Switch, Call of Duty & Mobile Boost U.S. Games Industry Spending to Record $60B in 2021

Anything going on lately in gaming?

Joking, of course. It’s been a busy time in what’s proving to be a most rambunctious year already for industry news. Last week Take-Two Interactive announced its $12.7 billion purchase of Zynga in what was, at the time, the biggest deal ever for gaming. Not to be outdone, Microsoft dropped a megaton this past week on how it’s going to pay a whopping $68.7 billion in cold hard cash to buy Activision Blizzard.

Oh. Consumers also spent a record amount of money on video games in the U.S. during 2021. No biggie!

While I’ll cover the Microsoft and Activision Blizzard news more in the future starting with the former’s earnings report next week, this here article is my recap of the final monthly report of 2021 from industry tracking firm The NPD Group.

And a standout report, it was. December’s over $7.5 billion in consumer spending on games during the holiday season resulted in an all-time annual high of $60 billion. Backing into the global share using recent data from Newzoo, the U.S. was almost exactly one-third of global games industry dollar spending.

Underlying this 8% domestic spending growth for the full year was consistency in mobile, subscription growth, hardware acceleration during this latest generation plus major software franchises at the top like Call of Duty, Madden NFL and the ever-present Pokémon.

As a quick reminder, there are three categories tracked broadly by The NPD Group: Content, Hardware and Accessories. Content as the largest includes game sales plus mobile spend, downloadable content (DLC), in-game transactions and subscriptions. Hardware measures console sales while Accessories comprises all the physical peripheral items. All three saw some level of growth during 2021.

The Content category rose 7% year-on-year and comprised over 85% of annual games industry sales. Like its trend globally, mobile had a significant impact as the report mentioned December was the best month ever for mobile spend. Content also benefited from two Call of Duty titles atop the yearly software chart, new sports game launches, various catalog releases in the top ranks and ongoing subscription momentum.

Hardware was the only mega category with double-digit gains in 2021, led by Nintendo Switch as its top seller and bolstered of course by PlayStation 5 and Xbox Series X|S production, the latter of which has edged up slightly for its Xbox Series S model during the holiday push. Demand is thriving, and supply is doing its best to catch up.

The smallest category of Accessories also saw the lowest annual growth at 2%, showing some resilience even as it’s harder to make both consoles and devices lately due to chip production limitations. Game pads from PlayStation and Xbox led the charge.

Briefly focused on the December month alone, overall spending fell ever so slightly at 1%. Content was essentially flat, Hardware moved 3% lower while Accessories took the biggest hit with nearly a double-digit dip. Premium game sales declined to the point where subscriptions and recurring revenue weren’t enough to offset during the month. Hardware was trying its best to match holiday demand, no doubt pressured by shortages.

“Hardware revenues in December across the three lead platforms [were] very close,” wrote The NPD Group’s Mat Piscatella on Twitter. “All are finding great success and strong demand. Switch [was] off its peak, but still leading.”

It’s a lot to take in between annual and monthly figures. No time like the present!

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United States Games Industry Sales (November 28th, 2021 – January 1st, 2022)

For December, total spend on the domestic games market hit that $7.54 billion figure which was a slight decline from the highs of last year’s $7.63 billion. Expanding to full-year 2021, the impressive record $60.4 billion level was 8% higher than 2020.

First, I’ll address the leading segment of Content spending. Content reached $5.73 billion, or 76% of the whole, the same dollar amount as December 2020. Across all twelve months of 2021, Content produced $51.7 billion compared to $48.1 billion prior year.

Mobile, subscriptions, micro-transactions and downloadable content bolstered the growth. While there are select brand new titles atop the charts, legacy titles from prior years remain and people are spending a lot for new stuff in their favorite older experiences.

The report prominently highlights mobile as a catalyst, increasing 14% for the full year after an excellent December for the sub-category. The best December ever, actually. It was also the 10th straight month where mobile eclipsed $2 billion in spending, which happened every month in 2021 except February. While the report doesn’t provide mobile game rankings, it cited Candy Crush Saga, Roblox, Coin Master, Garena Free Fire plus Pokémon Go among the year’s top earners.

Swapping over to results for more traditional software releases. Call of Duty: Vanguard topped December’s overall chart. That and 2020’s Call of Duty: Black Ops Cold War tag-teamed the year’s Top 2 spots, like last year with Black Ops Cold War and 2019’s Call of Duty: Modern Warfare. Activision Blizzard’s military multiplayer shooter series has now led annual software spending for 13 years in a row.

Looking back based on my research, the last time a non-Call of Duty title led the annual software chart was 2009 when Wii Play landed at number one. Note that back it was measured by unit sales as opposed to dollar revenue. At the time, all three best-sellers launched on Nintendo’s Wii console. Those were the days!

Microsoft’s Xbox exclusive Halo Infinite reached the second spot during its debut month of December, proving once again that Xbox Game Pass launches supplement premium sales as opposed to cannibalize them. It was the month’s best-selling title on both Xbox and PC platforms. There’s no word yet on player counts or engagement for Halo Infinite, and it’s difficult to compare directly to prior debuts because of its staggered roll out on the subscription service. Just for the sake of documenting it, Halo 5 Guardians led its launch month of October 2015 while Halo 4 on Xbox 360 started at #2 in November 2012. All very similar ranks.

Next up was Pokémon Brilliant Diamond & Shining Pearl, which captured the third spot for the second consecutive month after launching in November. Not only that, but it also ended the year as 2021’s fourth best-selling game. All of these without even considering its digital portion since Nintendo still doesn’t share it. Pokémon franchise retail software dollar revenue had its best year in over two decades, since 2000! Incredible.

During the latter part of the National Football League (NFL) season here in the States, Madden NFL 22 ranked fourth on the December chart and third for 2021. Electronic Arts’ football sim named for the late great John Madden (Rest in Peace) was the best-selling sports title of the year in the U.S. for a second straight year.

One major trend within the 2021 best-sellers was older games that many people kept on buying. Especially alongside new purchases of a Nintendo Switch console. There are several repeats from last year. Seven games among the Top 20 to be exact. Three of these in Mario Kart 8, Mortal Kombat 11 and Super Smash Bros. Ultimate also charted during 2019. Talk about evergreen, as in ever making a lot of green for publishers.

Check below for full lists for December and 2021 plus more commentary on the additional categories.

Top-Selling Games of December 2021, U.S., All Platforms (Physical & Digital Dollar Sales):

1. Call of Duty: Vanguard
2. Halo Infinite
3. Pokémon Brilliant Diamond & Shining Pearl*
4. Madden NFL 22
5. Battlefield 2042
6. Mario Kart 8*
7. Marvel’s Spider-Man Miles Morales
8. Mario Party Superstars*
9. NBA 2K22*
10. Animal Crossing: New Horizons*
11. FIFA 22
12. Super Smash Bros. Ultimate*
13. Minecraft
14. Far Cry 6
15. Just Dance 2022
16. Forza Horizon 5
17. Marvel’s Guardians of the Galaxy
18. Ghost of Tsushima
19. Super Mario 3D World + Bowser’s Fury*
20. The Legend of Zelda: Breath of the Wild*

Top-Selling Games of 2021, U.S., All Platforms (Physical & Digital Dollar Sales):

1. Call of Duty: Vanguard
2. Call of Duty: Black Ops Cold War
3. Madden NFL 22
4. Pokémon Brilliant Diamond & Shining Pearl*
5. Battlefield 2042
6. Marvel’s Spider-Man Miles Morales
7. Mario Kart 8*
8. Resident Evil Village
9. MLB The Show 21^
10. Super Mario 3D World + Bowser’s Fury*
11. Far Cry 6
12. FIFA 22
13. Minecraft
14. Animal Crossing: New Horizons*
15. NBA 2K22*
16. Assassin’s Creed Valhalla
17. Super Smash Bros. Ultimate*
18. Back 4 Blood
19. Mortal Kombat 11
20. Forza Horizon 5

As seen in my many monthly report recaps including those starting around the holiday season, Hardware movement is the story as that new generation cycle continues. While December was a down month, 2021 more broadly saw a double-digit boost for console revenue.

Strictly speaking on December, Hardware dollar sales lowered 3% to $1.32 billion. Spending on consoles pushed past $6 billion for full year 2021, rising 14% and exhibiting the best growth across all three major categories.

Fitting the trend of recent years, Nintendo Switch topped December console sales when measured by units sold. As it’s done for 36 of the last 37 months on record, with September 2021 being the only time over that period when it lost to Sony’s PlayStation 5.

Speaking of PlayStation and looking at dollar sales instead during the holiday month, The NPD Group said Switch effectively tied with PlayStation 5. Which makes sense given the latter’s more premium price point and lower unit volume.

“Hardware revenues in December across the three lead platforms [were] very close,” Piscatella wrote. “All [are] finding great success and strong demand. Switch off its peak, but still leading.”

As I had predicted what feels like many years ago back in January 2021, Switch ended the year as the best-selling console domestically by both unit sales and dollar sales. The resilience is spectacular as Nintendo uses the multiple model approach to attract new buyers and entice existing owners to snatch up another hybrid console for their household. That’s one of the company’s ultimate goals: Multiple Switches in a single home. And it’s working.

There wasn’t much color around PlayStation 5 and Xbox Series X|S on an annual basis. Based on monthly trajectory and broader dynamics, I assume PlayStation 5 was second place and Xbox platforms took third. Right now, it’s solely dependent on who can produce more boxes.

Though the gap isn’t as wide as last generation. Global shipments for PlayStation 5 totaled 13.4 million at Sony’s last earnings call. Xbox’s recently-promoted CEO of Microsoft Gaming Phil Spencer told The New York Times that Xbox Series X|S is the fastest-selling Xbox ever, which prompted trusted friend and Niko Partners Senior Analyst Daniel Ahmad to estimate 12 million units shipped worldwide. Console competition is healthy!

For our final category of Accessories which includes things like controllers and headsets etc, a weaker December wasn’t enough to offset earlier year gains.

December monthly spending reached $493 million, which was 9%$ lower than $540 million generated this time last year. However, the segment gained 2% to $2.65 billion when looking at the year overall compared to the $2.61 billion of 2020. While the annual rise wasn’t as pronounced as its counterparts of Content and Hardware, it certainly benefited from that growth as buyers grabbed additional items to use with their new consoles.

Microsoft’s fancy Xbox Elite Series 2 wireless controller was the best-selling accessory in December, seemingly a hot holiday gift item for core gamers. On the year, Sony’s PlayStation DualSense white game pad was the strongest seller no doubt bolstered by that hardware expansion.

One area I don’t often cover in these reaction articles is virtual and augmented reality (VR/AR). Sales of this hardware sub-category and related accessories more than doubled in the time between Thanksgiving (November 21st) and Christmas (December 25th). That’s based on both units and dollars, which rose 180% and 153% respectively.

2021 sales for VR/AR products in the U.S. moved up 163% in unit sales and 137% on revenue generated. Piscatella noted specifically how Meta’s Oculus Quest had a “big” month to close out 2021.

So. That’s the scoop on U.S. games industry spending in the year that was 2021. Even if the holiday period softened year-on-year, even with supply constraints on hardware, even given several delays for software, earlier months picked up the slack to achieve that record spending amount. Demand was way high. Spending reflected that.

Mobile, subscriptions, Call of Duty and Nintendo Switch told the story domestically last year as services grew in popularity and people kept spending on entertainment’s most lucrative segment that is gaming.

If the current slate of premium releases holds and hardware expectations continue, 2022 is going to be a tricky one with major upside especially for mobile, subscription revenue and ongoing sales. Flagship titles from PlayStation and Nintendo plus Microsoft’s non-stop investment moves alongside other huge publishers like Tencent expanding globally, I’m seeing a lot of potential for premium game spending. It’s hardware supply that will continue to be a major question mark.

“The pool will continue to grow as the industry offers more options in what to play, where to play and even the ways in which to engage, Piscatella said. “Getting to growth is no small feat after 2020, [the] future remains incredibly bright for the market.”

I’m very much looking forward to more monthly recaps in 2022. In the meantime, please check out my predictions piece to read more about the future of gaming and what trends we’ll see in these spending reports in the next twelve months.

Be safe and well, all!

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

Comparisons are year-over-year unless otherwise noted.

Sources: Daniel Ahmad, Getty Images (Photo Credit), The NPD Group, Sony Corp.

-Dom