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

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

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

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

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

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

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

Dom’s Top 10 Games of the Year 2023

10. Remnant 2 (Gunfire Games, Gearbox Publishing)

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

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

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

Platforms: Xbox Series X|S, PC.

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

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

Platforms: PlayStation 5.

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

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

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

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

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

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

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

5. Dave the Diver (Mintrocket, Nexon)

Platforms: Nintendo Switch, PC, Mac.

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

4. Super Mario Bros. Wonder (Nintendo)

Platforms: Nintendo Switch.

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

3. Cocoon (Geometric Interactive, Annapurna Interactive)

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

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

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

Platforms: Nintendo Switch.

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

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

  1. Baldur’s Gate 3 (Larian Studios)

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

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

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

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

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

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

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

Honorable Mentions (Alphabetical):

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

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

Chants of Sennaar (Rundisc, Focus Entertainment)

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

Dredge (Black Salt Games, Team17)

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

Tchia (Awaceb, Kepler Interactive)

Platforms: PlayStation 5, PlayStation 4, PC.

Thirsty Suitors (Outerloop Games, Annapurna Interactive)

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

Sources: Company Media Websites.

-Dom

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

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

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

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

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

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

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

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

On to the winners, in alphabetical order!

Awaceb (Canada)

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

Black Salt Games (New Zealand)

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

Enhance Games (United States)

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

Geometric Interactive (Denmark)

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

Kinmoku (Germany)

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

Mojiken Studio (Indonesia)

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

Outerloop Games (United States)

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

Rundisc (France)

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

Sabotage Studio (Canada)

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

Sad Owl Studios (Scotland)

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

Tour de Pizza (United States)

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

Visai Games (Canada)

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

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

-Dom

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

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

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

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

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

Here’s the full list, in alphabetical order!

Capcom (Japan)

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

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

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

Insomniac Games (United States)

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

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

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

Larian Studios (Belgium)

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

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

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

Nintendo (Japan)

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

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

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

Remedy Entertainment (Finland)

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

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

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

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

-Dom

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

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

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

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

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

Labor Market, Layoffs, Strikes & Return to Office

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

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

Consolidation Continues as Activision Blizzard Joins Microsoft

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

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

Coming Out Party for So-Called Artificial Intelligence

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

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

Rising Streaming Costs & Media Subscription Changes

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

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

Companies & Governments Battle in Court

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

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

Best Year (Maybe) Ever for Game Releases

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

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

Bonus: Embarrassing & Epic Embracer Group Fail

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

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

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

-Dom

2023 Year-in-Review Megapost is Here

That’s all she, and I, wrote. Well, almost. Because 2023 is nearly done.

Which can only mean one thing: It’s time for my prestigious, anticipated, incredible Year-in-Review!

This marks the seventh (!) installment of my annual wrap-up series, where I recap the biggest, best and often bittersweet topics across gaming, technology and media from the last 12 months.

Broadly, across four different categories, I’ll be highlighting a number of topics impacting these industries. From layoffs to labor. Consolidation to unionization. Return to office to hybrid workflows. Artificial intelligence to large language models. Information breaches to antitrust suits. Megalomaniac leaders and Twitter to China and Tik-Tok. Barbenheimer to Mario Bros. Fantastic games to hardware supply.

Scroll below for a rundown of the specific articles you’ll have to look forward to during this year-end time, which runs the gamut from celebration to lamentation. I’ll add links as the posts go up.

Biggest Trends in Gaming, Tech & Media

Five Most Impressive Gaming Companies & The People Who Defined Them

Independent Game Studios of the Year

Dom’s Top 10 Games of the Year

I know I’m partial; I highly recommend bookmarking this post. That makes it super easy to check back often for full coverage of my 2023 Year-in-Review wrap-up!

Thanks so much for visiting and making it a great year here at the site and on social media. Happy Holidays to you and yours. Be safe and well!

-Dom

U.S. Games Industry Sales Decline in November 2023 Circana Report Despite New Best-Selling Call of Duty

The year is nearly done. Which means the States are getting chillier, Baldur’s Gate 3 won The Game Awards and this will be the last monthly sales report recap that I’ll write before the calendar turns to January.

Before you know it, I’ll be posting my annual Year-in-Review series. There, I’ll talk about how it’s been an amazing year for game releases yet a very difficult one for working in games. Here, I’m sending all my best to the thousands impacted by layoffs this year and my heartfelt thanks for their work and dedication to their craft.

In terms of the U.S. industry itself, tracking firm Circana recently released its November spending report. It turned out to be a down month as sales declined 7% to $5.87 billion, a lower-than-expected result during the coveted Black Friday month partly due to the console category dropping more than 20%.

This is the second month in a row of spending declines, as October showed a similar dynamic.

The two largest segments, Content and Hardware, both saw lower spending than November last year. Only Accessories experienced growth, and a modest amount at that. Not even ample supply, the PlayStation Portal launch or a brand new Call of Duty could propel towards broader gains last month.

The latest installment Call of Duty: Modern Warfare 3 secured the top spot on the premium software chart during November. This means Activision Blizzard’s military shooter franchise has led its launch month for a staggering 16 years straight. Even so, signs point to a weaker start than its predecessor, and there’s a chance the series will be dethroned in the final 2023 rankings.

“It’s not to say that Modern Warfare 3 is doing poorly (it is already the 2nd best-selling game of 2023 after all),” Circana’s Mat Piscatella told IGN. “But no it is not currently meeting what Modern Warfare 2 did a year ago.”

On the console front, Sony’s PlayStation 5 continued its monthly dominance as it outsold all competitors measured by dollars and units. Similar to its performance in every month this year except for May, when Nintendo Switch led due to a new Zelda, well on its way to securing a win for the full 12 months.

Overall spending across the industry in 2023 still remains ever-so-slightly positive. Earlier monthly gains due to Hogwarts Legacy and The Legend of Zelda: Tears of the Kingdom plus a steady mobile resurgence are carrying weight. It all comes down to December, as this month’s performance will dictate where the year ends up.

Scroll down for a full recap of the figures and my final set of predictions this year.

United States Games Industry Sales (October 29th, 2023 to November 25th, 2023)

Total money spent across all of gaming in November was $5.87 billion, or 7% lower than a year back. The downward movement was attributed to a lack of flagship system launches for both PlayStation and Nintendo, which November 2022 had in God of War Ragnarök, Pokémon Scarlet and Pokémon Violet, alongside generally weaker demand in the console space.

After accounting for this latest result, sales for 2023 are currently trending upwards by 1% to $49.28 billion.

The primary contributing segment of Content dipped 3% in November to $4.6 billion, thus making up 78% of the whole. Compare that to last year’s 75% slice.

“An 11% decline in Console & Portable Content spending was partially offset by 3% growth across each of the Mobile, Subscription, and PC, Cloud & Non-Console VR Content segments,” Piscatella noted.

Mobile is now showing consistent growth, even if it’s in the single digits, a solid reversal of where it was earlier in the year. MONOPOLY GO! repeated as the top monthly earner, followed by Royal Match, Roblox, Candy Crush Saga and Coin Master.

The release slate in premium software has slowed leading into year-end, though there were still four new titles among the Top 20, with two of them among the Top 7.

Call of Duty: Modern Warfare 3 started in that top spot, as it often does. This marks five straight Novembers led by a Call of Duty game, dating back to 2019. After Call of Duty: Black Ops 4 and Red Dead Redemption 2 launched in October 2018, a month won by the former, the latter went on to take November 2018.

October’s leader Marvel’s Spider-Man 2 came in second during its second month, while Hogwarts Legacy bounced back into the Top 3 due to its Nintendo Switch launch as Warner Bros. title in the Harry Potter universe was the second top-selling title on that platform.

Nintendo’s Super Mario Bros. Wonder retained a high position at #5, while the publisher’s newest release Super Mario RPG Remake debuted in 7th. Bandai Namco’s Naruto x Boruto: Ultimate Ninja Storm Connections landed at #12, while Star Ocean: The Second Story R from Square Enix launched at #17.

With respect to Monthly Active Users (MAUs), Fortnite moved up to the most played position on both PlayStation and Xbox ecosystems, surpassing the Call of Duty HQ launcher, while Valve’s Counter-Strike 2 secured Steam’s top engagement. Lethal Company from indie team Zeekerss was the big mover on PC, jumping from 115th in October to 2nd in November.

In terms of the annual list approaching the end of 2023, Hogwarts Legacy is still leading, just above the newly-launched Call of Duty: Modern Warfare 3 at 2nd with less than a month of tracked sales. There are now two Call of Duty titles among the annual ranks, with 2022’s Modern Warfare 2 is #7. The Legend of Zelda: Tears of the Kingdom dropped to 3rd. The biggest mover was Super Mario Bros. Wonder, moving into 15th place after starting October outside the Top 20.

See below for the full list of November top sellers and full-year with only a month to go!

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

  1. Call of Duty: Modern Warfare 3
  2. Marvel’s Spider-Man 2
  3. Hogwarts Legacy
  4. Madden NFL 24
  5. Super Mario Bros. Wonder*
  6. EA Sports FC 24
  7. Super Mario RPG Remake*
  8. Mortal Kombat 1
  9. NBA 2K24*
  10. UFC 5
  11. Assassin’s Creed Mirage
  12. Naruto X Boruto: Ultimate Ninja Storm Connections
  13. Sonic Superstars
  14. Star Wars Jedi Survivor
  15. God of War Ragnarök
  16. NHL 24
  17. Star Ocean: The Second Story R
  18. Marvel’s Spider-Man: Miles Morales
  19. Minecraft
  20. Just Dance 2024

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

  1. Hogwarts Legacy
  2. Call of Duty: Modern Warfare 3
  3. The Legend of Zelda: Tears of the Kingdom*
  4. Marvel’s Spider-Man 2
  5. Madden NFL 24
  6. Diablo IV
  7. Call of Duty: Modern Warfare 2
  8. Star Wars Jedi Survivor
  9. Mortal Kombat 1
  10. Starfield
  11. Resident Evil 4 Remake
  12. EA Sports FC 24
  13. MLB The Show 23^
  14. Dead Island 2
  15. Super Mario Bros. Wonder
  16. Final Fantasy XVI
  17. Street Fighter 6
  18. FIFA 23
  19. Elden Ring
  20. Remnant II

Hardware ended up being the most surprising part of the whole report, moving down 24% to $964 million, as opposed to over $1.27 billion in November 2022.

This means the segment has now turned negative for 2023, currently down 1% to $4.99 billion.

Declines certainly weren’t isolated to a single platform. Revenue for PlayStation 5, Xbox Series X|S and Nintendo Switch all dropped double-digits last month, with the Nintendo Switch experiencing the most precipitous drop. On units, while Xbox Series X moved up against last November, Xbox Series S sales were lower, thus dragging down that device family.

This result undoubtedly missed my expectations, which weren’t even that upbeat after October. Rather than supply, this is squarely on the demand side as people have already been purchasing the latest generation of devices and weren’t enticed by slight discounting or bundles. Also, buyers didn’t see a must-have exclusive on any platform last month, something that usually drives interest.

“Instead of seeing huge growth because we were comparing to a supply constrained market (like we saw last year), we’re seeing the reverse now,” Piscatella explained. “Where we are comparing to a period of elevated supply and existing demand getting satiated. This comp issue is going to be a challenge in December as well and will finally start settling out in January.”

Sony’s PlayStation 5 again led November, with the most units sold and dollars generated. Xbox Series X|S was the runner-up, while Nintendo Switch slotted in third.

Then there’s a newcomer in PlayStation Portal, a cloud peripheral oddly classified as hardware rather than an accessory even though it requires a console to even function. Well, it debuted in fourth place. Its output wasn’t helped by PlayStation shipping a low supply as anecdotally it’s been selling out at every retailer when there is stock available.

Across all of 2023, PlayStation 5 remains first for the year by units and dollars. Nintendo Switch is currently trending in second place by both as well.

Speaking of Nintendo Switch, Circana shared a quick tidbit. And we love tidbits! It passed the lifetime unit sales of Xbox 360 during November. It’s now behind only Nintendo DS and PlayStation 2 on the all-time domestic list.

Our final segment of Accessories is up next, and it’s the only one that showed growth. Sales here were up 3% to $303 million. Circana shouted out game pads in particular, which moved up 8%.

Intriguingly, this happened without the inclusion of the aforementioned PlayStation Portal. Which means it’s due to mostly existing peripherals and controllers. I’d imagine that instead of putting cash towards consoles, people in the U.S. were more interested in scooping up various accessories for the devices they or their families and friends already own.

Accessory sales are looking up 1% to $2.05 billion if expanding to the full year at present.

November’s best-selling device was Sony’s PlayStation 5 DualSense in midnight black, repeating its win from October.

I assume the PlayStation 5 DualSense Edge game pad remains the year’s top seller, although the report wasn’t specific in this regard. I’ll update this piece if I receive confirmation of this point.

While November was more lackluster than I expected, especially for console sales, spending declines were partly because of a high comparable last year and a softer Call of Duty start compared to its popular predecessor.

After back-to-back negative reports in October and November, there’s a whole lot of pressure on December to secure a fourth quarter to end 2023 on a high note. Personally, I’m not quite sure it’s going to get there, as I’ll now move into a quick set of predictions.

First, December. The big holiday month is upon us. While there’s plenty of enticing games to purchase in a year of incredible releases, I’m thinking overall monthly spend will be effectively flat, driven by a lack of new releases and continued downward pressure in hardware demand.

I think mobile will keep its solid momentum in Content, while a number of familiar faces will appear on the premium sellers list. Ubisoft’s Avatar: Frontiers of Pandora is the only AAA launch this month. I think it will have a Top 7 start, even during the busy holiday blast. Expect Call of Duty: Modern Warfare 3 to repeat as the top seller.

Within Hardware, I’m leaning towards a single-digit revenue decline in December. Microsoft announced a substantial price cut for the Xbox Series X yesterday, dropping it by a hundred bucks for a limited time. Even considering that, I believe PlayStation 5 tops December with Xbox Series X|S next up.

Now, what about the year as a whole? Circana and Piscatella are now weary of their original 3% growth prediction for 2023. Personally, I think a flat December will bring the year to effectively even, with slight upside towards 1% growth. Essentially, due to a declining fourth quarter, consumers will spend about the same amount as 2022.

Hardware is an easy call, as PlayStation 5 will undoubtedly sweep 2023.

The big question is for Content: Will it be the first time since 2008 that a Call of Duty or Rockstar Games title like Grand Theft Auto or Red Dead Redemption doesn’t win?

It’s a distinct possibility, especially with a shaky start for Modern Warfare 3. I’m usually stubborn. This time, similar to my The Game Awards prediction of Baldur’s Gate 3 winning (which happened), I’m updating my expectation. I now think Hogwarts Legacy will be the year’s best premium seller, breaking Activision Blizzard and Rockstar Games streak in a shocking upset.

Thanks for checking out this big recap. I recommend reading through Piscatella’s Twitter thread which has more details on Circana’s latest monthly report.

Check back soon for my annual Year-in-Review series. Happy Holidays to all!

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

*Digital Sales Not Included

^Xbox & Nintendo Digital Sales Not Included

Sources: Circana, IGN.

-Dom

Spider-Man & Mario Highlight a Down Month for U.S. Games Industry Sales in October 2023 Circana Report

Here I am with another domestic sales recap, beginning the final quarter of results for 2023!

October’s numbers are in from industry tracking firm Circana, who revealed the winners of last month’s big battle for supremacy during the year’s busiest time for new game releases.

Despite all the premium software launches, total spending across the U.S. declined 5% in October to just over $4 billion. All of the three major segments of Content, Hardware and Accessories saw lower sales, with Hardware suffering the worst loss over 20%.

That said, 2023’s annual spend remains trending upwards as each category is pointing towards growth rates in the single digits.

The main reason behind October having lower spending, which I apologize for not pointing out last month, was Call of Duty launched last October while this year’s title didn’t hit until November. This led to a strong October 2022, and a difficult comparison against which last month had to contend.

“Growth in physical console software and mobile spending was offset by declines in other areas,” said Circana’s Mat Piscatella. “Particularly digital premium downloads driven by the release date shift of Call of Duty.”

There were still plenty of success stories. October had nine new titles among the Top 20 premium best sellers list, six of which settled within the Top 10. All of them within existing franchises, mind you, as is often the case in a world of brands and sequels.

The biggest among them being Marvel’s Spider-Man 2 which swung a victory as the month’s top earning game, experiencing a notable boost from leading on physical sales in particular. Congrats to everyone who participated in my poll and voted for Sony’s latest blockbuster hit!

It follows that Super Mario Bros. Wonder came in second place, with the usual caveat that Nintendo doesn’t share digital sales here for its published titles.

Supported by the system-seller that is a new Spider-Man game, Sony’s PlayStation 5 again led the Hardware segment. As it has most months this year except for May, trending towards winning 2023 overall in a fully-supplied environment.

Scroll down to get right into October’s data and lists, then my predictions for November.

United States Games Industry Sales (October 1st to October 28th, 2023)

Overall, consumers spent $4.04 billion across gaming in the U.S. during October, or 5% less than last year’s $4.27 billion. This lack of growth, despite all the great starts for software and healthy console dynamics, displays the power of Call of Duty: Modern Warfare 2 launching in last year’s corresponding period. It’s truly a rising tide that lifts all boats.

This latest sales number means 2023 is now tracking up 2%, towards $43.42 billion.

As the largest contributing segment, Video Game Content moved down 4% in October to $3.56 billion. It made up 88% of spending, compared to 86% a year back. Circana attributed it partially to lower downloaded games, even as physical console and mobile gained.

The Content category, which includes software, add-ons and subscriptions, is trending up 1% year-to-date to $37.64 billion.

Mobile was one of the bright spots, a trend we haven’t seen much in 2023. Spending in this area rose 2%, with the report highlighting a consistency among the top games and a notable jump for Clash of Clans back into the Top 10. October’s biggest mobile earners were, in order: MONOPOLY GO!, Royal Match, Roblox, Candy Crush Saga and Pokémon GO.

A variety of new launches bolstered premium software, more than I can remember compared to any month this year.

Marvel’s Spider-Man 2 web-launched above all others during its impressive debut, with launch month sales This year’s Insomniac Games’ open world comic adventure is already the 4th top seller of 2023 even with less than a month of tracking, a monumental win for Sony’s first party that benefited from huge physical sales and a higher price point.

Here’s where Super Mario Bros. Wonder slotted, in 2nd on the overall list and the leader of Nintendo Switch as a platform. It just missed the Top 20 for 2023 to date, at numero 21. Being the first 2D Mario title in over a decade, it’s hard to make legit comparisons for the domestic charts. So I’ll use Switch titles instead. Both Super Mario Odyssey and New Super Mario Bros. U Deluxe reached third during their respective debuts.

Rounding out the Top 3 was Assassin’s Creed Mirage, which continued as a quiet seller echoing recent announcements from Ubisoft on its successful start. Even as a more focused, lower-priced title than its recent predecessors. It began one spot below Assassin’s Creed Valhalla, which debuted in 2nd during November 2020, and the same position as Assassin’s Creed Odyssey in 2018.

Next up for new titles were two annual sports releases in UFC 5 and NHL 24 scoring 7th and 8th, respectively. This means Electronic Arts published four of the Top 8 titles, echoing its live service and ongoing game narrative.

Sega’s Sonic Superstars landed next at #9. For comparison, Sonic Frontiers sped to 4th last November. Beyond the Top 10, Metal Gear Solid: Master Collection Vol. 1 from Konami reached #12, Xbox’s Forza Motorsport reboot finished in 17th and CI Games’ Lords of the Fallen snuck on the list at #20.

You may notice one critical darling that’s missing from October. As I anticipated, Alan Wake 2 didn’t chart. The reasoning is pretty clear. Remedy Entertainment’s latest didn’t have a retail release and publisher Epic Games does not share digital sales. Meaning none of its sales were even counted in this context, thus it’s not comparable to more traditional software starts.

Moving briefly to the annual list right now, the Top 3 remained constant: Hogwarts Legacy, The Legend of Zelda: Tears of the Kingdom and Madden NFL 24. Then there’s the only new entry in Marvel’s Spider-Man 2, knocking Mario Kart 8 out of the Top 20 for the first time all year.

Check below for October’s aggregate premium rankings and 2023 so far.

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

  1. Marvel’s Spider-Man 2
  2. Super Mario Bros. Wonder*
  3. Assassin’s Creed Mirage
  4. Madden NFL 24
  5. EA Sports FC 24
  6. Mortal Kombat 1
  7. UFC 5
  8. NHL 24
  9. Sonic Superstars
  10. Hogwarts Legacy
  11. Call of Duty: Modern Warfare 2
  12. Metal Gear Solid: Master Collection Vol. 1
  13. NBA 2K24*
  14. Starfield
  15. Elden Ring
  16. The Crew Motorfest
  17. Forza Motorsport
  18. Star Wars Jedi: Survivor
  19. Minecraft
  20. Lords of the Fallen

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

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

Video Game Hardware took the biggest hit of all major segments in October, moving down 23% to $327 million. I don’t see this as a major story, just a move from one month to the next. So many folks picked up new consoles to play Call of Duty in October 2022, with comparable system sales shifting into November this year.

In stark comparison to the monthly figure, Hardware has grown the most through the first ten months of the year, up 6% to $4.03 billion.

The month’s best-selling console again went to PlayStation 5, as measured by both units sold and revenue generated. It’s continuing to track as 2023’s top device by both metrics.

Intriguingly, even during a month in which a new Mario launched, Xbox Series X|S earned 2nd place on dollar sales, while Nintendo Switch was the runner up by units. I’d imagine that’s partially because of a higher selling price for Xbox, and Switch sales are mostly double dips, Mario red OLED versions or purchases for kids as its audience is firmly saturated.

Similar to the movement of their overall category, all of the three big console families saw double-digit spending declines in October.

In addition to the monthly figures, Circana also provided a quick update on where lifetime figures are for the current generation consoles. Which have now been on market for nearly three years! PlayStation 5 is currently 9% above the PlayStation 4, while the Xbox Series X|S family is tracking behind Xbox One by 11%. Makes sense, given the dichotomy between each company’s approach.

Within our final category of Video Game Accessories, spending last month lowered 2% to $147 million. The most modest of declines compared to its counterparts.

Through October, buyers have purchased $1.75 billion worth of Accessories, or 1% higher than the same time frame in 2022.

October’s top earning peripheral was Sony’s PlayStation 5 DualSense in midnight black. I was expecting that the Marvel’s Spider Man 2 Limited Edition controller might win again, as it did in September, though this result is probably more about limited supply than consumer sentiment.

I’ll confirm with Circana on the current annual best seller, which I believe is still the premium tier PlayStation 5 DualSense Edge based on just how much revenue it generates per sale alone.

Now, what about the Meta Quest 3? Didn’t it launch in mid-October?

It did. However, it wouldn’t be included in this particular industry report. Circana confirmed that Meta Quest headset spending isn’t considered gaming for their tracking purposes. Rather, it’s a “a multi-function device.” Which means that Circana’s Technology group reports on Meta Quest.

Compare that to something more streamlined for gaming like PlayStation VR 2, which is included. Even if it remains a somewhat small portion of the pie.

This treatment truly affects the Accessories numbers because Meta Quest has proven to have the most widespread appeal of any augmented or virtual reality device across the consumer space.

Before I recap and shift to predictions, here’s an added bonus: Circana’s new engagement rankings by platform! As part of its public report, the company is now sharing the most played titles across PlayStation, Xbox and Valve Corporation’s Steam digital marketplace for PC titles. Here’s a look at those, in order of Monthly Active Users (MAUs).

During October, Call of Duty: Modern Warfare 2, Fortnite and Marvel’s Spider-Man 2 were the most-played on PlayStation. When it came to Xbox, it’s the same top 2 games then Grand Theft Auto V reached third. Counter-Strike 2, Baldur’s Gate 3 and Cyberpunk 2077 were the most played on Steam. Other standouts included Roblox starting in 4th on PlayStation, Forza Motorsport zooming to 7th on Xbox and The Finals beta landing it in 4th on Steam.

While October’s total spend declined, there’s a clear reason for it and it won’t really impact 2023’s overall result other than shifting spending on Call of Duty to November. Separate of that, which is a purely hypothetical scenario of course, I’d bet October spending would have grown against last year, especially within Content.

On social media, Piscatella mentioned Hardware in particular didn’t have a surprising result, although he believe it was below that which the platform holders expected. He anticipates more discounting and promotion in the coming months. Plus, he’s becoming more cautious on his annual forecast of 3% spending growth in 2023.

Speaking of looking ahead, I’m looking at spending gains in November driven by what I expect to be the biggest seller in Call of Duty: Modern Warfare 3.

Even with lackluster reviews, it’s still the single most popular gaming brand in the country. It will catapult up the annual chart to become 2023’s best seller, maybe even in November’s report. I expect yet another year where two Call of Duty titles end up in the Top 10.

Now that October is behind us, the release slate is slowing down considerably. There’s a couple niche Nintendo titles in WarioWare: Move it! and Super Mario RPG remake, both of which will end up charting, the latter having more upside into possibly the Top 7. Otherwise, I think Sega’s Like a Dragon Gaiden: The Man Who Erased His Name can surprise, reaching a Top 15 start. There’s also Robocop: Rogue City which garnered more critical appeal than anyone ever thought it would. Why not, let’s say it gets a Top 20 start!

It’s a key time for Hardware approaching the November pre-holiday and the Black Friday period here in the States. I expect a comparable dynamic as October where PlayStation 5 will lead on revenue and units, with Xbox in second by dollars and Switch by units. Especially given the new PlayStation 5 model is now on sale, just in time for shopping sprees to begin.

This is where I recommend hopping over to Piscatella’s Twitter thread for further details and a complete rundown of those spankin’ new engagement lists.

I remain eternally thankful you are checking out the site! Stay well as the holiday season approaches.

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

*Digital Sales Not Included

^Xbox & Nintendo Digital Sales Not Included

Sources: Circana, Nintendo, PlayStation Blog, Sony Interactive Entertainment, Ubisoft Entertainment.

-Dom

PlayStation Hits Its Best Second Quarter Sales Ever as PS5 & Third Party Games Lift Sony’s FY 2023 Q2 Report

No rest for the writer!

Today continues an especially busy stretch of this latest earnings season, as Sony Corp just reported its fiscal 2023 second quarter results today out of Japan.

During this three months ending September, both the firm overall and the PlayStation division experienced revenue growth. And while profitability declined at the company level, the amount earned by Sony’s gaming business moved up double digits.

In fact, PlayStation just generated its best ever Q2 revenue in history.

That marks multiple record-breaking quarters in a row for Sony’s Game & Network Services (G&NS) segment, since Q1 hit its own all-time high as I covered a few months back. This past second quarter saw sales zip past $6 billion for the first time, jumping up more than 30% since last year.

Plus, unlike back in June, PlayStation has bounced back to profit growth this time. I’d argue this is even more substantial than record revenue because it accounts for expenses and really gets to the core of its ongoing health amidst a most turbulent of industries.

Underlying momentum was a higher PlayStation 5 contribution alongside better third party and add-on content performance. On the profit side, signs point to the Bungie acquisition costs being fully recognized, since there’s no longer a mention of the deal. Caveat being, similar to Nintendo, we can’t forget about the yen’s weakness on results for these kinds of Japanese companies that have a ton of overseas sales.

One major component is how PlayStation 5 shipped 4.9 million units between July and September, notably more than this time last year and the corresponding quarter for PlayStation 4. This figure was within management’s forecast, pushing lifetime PlayStation 5 sales to 46.6 million and closing the gap with its predecessor when launch-aligned, as I’ll dig into later.

As for the group’s forecast, executives increased guidance for annual gaming revenue across fiscal 2023 while maintaining guidance for operating income and PlayStation 5 hardware shipments at 25 million, which would be the single best year ever for the brand’s console output.

“We recognize selling more than 25 million PlayStation 5 units this fiscal year remains a challenging goal,” said Chief Financial Officer (CFO) Hiroki Totoki when talking to the media. “It will depend on how sales do in the year-end holiday season. We won’t pursue expanding the PlayStation 5 installment base alone, but will keep profitability in mind.”

Scroll down for a swing through the numbers then a set of my own predictions alongside Sony’s future forecasts.

Total revenue for Sony as a whole rose 3% to $19.6 billion, with the biggest growth contribution from G&NS, Sony Pictures and Music, offset by declines in other areas. However, operating profit at the group level declined 24% to $1.82 billion. This was led by quarterly declines for Financial Services, Imaging & Sensing Solutions and Entertainment, Technology & Services segments.

Focusing strictly on PlayStation during the three months ending September, revenue jumped up 32% to $6.6 billion. That’s an entire third of Sony’s overall business. It’s what I call a massive all-time number, considering last year’s $5 billion or so was also a Q2 record at the time.

A crucial note both in the broader context and at the PlayStation level is the specific impact of currency movement. Out of the $1.6 billion growth, upwards of $410 million is strictly because of foreign exchange rate changes. This helps understand how much of the trajectory is organic, compared to an economic market force like yen weakness.

Reversing its fortune compared to a decline in Q1, operating profit for G&NS moved up an impressive 16% to $340 million. That’s 19% of Sony’s group total. Affecting the plus side were both third party content sales and currency movement, plus there’s no longer any mention of certain acquisition costs that were dragging down profitability. I believe the $3.6 billion purchase of Bungie has been fully recognized now and will no longer affect the bottom line. On the downside, management cited how hardware has produced increased losses, I’d imagine due to higher manufacturing costs.

Checking out product category splits, which are shown in the last graph above, Hardware sales grew a whopping 60% since last year and contributed 30% of PlayStation’s total. The next largest segment at 23% of the pie was Add-On Content, moving up 18% in dollar value. Digital Software produced 39% growth, settling at 21% of the total. In fact, the only product type to decline was Physical Software, down a modest 4%.

Annual PlayStation revenue is tracking towards $28 billion. As you can see in the gallery above, on the revenue graph, this is well above the highest it’s ever been, over a billion more than last quarter. Essentially, if this keeps up, Sony’s gaming unit will have its best year of sales ever. On the other hand, annualized operating profit is at $1.75 billion, which compares more to the late days of the PlayStation 4 life cycle. Still great in a historical context, just not as strong as the past three years or so.

As of this week, the “big three” console manufactures have all reported their latest results. The sole remaining biggest player is Tencent, which will be later this month. Right now for comparison purposes, Sony’s $28 billion is tops for the industry. Even if backing out currency impact, it’s well in the lead. Tencent generated $25 billion as of last quarter, and Microsoft’s Xbox segment saw almost $16 billion (though that’s before accounting for anything from Activision Blizzard). Nintendo’s at $13 billion, albeit with more than twice as much annualized operating profit than PlayStation: $4.2 billion compared to $1.75 billion, respectively.

Heads up: enhanced launch-aligned PlayStation console sales chart is live!

This fancy visual aid gives more context to PlayStation 5’s improving shipment numbers. The console’s 4.9 million units sold-in last quarter is an increase of 48% compared to the 3.3 million in Q2 last year. Plus, it’s 26% higher than the PlayStation 4’s 3.9 million in the corresponding second quarter of fiscal 2016.

It’s the fourth quarter since PlayStation 5’s release in November 2020 that it moved more than 4 million units in a quarter, and one of those was that launch period.

Which means that PlayStation 5, at 46.6 million lifetime, has reversed course and narrowed the gap against its predecessor this quarter. It’s presently only a million units away from reaching PlayStation 4, boosting its trajectory since the supply challenges of yesteryear.

This latest lifetime figure means it’s also passed another gaming device on the all-time best-sellers list. That would be Nintendo’s 1980 handheld the Game & Watch, of course, which ended its tenure at 43.4 million. Next up will be Nintendo’s classic Super NES, which sold 49.1 million globally.

One statistic that Sony didn’t update was console sell-thru to consumers. Probably because it usually waits until a big milestone in order to do so. Earlier this year, the PlayStation 5 reached 40 million sold-thru as of July 16th. I’d bet it’s a bit higher now, maybe in the 45 million range, especially ahead of a system-seller like Marvel’s Spider-Man 2. I don’t see a reason demand would have fallen off.

Digging more into the supplemental stats present in PlayStation’s presentation, full game software unit sales stood at 67.6 million in Q2, up from 62.5 million last year. However, due to a lighter calendar, the proportion of first-party published games was lower, making up 7% of that total as opposed to 11% a year back.

Digital versions accounted for 67% of PlayStation game sales, up from 63% in September 2022. This means that 2 out of every 3 premium games purchased for Sony’s platforms were downloadable.

As for player engagement, Monthly Active Users (MAUs) across all of PlayStation Network totaled 107 million as of September month-end. While this is down a million from the June quarter, it’s up 5 million since last year’s Q2. Management also said that total hours played moved up 4% in the latest three months.

Here is where I’ll continue to lament the loss of PlayStation Plus membership numbers, which Sony stopped reporting earlier this year. It will forever, at least for the foreseeable future, remain cemented at 47.4 million as of March 2023.

It’s been a historic run lately for Sony’s top-line gaming numbers, pumping out multiple quarter’s worth of record revenue and generating more than $6 billion in second quarter sales for the first time. PlayStation is the premier industry player by revenue right now, even if backing out the impact from the yen’s depreciation.

Profitability has certainly been more questionable, partially because of temporary factors like studio investments, acquisition expenses and hardware manufacturing costs. Still, it achieved a double-digit income boost in Q2 on hardware units ramp up and software support from external partners like Electronic Arts and Take-Two Interactive with their respective sports titles, plus something like Diablo IV from Blizzard Entertainment and the Warner Brothers Mortal Kombat 1.

Which is why it’s even more painful to hear about layoffs at various PlayStation studios, including Media Molecule, Visual Arts and Bungie. There continues to be a disconnect between executives and everyone else. It’s not just at Sony, this is just one of the more glaring examples especially as its profitability gets back on track.

Impossible as it is to follow that up, I’ll take a look now at the company’s forecast and make some quick predictions.

The firm revised its fiscal year 2024 PlayStation revenue upwards by 5%. Management now thinks gaming sales will surpass $30 billion when the 12 months end in March 2024, in what would be an astonishing finish and record-breaking result. It then reiterated operating profit guidance of $1.87 billion.

In order to hit the 25 million PlayStation 5 hardware unit target, it still needs to ship almost 17 million units across the next two quarters. 16.8 million to be exact. Even with new PlayStation 5 slim models and the PlayStation Portal, this remains a staggering target that will require an absurd holiday number then a miraculous January to March. For context, the largest holiday season ever for PlayStation 4 was 9.7 million in fiscal 2016, and its largest March quarter was 3.1 million right after launch.

Yea, I’m still not a believer. In that overly ambitious forecast or the over-priced peripheral that is the PlayStation Portal. I’ll keep my same prediction as back in August: 24 million to 24.5 million, leaning more towards the lower end.

With respect to software, note that Marvel’s Spider-Man 2 launched after the three months covered here. Still, Sony shared a sales update for Insomniac Games’ latest open world adventure, selling-thru 5 million copies to consumers after 11 days. It had previously started with the best first 24 hours in PlayStation history, at 2.5 million copies. It’s since fallen behind God of War: Ragnarök at 5.1 million in 3 days, nearly a year ago to the day. The Last of Us: Part 2 moved 4 million copies during its opening 3 days back in June 2020.

All in all, it’s a fantastic launch for Peter Parker and Miles Morales considering the size of the PlayStation 5 install base, clearly bolstering the company’s expectations for the back half of this year.

The final bit of relevant news from Sony’s earnings was a comment around its live service strategy, moving into next fiscal year and beyond. As reported by Video Games Chronicle, CFO Hiroki Totoki mentioned that out of its previously-planned 12 live service titles originally scheduled for launch by end of Fiscal 2025, only half of them are on target. Considering how much time and money Sony is putting into this effort, moving them out is a big deal for its financial future and resource allocation. Personally, I remain skeptical that all of them well actually hit market at any point.

Whew. Well, that’s a wild week of coverage coming to a close. I hope you enjoyed this latest recap. Thanks much for hanging around during this season. I’ll have more coverage here and on social media as another eventful year approaches its inevitable end. Take care!

Note: Comparisons are year-over-year unless otherwise noted. Exchange rate is based on reported average conversion: US $1 to ¥144.4.

Sources: Company Investor Relations Websites, Yahoo Finance, Video Games Chronicle.

-Dom

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

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

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

With a couple of caveats. As always.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thanks for reading! Take care, all.

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

Sources: Bloomberg, Company Investor Relations Websites.

-Dom

Starfield Rockets Xbox to Best September Quarter Sales Ever in Microsoft’s Fiscal 2024 Q1 Results

Now that I’ve posted my last earnings calendar of 2023, it’s time to look at some actual results!

First up for the big three of the games industry was Microsoft, which posted its first quarter of fiscal 2024 numbers last night.

During this time frame, the Xbox business unit had a record first quarter sales performance. Quarterly revenue on gaming moved up nearly double-digits, generating almost $4 billion.

The clear driver was Starfield in September, a launch which fit the general theme of the Washington-based company’s strategy. Bethesda Game Studios’ space RPG pulled in Game Pass subscribers more than console buyers, a clear signal that this generation is unlike any other for the platform holder.

That’s because, while content and software sales moved up for Xbox, hardware spend actually declined in this same quarter of the year’s flagship game hit market. Starfield and all first-party titles for Xbox land on its subscription service day one, plus the publisher has been offering early access to its biggest titles. For a small fee, of course.

This translated to a boost in hours played and dollars spent by gamers during July to September period, even if they weren’t as interested in scooping up Xboxes.

“In our consumer business, PC market unit volumes are returning to pre-pandemic levels. Advertising spend landed roughly in line with our expectations,” said Chief Financial Officer (CFO) Amy Hood. “And in Gaming, strong engagement helped by the Starfield launch benefited Xbox Content and Services.”

The other headline news recently for Microsoft was the closure of its $69 billion deal for Activision Blizzard, as of mid-October. This subsidiary is now included in financial forecasts and will account for the bulk of the combined entity’s gaming growth during the upcoming holiday quarter.

Scroll down for a close examination of Xbox’s all-time Q1, industry peer comparisons, a discussion on Activision Blizzard’s impact plus a suite of predictions from both management and yours truly.

Based on the above slides and its filings, Microsoft reported gaming revenue of $3.92 billion in the latest quarter. That’s an all-time Q1 best, 9% above the former record holder last year of $3.61 billion.

This growth came in slight above the company’s estimate of “low to mid single digits,” attributed to out-performance of first party and a higher contribution from Game Pass revenue. This indicates that, at least on the content sales side, Starfield had a better debut than management thought it would and brought in more interest than projected.

Moving to the chart in the gallery above, despite this record quarter, Xbox’s $15.78 billion in trailing 12-month revenue is currently 3% below where it was at the beginning of fiscal 2023.

This modest downward trajectory for the annualized figure is certainly temporary, as you can see in the final column there which incorporates the second quarter estimate due to an Activision Blizzard boost, which I’ll cover in a later section.

Now that we know Xbox’s present annual revenue figure of $15.78 billion, we can map where it stacks up across big players in the industry. Sony’s in the lead with the PlayStation figure being over $27.8 billion, amplified by a currency impact and maximum console availability. Tencent accumulated $25 billion over its latest year, while Nintendo generated $13.46 billion.

Here’s where I remind everyone, especially the fanboys, of certain caveats on these comparisons. First, it’s early in the season and there will be updates throughout the coming weeks. Then, the yen has bumped up sales especially for Sony which is also much less profitable then at least Nintendo (Microsoft and Tencent do not report profit numbers for gaming). Plus, Activision Blizzard will augment Microsoft to at least $18 billion and more in the future, so everything is relative.

As I alluded, sales only tell part of the story. While we don’t know how much Xbox made when backing out expenses, we can infer some things from its broader category and the margin mix. Gaming is a part of Microsoft’s More Personal Computing (MPC) segment, which saw Q1 operating profit go up a whopping 23% to $5.17 billion. While expenses declined 1%, the firm cited how this was more driven by a better margin in Devices that was offset by “investments in Gaming” probably related to Starfield’s marketing push. Still, since it didn’t sell as many consoles, which are typically lower margin than software, I’d wager Xbox’s profit only reduced marginally.

I’ll now shift towards digging into results for the two major product categories: Xbox Content & Services and Xbox Hardware.

Essentially, the former had a great quarter while the latter was lackluster.

Xbox Content & Services spending moved up a healthy 13%, amassing $3.18 billion over the three months ending September. By my math, that’s the highest single first quarter for this segment in history. It comprised 81% of Microsoft’s total gaming revenue in Q1, versus 78% this time last year.

It also follows that, over the last year, Content & Services hit $12.55 billion, which is the second highest total ever behind only fiscal 2022 Q3 at $12.7 billion.

More than ever, the fact that content was over 80% of gaming sales when a traditional “system-seller” type game hit market signals the ever-growing movement away from console sales and towards ecosystem. Management wants people to subscribe to their service, to generate ongoing revenue, to bolster that bottom line, rather than one-time purchases of low margin hardware.

And that’s exactly what’s happening more and more this generation as the mix remains towards software and subscriptions.

When talking about the gaming division on the earnings call, Chief Executive Officer (CEO) Satya Nadella shared that Starfield has now attracted over 11 million players to date, up from 10 million as of September 20th.

Showing a more multi-platform skew, management mentioned that almost half of the hours spent on the title have been on PC. Plus, they said it led to a single day record for new Game Pass subscriber sign-ups on its launch date. Unfortunately, they didn’t give any specific figures behind this particular claim, or what the prior best day ever might have been.

I’ll now sound like a broken record, and not the good kind, when I write that yet again management did not share updated Game Pass subscriber numbers. Which is increasingly odd, notably during a monumental quarter with Starfield supposedly boosting the service. Microsoft would have us believe it’s still at 25 million. I’d imagine we might finally hear more after Activision Blizzard titles are integrated and it hits another big milestone because of that.

Flipping in the other direction in Q1 was Xbox Hardware, which saw 7% lower sales than 12 months back. That’s 5% worse than expected, based on backing into management’s prior guidance.

This happened right after a Q4 where it declined 13%, showing that not only were console sales down even leading into the year’s biggest exclusive software launch, they were even worse than Microsoft expected.

Combining the last four quarters, Xbox Hardware currently accounts for $3.23 billion. That’s down 15% year-on-year from the high of $3.8 billion earlier in this Xbox Series X|S generation.

Which, I believe, won’t necessarily phase management. Because console sales are on the back-burner more than they have ever been in the 20-year plus history of the brand.

This time period encapsulates, even amplifies, Microsoft’s strategy. It doesn’t have system-sellers anymore; it has Game Pass sellers. It doesn’t rely on console sales any more; it relies on subscription offerings and catalog consistency. Whether or not this will be sustainable over a longer timeline is the million, scratch that, billion dollar question.

Without unit shipments being reported publicly, all we have are estimates that really end up being closer to guesses. Last quarter, I had Xbox Series X|S at between 24 million and 24.5 million lifetime, thus below Xbox One’s 24.7 million at that same stage. Xbox Series X|S was still above the Xbox 360, which was at 20.3 million launch-adjusted.

What about now and the comparison to prior generations and peers? My best guesstimate puts Xbox Series X|S lifetime at 25.5 million or so. Almost definitely no higher than the 26 million that many estimate Xbox One had by fiscal 2017 Q1. As for current generation comps, Sony’s PlayStation 5 is at nearly 42 million, likely approaching at least 45 million by the time it reports next week.

Competitors are consistently outpacing Xbox in key regions, even during the debut month of Starfield. Circana’s September report on U.S. sales had it in second place behind PlayStation 5, which was also last month’s best-selling console across Europe according to a Games Industry Biz article.

Echoing the success of gaming, Microsoft overall amassed $56.5 billion in revenue in Q1, ending 13% higher than the year prior. Operating profit jumped a whopping 25%, to nearly $27 billion.

Similarly, Microsoft Cloud sales bumped up 24% to $31.8 billion. Nadella and Hood both cited Artificial Intelligence (AI) businesses along with its enterprise operating system and productivity offerings as providing substantial upside.

The Xbox unit just had an all-time July to September period, as predicted in earlier articles, due to the highest profile software it has all year alongside the attraction of a subscription service that offers a lower-priced entry to play that. Plus, an experience like Starfield brings in more PC players than usual because of its modding potential and that Bethesda longevity.

Looking ahead, this is the first official forecast we’ve had from Microsoft on the impact from Activision Blizzard. The firm’s historical comparisons and financial forecasting are both going to be skewed due to the inclusion of this new subsidiary for the foreseeable future.

Its immediate effect will be massive. Across Q2, which is also the holiday quarter ending December, gaming sales are expected to see a growth percentage increases in the “mid to high 40s” i.e. around 45% to 49%.

Out of that, executives said the net impact from Activision Blizzard’s inclusion was 35 points, or 35%. Thus, organic growth for Xbox in Q2 would be around 10% to 14%.

What would that look like in dollar terms? Nearly $7 billion in revenue for the quarter ending December, with Activision Blizzard contributing nearly all of the growth. That’s over a billion and a half better than Xbox’s best quarter of all time, and it means 12-month sales would breach the $18 billion mark.

The company said Xbox Content and Services would grow in the “mid to high 50’s” or almost 60% growth. This would equate to another record of $5.3 billion in quarterly content sales alone.

50 points, or 50%, of that will be from the acquisition. Notably, there’s November’s Call of Duty: Modern Warfare 3, knock-on from Diablo IV and legacy titles entering Game Pass. Something like Forza Motorsport will bolster organic growth, as will major third party launches like sports titles from Electronic Arts and Ubisoft’s busy late calendar slate of Assassins Creed Mirage, Avatar: Frontiers of Pandora and The Crew Motorfest.

While Microsoft doesn’t provide official guidance on Xbox Hardware, it’s easy to back into it, and I arguer it leads to an even bigger story. Management is signalling growth for console sales well into the double-digits, upwards of 22%, to $1.7 billion. That would be the best growth rate in two years, and it’s the aspect of this forecast where I’m the most skeptical.

Now that I’ve covered the financial results, what caused them and where Microsoft is going into this quarter and beyond, that wraps up my first big rundown of the season. Thanks everyone for reading, and hopefully I’ll see you back very soon for more articles and analysis. Stay safe, all.

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

Sources: Bethesda, Circana, Company Investor Relations Websites, Games Industry.Biz.

-Dom