Even so, select titles are showing strength which implies people are still playing, albeit spending at a lower clip. Candy Crush Saga, Roblox, Coin Master, Evony: The King’s Return and Royal Match were the top earners.

Moving into premium titles, the aforementioned Lego Star Wars: The Skywalker Saga led the rankings overall and every single individual platform chart as well. Including Nintendo Switch, as it was the first third-party title to top that chart since Monster Hunter Rise in March of last year. This performance across platforms led to the adventure title from Warner Bros. achieving the single best launch month dollar sales for any Lego game in tracked history. It’s immediately the second best-selling title of 2022 at present, behind only Elden Ring.

Speaking of Elden Ring, it was number two on the overall chart in April. Into its third month on market and it’s already achieved an astonishing accomplishment: The open-world soulslike has now outsold November 2021’s Call of Duty: Vanguard in the U.S., making Elden Ring the top-selling premium game of the last 12 months. This is virtually unheard of in the States, where Activision Blizzard’s military shooter perennially dominates sales charts. It’s a combination of relative weakness in Call of Duty lately and the stunning quality of FromSoftware’s latest masterpiece, which reached 13.4 million units globally in March according to publisher Bandai Namco. It’s even more by now, the true definition of a sales giant.

After an early access period led MLB The Show 22 to #4 in March, it advanced up to the third spot in April and moved up to 5th on the year’s best-sellers list after debuting outside the Top 10. While this performance isn’t as high as last year’s entry, which led its initial month, it’s still a quality showing. Intriguingly, it didn’t appear in the Top 10 on Xbox yet from an engagement standpoint, Xbox is its leading platform by player count. It’s a clear display of the Xbox Game Pass effect, as this year’s title was again available on the service at launch. It’s also worth noting this report doesn’t include digital sales from Xbox for this particular title, which of course impacts platform ranks.

The last new release on the overall chart was Nintendo Switch Sports, which really had only two days on sale during this time period. It still scored an impressive fifth place on the overall chart. Within the Nintendo list individually, it ranked third behind Lego Star Wars: The Skywalker Saga and Kirby and the Forgotten Land. It’s another title, like all of those published by Nintendo, that doesn’t account for digital downloads. May’s result will give a better indication, as I expect it to be quite successful.

That covers the new releases, and most other movement on the charts featured familiar names from the prior month. Kirby and the Forgotten Land is holding strong, as is Horizon Forbidden West. Then there’s Mario Kart 8 which will never, ever stop selling. Most of the year’s Top 10 is the same save for the entry of Lego Star Wars: The Skywalker Saga. Check below for a full look at April’s ranks plus 2022 so far.

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

  1. Lego Star Wars: The Skywalker Saga
  2. Elden Ring
  3. MLB The Show 22^
  4. Kirby and the Forgotten Land*
  5. Nintendo Switch Sports*
  6. Call of Duty: Vanguard
  7. Horizon Forbidden West
  8. Mario Kart 8*
  9. Gran Turismo 7
  10. Pokémon Legends: Arceus
  11. Minecraft
  12. FIFA 22
  13. Call of Duty: Black Ops Cold War
  14. Super Smash Bros. Ultimate*
  15. Marvel’s Spider-Man: Miles Morales
  16. Animal Crossing: New Horizons*
  17. WWE 2K22*
  18. Mario Party Superstars*
  19. Madden NFL 22
  20. Tiny Tina’s Wonderlands*

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

  1. Elden Ring
  2. Lego Star Wars: The Skywalker Saga
  3. Pokémon Legends: Arceus
  4. Horizon Forbidden West
  5. MLB The Show 22^
  6. Gran Turismo 7
  7. Call of Duty: Vanguard*
  8. Kirby and the Forgotten Land
  9. Madden NFL 22
  10. Mario Kart 8*
  11. FIFA 22
  12. Marvel’s Spider-Man: Miles Morales
  13. Minecraft
  14. Dying Light 2: Stay Human*
  15. Monster Hunter Rise
  16. Mario Party Superstars*
  17. Animal Crossing: New Horizons*
  18. Super Smash Bros. Ultimate*
  19. WWE 2K22*
  20. Call of Duty: Black Ops Cold War

Hardware was the main bright spot of April from a growth standpoint, boosting up 16% since last year to $343 million. Even so, it’s still down for the first four months of the year in aggregate. Sales of consoles year-to-date reached $1.54 billion, or 9% lower than the same period in 2021.

This April figure is somewhat reassuring, considering spending on this segment declined 30% this time last year. It indicates better availability, at least for certain platforms as The NPD Group called out PlayStation and Xbox increasing supply. This year has been a wild one for hardware; a different console has led each of the first three months. Demand is thriving, so consumers are buying whenever inventories pop up. Something like the Xbox Series S in particular is proving attractive because of its price point.

Still, it was actually the PlayStation 5 that showed up in April. Sony’s massive new console led last month on dollars generated as more stock hit shelves, a similar story as other regions including Europe based on data from local providers. Other than January, which was the last time PlayStation 5 topped the list, it’s been a somewhat dry year for Sony and its supply chain. As I wrote just this week, the company announced the platform passed 19.3 million units shipped globally and is now lagging its predecessor considerably.

Not to be overlooked, Nintendo Switch was April’s best seller by units. It’s the same for 2022 to date as Nintendo’s hybrid console continues to attract interest going into its sixth year on sale. In the States, lifetime Switch sales have now outpaced PlayStation 4 to become the fourth best-selling home console of all time. PlayStation 2, Xbox 360 and Nintendo Wii, in that order, are the only home platforms with more units sold domestically.

Xbox Series X|S rounds out this category as it secured second place during April by both dollar and unit sales. Similar to March, Microsoft’s family of devices is currently the year’s best seller by dollar sales. Microsoft has been most consistent on the production side, plus of course benefits from higher average revenue per unit for the premium Xbox Series X model.

I know that’s a lot to digest for hardware, since the report includes multiple metrics. Suffice to say there are at least minor indications of greater supply popping up, however it’s not yet a trend until it keeps happening. We still need to closely monitor the semiconductor shortage and input costs to see if it becomes an upward trend in overall supply movement, rather than one-off monthly spikes.

The third and final category of Accessories unfortunately didn’t track alongside hardware in April, instead showing some weakness compared to a year back. Monthly spending here fell 10% to $151 million. It’s currently the only segment in a double-digit decline for the year as a whole, moving down 15% to $743 million.

In a shocking upset, the PlayStation 4 DualShock 4 Wireless controller in black was April’s best-selling accessory. You read that correctly. That’s last generation’s PlayStation game pad leading a month in the second year of this current console cycle. Perhaps there were discounts leading to this upside? Though this report is mostly based on dollar sales, so there has to be some sort of advantageous average selling price for Sony in order for it to win.

I can’t remember the last time a PlayStation 4 game pad led the category.

Expanding a bit, the Xbox Elite Series 2 wireless controller, which has led all months except this past one, is still the best-selling accessory for the year right now. As it has all year, bolstered by its extravagant price tag.

Lately, it’s proving difficult for spending on games to keep pace with the highs of recent years. Especially early last year, which saw months of historic highs. Six months of monthly declines and we’re seeing this movement away from the ballooning amounts of spending during the pandemic due to restrictions of going out plus stimulus money at the time.

Softening is expected right now, even if it’s challenging to report on a downward trend. It’s just a matter of magnitude as spending normalizes, plus buyers face inflation pressure for essential goods which limits additional cash flow. There’s also the allure of spending on different types of entertainment as more people get out of the house in which they’ve been cooped for a while.

“We’ve also seen an extended run of months showing year-on-year declines,” Piscatella wrote. “[The] video game market is facing a return to experiential spending as well as higher prices in other areas of consumer spend. Tough combo. Will require the bigger games to really pull the market.”

On those AAA projects, the latest news cycle revealed how 2022 is shaping up to be another year of delays. Starfield. Redfall. Suicide Squad: Kill the Justice League. The next The Legend of Zelda mainline entry. Stalker 2: Heart of Chernobyl is on hold due to Russia’s invasion of Ukraine. And I’m not sold on God of War: Ragnarok hitting this calendar year, as I’ve said many a time on social media.

Focusing strictly on the potential for May’s monthly report, it’s a very light month for new software that isn’t a remake, re-release or indie launch. I’m expecting another month of spending declines, except perhaps for consoles. Evil Dead: The Game and Sniper Elite 5 are probably the highest profile releases on the calendar. I’m not sure the Top 10 will have any new entries, let alone the Top 5.

Which means it’s a major opportunity for carryover titles to promote new content or have events that keep players buying. This ties in with the subscription play, a staple in Microsoft’s suite of course and Sony’s strategy with its PlayStation Plus reworking starting in June. Games like MLB The Show 22 and Nintendo Switch Sports will have a lot more days on sale than last month. Lego Star Wars: The Skywalker Saga has a good chance at leading again, as does Elden Ring. I’m not the most upbeat on Call of Duty: Vanguard right now, but it will certainly secure a solid position.

My best guess is Elden Ring returns to number one. With the caveat that if Nintendo included digital, I’d probably bet on Nintendo Switch Sports.

As for Hardware, throw a dart at the wall and take a guess. Xbox Series X|S on dollars. Nintendo Switch again on units. Those are my dartboard guesses, at least.

Now that I’ve come to the end of this month’s coverage, I highly recommend perusing Piscatella’s Twitter thread for more details on platform rankings and additional commentary.

It’s been a supremely busy week for the games industry and business nerds. I’m both exhilarated and exhausted. I hope you enjoyed the articles, I plan to have more in the coming weeks. Thanks for reading. Until next time, be well!

*Digital Sales Not Included, ^Xbox Digital Sales Note Included

Comparisons are year-over-year unless otherwise noted.

Sources: Bandai Namco, The NPD Group, Warner Bros Interactive.

-Dom