Tag: Microsoft

Xbox Hardware Market Share Gain Propels Microsoft Gaming Revenue to Best Non-Holiday Quarter in Company History

DomsPlaying1 Comment

The ongoing Activision Blizzard deal isn’t the only thing making major headlines for Xbox lately.

Microsoft was the first of the “big three” console makers to report this earnings season, which I outline in my latest calendar post, this time sharing its fiscal year 2022 third quarter results covering the period between January and March.

During this time, gaming achieved its best non-holiday sales total ever. While certain parts of the industry cool off, Xbox is at least keeping the fire alive.

Driven by new generation hardware gaining market share plus growth in Xbox content and services, Microsoft generated $3.74 billion in quarterly revenue from gaming, up 6% since last year. That means Microsoft’s Xbox division secured its best revenue ever for a quarter that wasn’t October to December. The prior non-holiday record holder was $3.71 billion back in April to June 2021, a few months after the November 2020 launch of Xbox Series X|S.

This strength bolstered trailing annual sales to reach $16.5 billion for the first time since reporting began. That’s after a record holiday pushed it past $16 billion just last quarter as I wrote about then.

It’s even more impressive considering last year’s stricter pandemic restrictions leading to a strong comparable. According to its report, Xbox Content & Services moved up 4% while Xbox Hardware boosted 14%. Gaming as a whole rose due to growth in Xbox Game Pass subscriptions, first party software (like Halo Infinite and Forza Horizon 5) and Xbox console hardware revenue growth. Third party content was really the sole area of weakness, exhibiting declines year-on-year. What this says is the ongoing Xbox ecosystem play is paying off, supplemented by better inventories at retail.

CEO Satya Nadella even provided a more macro view for hardware right now. “With our Xbox Series S and X consoles, we have taken share globally for two quarters in a row,” Nadella said on the company’s conference call. “We are the market leader this quarter among next gen consoles in the U.S., Canada, U.K., and Western Europe.”

Based on supply driving the cycle due to a global semiconductor shortage, this sort of strength in hardware and market share implies Microsoft was able to secure more components than Sony producing its PlayStation 5. Note that Nintendo Switch was not a part of this statistic, since Nadella’s comments specifically cite the newest console generation.

While the numbers point mostly positive, I have to bring up the usual caveat that Microsoft unfortunately doesn’t share individual profit metrics for its Xbox division. That means purchasing those inputs to produce more retail units could very well have undercut profitability due to higher margins. I’ll shed more light on profit dynamics below the fold.

It’s now time to chart a course towards a more detailed analysis.

As the slides show, Microsoft’s gaming revenue increased 6% to that $3.74 billion during the quarter which was in-line with the company’s forecast. This quarterly result implies nearly $16.5 billion in trailing annual sales, an all-time high, shown via my chart in the above gallery. If combined with Activision Blizzard’s $8.3 billion annual sales and reduced by say $1 billion in double-counting and synergies, it would be between $23 billion to $24 billion.

To provide context, how does this latest top-line result compare to peers? I usually cite Tencent, Sony and Nintendo for these sections, all of which are reporting later in May so I’ll use the latest annualized figures for now. Tencent’s 2021 revenue exceeded $27 billion, maintaining its spot as largest gaming company in the world. Sony’s at $24 billion, suggesting its standing is probably just above Microsoft plus Activision Blizzard’s operations. Finally, Nintendo generated $15 billion.

The largest sub-segment for Microsoft’s gaming business was Xbox Content & Services, which improved a modest 4% to $3 billion in fiscal Q3. That means sales from Xbox Game Pass, software, cloud and any sort of add-on content via its digital storefront account for over 80% of quarterly gaming sales. This was just the second time ever it’s crossed the $3 billion threshold.

While Xbox Content & Services slightly missed the internal growth estimate of “mid to high single digits,” it’s still a success to grow versus a great result last year. I see it as a sign the Xbox brand strategy is stimulating a paying audience.

Disappointingly, Microsoft didn’t share an update on the exact number of Xbox Game Pass subscribers. The latest figure is 25 million from back in January. I’d imagine this was due to seasonality, where it picked up after the holiday and has grown only incrementally since then. Especially given a lack of major exclusives or even third party partnerships launching into the service other than Ubisoft’s Rainbow Six Extraction.

Instead, Microsoft highlighted new information specifically on cloud gaming usage. Nadella said 10 million people have streamed games remotely since the feature kicked off in beta during November 2019 then was formally introduced to Xbox Game Pass Ultimate subs in September 2020. While cloud is still niche in the scheme of things, hitting this sort of milestone shows there’s at least some level of growing interest.

“Our Game Pass library now includes hundreds of titles across PC and console, including more games from third party publishers than ever before.” Nadella noted. “Billions of hours have been played by subscribers over the past 12 months, up 45 percent.”

Lastly, he said Azure gaming revenue increased 66% during the current fiscal year to date. These sorts of statistics on service, cloud, streaming and the like fit with the company’s gaming mantra of allowing people to play on various devices. It eases the burden on hardware shipments, which I’ll cover next.

The second sub-segment within gaming is Xbox Hardware, which exhibited the better growth during January to March. Sales here moved up 14% to $728 million. That’s the second best non-holiday result since the company began reporting splits. Microsoft didn’t previously share internal guidance for hardware, yet CFO Amy Hood said on the call that it exceeded expectations.

Company slides highlight continued demand for Xbox Series X|S underlying this change, however clearly it’s capped by supply conditions. Based on evidence from both regional tracking firms and retail channel checks, Xbox Series S in particular is showing better availability at least.

Of course, the question on everyone’s mind is: how many units of Xbox Series X|S has Microsoft shipped now during its fifth full quarter on market? Last quarter, I mentioned the estimate from Daniel Ahmad, Senior Analyst at Niko Partners, being above 12 million. While revenue growth doesn’t directly translate to unit sales trajectory, I’d guesstimate the family at upwards of 14 to 14.5 million globally. As a reference, last count for Sony’s PlayStation 5 was 17.3 million.

We’d know for sure if Microsoft was more transparent. (Wishful thinking!)

Fitting with the theme of market share gains and increased inventories was The NPD Group’s recent monthly report on U.S. games industry spending. As I covered in my article, Xbox Series X|S was the leading console for both March and the first quarter domestically by dollar sales. It’s certainly attracting buyers, when there’s stock on hand.

“Coming to the end of a good week,” wrote CEO of Gaming Phil Spencer on Twitter. “Microsoft earnings were a nice moment for Xbox, it’s always great to hear Amy [Hood] and Satya talk about the progress.”

Now, here’s yet another important caveat related to profitability. We don’t know if Microsoft is making a profit on either model right now. In fact, last year during the Epic v. Apple trial, Head of Xbox Development Lori Wright specifically said the firm sells hardware at a loss. Which is consistent with historical data and anecdotes across the industry, as consoles are known as a loss leader and a means to have people spend on software, and now subscriptions or other content.

Comparatively, Sony said it’s now turning a profit on each PlayStation 5 standard edition it ships. Without a better indication of cost impact, it’s difficult to make a direct comparison.

Stepping back to briefly touch on Microsoft’s general results, the company generated over $49 billion in quarterly sales which is 18% higher than last year. Operating income exceeded $20 billion, up 19%. Both top-line and earnings-per-share came in above analyst estimates.

Intelligent Cloud as a segment showed the most growth, jumping 24% in Q3. Microsoft Cloud revenue improved 32% to over $23 billion. Office Commercial products and cloud moved up 12%, while LinkedIn sales rose 34%.

Gaming is part of the More Personal Computing business for Microsoft, which rose 11% to $14.5 billion. This means Xbox comprised 26% of quarterly segment sales, down from 31% during the holiday quarter between October and December 2021.

In terms of a glimpse into profitability for this segment, gross margin percentage declined “slightly” last period. That’s because of a 17% increase in operating expenses, attributed to gaming, search, news advertising and Windows marketing costs.

Essentially, gaming is less profitable than other areas when investing heavily in console manufacturing and external deals. This also reflects the broader trend of inflation, impacting input pricing. The more it takes to make a product, the lower its margins. Right now, the implication is there’s higher cost in both producing consoles and making the types of deals required for Xbox Game Pass. Without exact data on how much profit is made per retail unit sold or for gaming as a whole, I have to make these kinds of inferences.

Considering gaming sales rose 50% this time last year, beating total growth estimates in the latest quarter was a great showing on the revenue side. That $3 billion figure for Xbox Content & Services in particular supports the brand’s reinvigorated move towards keeping players in a more accessible ecosystem as opposed to a singular piece of hardware. There are still indications that profitability is being hit by input availability and cost, so that’s worth keeping in mind especially moving into the second full calendar year of Xbox Series X|S.

Looking ahead, next time Microsoft will report fourth quarter and annual results for fiscal 2022.

When it comes to gaming, CFO Amy Hood laid out somewhat bearish internal guidance for April to June as the company anticipates lower sales, echoing a trend seen industry wide as a reversion towards more normalized spending habits.

“We expect revenue to decline in the mid-to-high single digits driven by lower engagement hours year-over-year as well as constrained console supply,” Hood said. “We expect Xbox Content & Services revenue to decline mid-single digits though engagement hours are expected to remain higher than pre-pandemic levels.”

Note: She didn’t provide formal guidance on hardware results.

Digging into that first estimate, let’s assume an 8% decline. This would lead to fourth quarter gaming revenue of $3.4 billion versus the prior amount of $3.7 billion. When aggregating for the full year, it would still be an increase from $15.4 billion to $16.2 billion. That implies we’ll see a fiscal year sales record for Xbox despite anticipated weakness in the final quarter.

Then, if Xbox Content & Services dips say 5%, it would generated $2.8 billion in the fourth quarter which would be the lowest result since the pandemic began.

We’ll have to see how it plays out for Xbox over a three month span where it’s going to reveal a lot more about future titles than actually launch many on the first party side. On June 12th, Xbox & Bethesda will host its annual summer showcase where I expect to see more about Starfield, Redfall, Senua’s Saga: Hellblade II, Avowed and hopefully the Indiana Jones project.

Thanks everyone for stopping by and making it this far. Be safe and well!

Comparisons are year-over-year unless otherwise noted.

Sources: Company Investor Relations Sites, The NPD Group, Xbox Wire, Yahoo Canada (Image Credit).

-Dom

Xbox’s Best Holiday Sales Result Pushes Microsoft’s Annual Gaming Revenue to Record $16 Billion

DomsPlaying1 Comment

As I reported back in October, Microsoft’s Gaming division at the time saw its healthiest first fiscal quarter ever.

Now, it’s going one step further. On the strength of its first party lineup and growing subscription base, Xbox has just achieved its best holiday on record and blasted past a new milestone for annual sales, establishing a record 12-month figure.

Mere days after announcing the biggest acquisition in industry history in its purchase of Activision Blizzard, Microsoft is showing off why it’s pumping dollars so much into the space. Because it’s seeing great returns. During its 2nd quarter of 2022 financial report, Microsoft said Gaming revenue reached $5.44 billion during the holiday quarter.

That’s the single best October to December ever reported, 8% higher than last year which was the previous record holder of $5 billion. The main contributor to this record output was Xbox Content & Services, especially strong during the holiday season bolstered by flagship titles in the Halo and Forza series.

This performance also means annual Xbox sales for the Washington-based tech giant pushed passed the $16 billion milestone for the first time.

Combining the last four quarters of sales for Xbox reaches upwards of $16.28 billion. That’s 18% higher than December 2020 and 3% more than even last quarter, both of which included the launch of Xbox Series X|S. The fact that the rolling annual figure was this high shows payoffs in first party game development and key investments in partnerships for Xbox Game Pass’s extensive library.

According to Chief Executive Officer (CEO) Satya Nadella on the company’s conference call, the Xbox division saw both record engagement and revenue during the quarter. While he didn’t share specifics on the actual level of engagement or revenue, he did cite certain juicy tidbits I’ll dig into later.

Unfortunately, there was no appearance from newly-minted CEO of Microsoft Gaming Phil Spencer on the call or questions from analysts on anything related to the acquisition of Activision Blizzard. In fact, the only mention of the deal was reiterating what we already knew about its cost and closing during the fiscal year ending June 2023.

No worries. It’s time to move into the underlying numbers and corresponding reaction!

The above slides provided by Microsoft give a rundown of growth rates for Gaming and its sub-segments of Xbox Content and Services plus Xbox Hardware during the quarter ending December 2021. Namely, that 8% growth for Gaming leading to $5.44 billion in quarterly revenue which was in-line with the company’s expectations of high single digits.

Underlying this all-time number was double-digit growth in Xbox Content & Services, the sub-segment that includes software and subscription sales, which rose 10% in the quarter to around $3.86 billion or 71% of the total. Yet another record! Boosted by first-party launches like Halo Infinite and Forza Horizon 5 plus Xbox Game Pass expansion, this figure was especially impressive given its consistency around this time in late 2020.

On the conference call, Chief Financial Officer (CFO) Amy Hood mentioned there was “significant” growth for Xbox Game Pass subscriptions and first party software sales in the holiday quarter.

Why? According to Nadella, Halo Infinite has now attracted 20 million players since its staggered launch beginning back in November. It’s the largest start ever in the series that dates back to the original Xbox. Another thing that, hm, drove sales is how Forza Horizon 5 is now up to 18 million players after hitting the 10 million threshold within a week of launch in early November. These games also attracted subscription growth, the other key revenue contributor, as Xbox Game Pass now has 25 million members up from the last official figure of 18 million (with the latest rumor being around 22 million).

To me, this dispels a false notion that Xbox Game Pass isn’t properly monetizing its user base. Even those buyers that get in at a discount are sticking around, which generates ongoing revenue once the rate resets. The numbers back this up. I’d love to know more on the profit side, of course, but I work with what’s available.

Intriguingly, the 10% Content & Services growth was technically below Microsoft’s guidance of “mid-teens.” That’s because of weakness on the third party side. This signals under-performance of AAA multi-platform releases like Call of Duty: Vanguard and Battlefield 2042. Perhaps even Madden NFL 22 and other annualized sports titles. So while Call of Duty and Battlefield both were among the best-selling premium titles in the U.S. during 2021 as I wrote about here, this missed estimate implies a lower contribution to the bottom line of platform holders.

Taking a look at the above chart I’ve compiled, this is 12-month revenue going back over time for the gaming business. It helps to provide context in a couple of areas, and smooths out short-term fluctuations. The main thing it shows is the overall level of Xbox revenue over time. That’s the record $16.28 billion as of this latest period, compared to $15.86 billion last quarter then going back from there. Clearly the trend-line is on that upward trajectory since bottoming out in Q3 of FY 2020.

There’s also the split between Xbox Content and Services and Xbox Hardware categories. The green portion is for Xbox Content and Services, which most recently contributed $12.58 billion to the annual amount. The red portion is Xbox Hardware which is all physical gaming consoles under the brand. $3.7 billion this time. Both of those are also all-time highs.

Next up is Xbox Hardware. This sub-segment contributed the remaining portion of the record holiday quarter, growing 4% to almost $1.59 billion in revenue on the back of steady demand. It’s actually one of the few things in this report that wasn’t a record. That happened back in fiscal 2018’s second quarter, when hardware accounted for $1.78 billion. This year’s was still second best, so I’d say it’s doing alright.

To put it another way, the second holiday quarter for Xbox Series X|S generated almost $70 million more in dollar sales than its launch quarter did.

On the call, Hood shared how Microsoft is seeing continued buyer interest for both console models. Additionally she saw “better than expected” supply, which is a good sign considering the doom and gloom of the modern semiconductor situation.

This commentary and performance is mostly consistent with Spencer’s recent comments around Xbox Series X|S being the fastest-selling ever for the brand. Xbox Hardware is performing well during this early part of the generational cycle even in the fact of shortages, with Xbox Series S as the highlight because of higher availability. While we don’t have exact figures from Microsoft on hardware shipments globally, we do have an estimate from my friend Daniel Ahmad, Senior Analyst at Niko Partners, that it’s above the 12 million of Xbox One’s first year.

Here’s a telling experiment: What would Microsoft’s gaming revenue look like if Activision Blizzard earnings were considered? The latter hasn’t reported its last quarter yet, so I’ll use historical figures for a baseline in this thought experiment.

The most recent October to December revenue for Activision Blizzard was $2.41 billion. That means the holiday quarter for the combined entity would have been over $7.58 billion! For the full 12-month period, Activision Blizzard’s latest is $9 billion.

Which means, in aggregate, Xbox and Activision Blizzard annual revenue right now would be $25.33 billion. How does that compare to its major competitors? Well, it’s pretty impressive and much closer to the top-end than ever before, naturally.

I usually pull in figures for Sony and Nintendo as the three main console manufacturers. There’s also Tencent, the largest gaming company in the world, which is an absolute behemoth notably in mobile and the Asia Pacific region. So let’s see them all!

This is using annual and the caveat is Microsoft is the only one that’s reported this season so far. It’s still helpful to illustrate. Tencent’s latest strictly from its games business was $27.3 billion. Sony’s Game & Network Services segment hit $25.5 billion while Nintendo’s total sums to $14.7 billion, both using the exchange rates at their last reports. Which means Microsoft alone sits closer to Nintendo, while combined with Activision Blizzard it nearly surpasses Sony’s total and might even some day approach the untouchable realm of Tencent.

And that’s part of why Microsoft is willing to pay almost $70 billion for it.

As is tradition, I’ll quickly run down Microsoft’s overall results for the three months ending December before closing up.

Total revenue for the company rose 20% to $51.7 billion. It’s the first time quarterly sales topped $50 billion, pushed by an all-time high $18.3 billion revenue from its Intelligent Cloud segment. Operating profit moved up 24% to $22.2 billion.

Its results beat analyst consensus on both top-line revenue and earnings-per-share. Microsoft Cloud product revenue was a major highlight, increasing 32% to over $22 billion for only the second time ever.

We can learn a bit on gaming profitability from the More Personal Computing business unit margin movement and operating dynamics. This experienced 15% revenue growth to $17.5 billion. At $5.44 billion, gaming makes up around 31% of More Personal Computing. Operating income rose 22% to $6.36 billion, while expenses rose at a lower 17% rate partially as a result of gaming. It’s not perfect, but this can indicate sales contribution is outpacing costs.

It’s hard to overstate just how much the record revenue stats keep piling up for the Xbox business, reflective of Microsoft’s general strategy of user engagement and ecosystem establishment. This time it was first party software moving the needle, with major internal studios like 343 Industries and Playground Games leading the charge by pushing quality within key brands. The result is Xbox Game Pass literally paying off, thus generating opportunities for more future investment both organic and external.

Moving into the new calendar year, Xbox’s early 2022 exclusive slate is light during a quiet quarter for first parties. CrossfireX is a third party console exclusive from Smilegate and Remedy Entertainment launching in February, plus there’s indie partnerships hitting the platform throughout the coming months.

It is, however, quite the busy period for third party games with select titles like Rainbow Six Extraction available simultaneously on Xbox Game Pass. Dying Light 2, Elden Ring and Destiny 2’s The Witch Queen expansion all debut in February. There’s always the long tails from late year launches of Call of Duty, Madden, NBA 2K, Battlefield then other major ongoing games with seasonal updates like Fortnite and Apex Legends.

On the hardware side, Xbox Series X|S availability will continue to set the narrative. I don’t expect the higher end Xbox Series X to pick up stock any time soon, though I’m turning optimistic on Xbox Series S inventories based on recent trends and anecdotal evidence. Microsoft executives themselves said that hardware will continue to be impacted by supply limitations and didn’t provide guidance on growth expectations.

For the quarter ending March 2022, Microsoft expects gaming sales growth in “mid single digits” range. Assuming it’s exactly 5%, that’s $3.7 billion. For Xbox Content & Services, strong engagement and continued momentum will lead to increases in the “mid to high single digits.” Putting it around 7% then, this would generate $3.1 billion.

Guess what? Both would be fiscal third quarter records. The latter would even be the first time it’s passed $3 billion in a Q3.

“The other area obviously we’re seeing strength is in gaming,” Nadella highlighted during the analyst question portion of Microsoft’s earnings call. “We see the intensity of usage and the business model diversity around games, that increasingly the economics of gaming franchises is also radically becoming much more software-like.”

That certainly is the case, considering the multi-faceted approach where now, because of ongoing financial support in both areas, main contributors are actual first party software and Xbox Game Pass as a catalog of titles plus cloud experience.

Thus ends this quarter’s deep dive into Microsoft’s financials. I look forward to recapping other companies very soon! Be safe all, and stay healthy.

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

Sources: Daniel Ahmad, Microsoft, The NPD Group.

-Dom

U.S. Game Sales Decline Double-Digits in November in Difficult Hardware Supply Environment

DomsPlaying

The super important November month and Black Friday shopping seasons have come to a close, and United States sales numbers are in from The NPD Group for the video game industry!

And it was a mixed one, for a variety of reasons. That can happen when the prior year was a record, I suppose.

Last month had consumer spending down double-digits overall with declines experienced across all three major categories of Content, Hardware and Accessories. Which is understandable, considering how last year was a best-ever November and the global semiconductor shortage continues to dampen all sectors of consumer technology.

Hardware took the biggest hit with gaming console sales down nearly 40% to the lowest November level since this time in 2016. Nintendo Switch is still the standout, with the company sharing how its hybrid system sold over a million console units in the month alone. That combines all devices in the family, including the latest OLED iteration. Which, fitting with the month’s general trend, is still lower than the 1.35 million achieved in November 2020.

There’s just limited inventories across the board within Hardware, especially for new generation Microsoft Xbox Series X premium model plus Sony’s PlayStation 5 family. One bright spot is the aggressively-priced Xbox Series S version has been available at various retailers, resulting in Xbox Series X|S reaching second place in the Hardware ranks for the first time in a while.

Speaking of software, services and subscription sales as part of the bigger Content category, spending focused on mobile, military first-person shooters, Pokémon remakes and the latest Forza car game from Xbox Game Studios.

Brand new titles occupied four of the top five spots on the general software ranking: Call of Duty: Vanguard led, Battlefield 2042 up next, Pokémon Brilliant Diamond & Shining Pearl snatched up #3 then Forza Horizon 5 finished in fourth. The first three of these entered the year’s best-sellers list with just the single month on record.

Mobile, consistent as ever, generated over $2 billion in spending for the ninth consecutive month. There’s only two months in 2021 where this particular source hasn’t reached that threshold.

The last broad category of Accessories saw similar declines in November dollar sales, about 20% lower than a year ago. Steering Wheels at least showed great upside, their popularity driven mainly by a Forza release. Read on for more puns later in the piece!

“It is much harder to find a console to buy this holiday,” said The NPD Group’s Mat Piscatella. “Hardware sales [are] limited by supply, and the console with the most units in market is going to lead in sales, perhaps for a while.”

I hope those here in the States that celebrated had a safe, happy Thanksgiving. Then, everyone both domestically and overseas had a good month despite confronting the challenges of COVID-19’s Omicron variant and likely still having to attend those Zoom meetings from home while juggling that precious work-life balance. For those that can, take advantage of vaccinations for teens and kids plus booster shots for adults! It’s for the benefit of all.

Read on below for a look at spending data plus software charts, then see who can spot the worst “jokes” of all.

United States Games Industry Sales (October 31st, 2021 – November 27th, 2021):

Within The NPD Group’s monthly report, the firm said spending across the U.S. games industry last month reached just under $6.3 billion or a decline of 10% since the record high of almost $7 billion in November 2020.

While Content sales are mostly showing resilience, hardware was mainly behind the dip as this time last year both Microsoft and PlayStation launched their latest consoles. Positive areas like subscription and mobile spending weren’t enough to offset lower results in console hardware and accessories, the former certainly restricted by input part scarcity. Plainly, the biggest manufacturers weren’t able to make enough consoles to satiate buyer demand.

Good news is 2021 taken as a whole is still ahead of last year. Year-to-date approached $53 billion in November, which is 9% growth against the $48.5 billion of the same 11-month period in 2020. Basically, despite a more supply-constrained and softer software holiday quarter so far, the year is in high single-digit growth territory and moving towards another potential record result.

The Content category, software and the like, accounted for $5.14 billion in consumer spending. That’s 82% of November’s total, and a slight decline of 1% versus a year back. When expanding to 2021 so far, Content sales have risen 8% to breach past the $46 billion threshold. Which is 87% of the year’s overall spend.

A main contributor here continues to be mobile, which grew 11% in November and accounted for that “at least $2 billion” figure I referenced earlier. Smartphone titles Candy Crush Saga, Coin Master and Roblox among others propelled revenue. Though The NPD Group, in collaboration with Sensor Tower, doesn’t publish full mobile charts.

For console and PC gaming, some of the biggest blockbusters of the year launched last month and occupied the highest spots on the overall software chart.

Unsurprisingly, Call of Duty: Vanguard tops the list. As a game within the Activision Blizzard-published military shooter series has done during its launch month for a whopping 14 years straight since Call of Duty 4: Modern Warfare started the trend in November 2007.

Even considering the single month on market, Vanguard is already the year’s second best-selling game on the combined chart. Behind only last year’s Call of Duty: Black Ops Cold War. It’s unclear how Vanguard compares to prior titles on dollar sales. I have a question out to The NPD Group for context, I imagine they may not be able to answer publicly.

Oh. More importantly, Activision Blizzard management fostered and even participated in workplace toxicity plus various forms of harassment, employs a torture apologist on its board of directors and is now trying to stifle employees from collective action. CEO Bobby Kotick, among others, should be ashamed. And fired.

Back to the rankings, Battlefield 2042 landed at the second spot during its initial month on market, That’s one above where Battlefield V began in November 2018, and one below where October 2016’s Battlefield 1 launched at the top position. (No, there weren’t three other games in the war epic shooter between those. It’s just Electronic Arts with its confusing naming convention.) The title developed by DICE secured the second spot on both Xbox and PlayStation respectively and is already the sixth best-seller for 2021 as a whole. Again, no comparison details to prior titles available that I could find.

Switch exclusive Pokémon Brilliant Diamond & Shining Pearl secured third place, and that’s excluding digital sales since Nintendo doesn’t participate in that portion of reporting. The Generation IV remakes in the long-running brand immediately became the 8th best-seller on 2021’s list, and of course led Switch platform ranks.

One of the biggest success stories remains Forza Horizon 5, ranking fourth on the total software chart and third on Xbox behind only Call of Duty and Battlefield. Importantly, this didn’t include Xbox Game Pass subscriptions. Which supports the notion that services can enhance sales rather than cannibalize them. The excellent open world driving title from Playground Games zoomed off the starting line, attracting 10 million players during its first week alone in the largest first-party launch for Xbox in its 20-year history.

Familiar titles like Madden NFL 22, Mario Party Superstars and Marvel’s Guardians of the Galaxy helped round out the Top 10. Ubisoft’s Just Dance 2022 was the next new release at #11, while Japanese role-playing game Shin Megami Tensei V from Atlus debuted at #16. Note that the latter does not include downloads, which means its upside was even greater.

With just one month left in 2021, Call of Duty: Black Ops Cold War is currently in pole position with Call of Duty: Vanguard on its heels and Madden NFL 22 in third place. Will Vanguard shoot past its predecessor? Well it certainly should, taking into account holiday sales, however it’s far from guaranteed. Which would be an anomaly in recent memory, telling a clear narrative of diminishing full game sales for the series this year.

For now, here’s November’s full results.

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

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

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

  1. Call of Duty: Black Ops Cold War
  2. Call of Duty: Vanguard
  3. Madden NFL 22
  4. MLB: The Show 21^
  5. Resident Evil: Village
  6. Battlefield 2042
  7. Super Mario 3D World + Bowser’s Fury*
  8. Pokémon Brilliant Diamond & Shining Pearl*
  9. Marvel’s Spider-Man Miles Morales
  10. Far Cry 6

The most newsworthy of categories lately is Hardware, and November’s numbers showed a heightened impact from tough supply situation.

“It’s all about stock. The console with the most units in market will lead the charts,” Piscatella said. “[This] will likely be the case for a long while.”

In what was the most pronounced monthly decline of the three segments, Hardware sales declined 38% to $883 million. That’s the lightest November outcome since 2016’s $759 million. Last year’s figure was over $1.4 billion in the corresponding month, an all-time high established as both PlayStation 5 and Xbox Series X|S began their life cycles plus Nintendo Switch carried major software momentum into the holiday quarter.

Speaking of Switch, it was the top-selling gaming console in November as measured by both unit sales and dollars earned. (Basically, my prediction last month was half correct. Or half wrong, depending on one’s outlook. I’ll try to stay positive!)

Nintendo announced Switch sold 1.13 million units in November, 550K of which happened during Black Friday week. Note that last year’s November monthly unit sales figure was 1.35 million, which implies a decline of 16%. Still, Switch has now led on unit sales during 35 of the last 36 months, losing only September 2021 to a push from Sony’s PlayStation 5.

“As we head into 2022 and the sixth year of Nintendo Switch, the system continues to see strong demand,” said Nintendo of America President Doug Bowser in the company’s press release.

Now that there’s a full year of data on the new consoles, it’s clear that supply is dictating performance more than ever. Essentially, whichever console manufacturer produces more boxes is winning right now as Piscatella alluded. Nintendo’s November win was no doubt driven by OLED model production as its premier product, its first full month on market since launching in October. This phasing of the original model is enticing owners to upgrade or purchase an additional system.

Another noteworthy topic from last month’s report is how Microsoft’s Xbox Series X|S platform landed in second place within hardware by units and dollars. Recently it’s been lower than competitors, and I am pretty sure the last time it actually led was June 2021 when it set a record for the brand. This time, it’s a combination of higher Xbox Series S availability and the attraction of Forza Horizon 5.

Now the details are fuzzy, from I gather it’s a substantial away from Switch mainly based on comments from Niko Partners analyst Daniel Ahmad. His claim is combining Xbox Series X|S and PlayStation 5 sales for November are barely equivalent to what Switch generated alone. Which is a bit surprising to me, given how all are based on similar components and existing within a consumer tech space that’s reliant on part sourcing.

Even further, Ahmad points out a quite intriguing historical statistic in how PlayStation 4, Xbox One and Nintendo Wii U sold more in November 2014 than the current three corresponding consoles did last month. I think that drives home the limited stock right now better than any quote or commentary.

So, in a rare occurrence, PlayStation 5 brings up the rear during one of the calendar’s most intense months of commercial competition. Hardware overall was down against a record high in November 2020, still it’s lower than it probably should be a year into a brand new console generation. Bad news is the chip environment isn’t expected to change any time soon, so we should brace for further distribution limitations.

Last category to cover for November is Accessories, which also dipped almost in lockstep with its Hardware counterpart. It’s still approaching record territory for 2021 as a whole, plus one sub-segment in particular saw a substantial improvement.

Consumer spending on Accessories contracted 20% to $258 million, down from $324 million last year. It’s the lowest November month figure since back in November 2017, when segment spend was $243 million.

On the bright side, revenue for the first 11 months of the year is certainly more positive and actually currently at a record $2.18 billion. Which is an upward trend of 4% compared to this time in 2020, the prior record holder.

Clearly November was, hm.. fueled by the start of Forza Horizon 5. Steering Wheels in particular drove a substantial boost. Consumer purchasing on this sub-category more than doubled, with the Logitech G920 Driving Force Racing Wheel for PC and Xbox platforms leading the pack.

Could I possibly squeeze any more racing terms into a single section? Perhaps. I clearly peeled out and road the momentum this far!

Alright. Enough of that.

All in all, November is always an eventful time for the commercial side of gaming, the biggest publishers and data nerds covering the industry. This year paints a slightly different story than most monthly reports this year, which have been overwhelmingly positive. It’s a comparison against a massive, record-breaking month in November 2020 amidst a most challenging hardware situation, which explains the difference.

This hardware availability impacts everything from new software buyers, spenders on ongoing games over time plus especially the purchasing upside of accessories. When someone scoops up a fancy new generation console, they often buy a headset or additional controller at the same time. Without a box to find, there’s less incentive to spend on the latest peripherals.

That said, I’m very much looking forward to the finale of 2021 in December’s data. The biggest exclusive title is Xbox’s Halo Infinite, as both Sony and Nintendo aren’t pushing any massive budget first-party projects other than those that are already on sale.

I’m wildly bullish on Halo Infinite’s engagement prospects, sharing on social media how I expect at least 15 million players around launch which should drive the science-fiction shooter to one of the top spots on December’s combined software list behind the likes of at least Call of Duty: Vanguard and a sports game or two that find popularity during the holidays.

On the multi-platform side, Take-Two Interactive has the physical release of Grand Theft Auto: The Trilogy – The Definitive Edition (yes, that’s a real title and way too long to type more than once) since it was only out in digital form during November. Otherwise, it’s a relatively light end-of-year calendar for triple-A studios.

December’s report will have 2021’s annual data, which is trending towards a year of growth, especially for hardware’s performance before the supply constraints worsened. During 2020, consumers spent a record $57 billion across the games industry. 2021 is already at $53 billion, growing almost 10% as of November like I mentioned earlier in the piece. Last year’s December was $7.7 billion, which means next month only needs $4 billion to set a new record. I’m saying the potential for over $59 billion in annual spend is in sight!

So, this is the final NPD wrap up I’ll write in 2021, since December’s release is currently scheduled for January 14th, 2022. I absolutely loved covering them, and I hope you enjoy reading the recaps as well.

There’s a lot ahead at the site before the New Year as my annual Year in Review pieces will go around the last week of December. Hope everyone remains safe and well, Happy Hanukkah, Merry Christmas and a very wonderful December to all.

Thanks for the time and interest!

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

Comparisons are year-over-year unless otherwise noted.

Sources: New York Times (Image Credit), The NPD Group.

-Dom

Microsoft’s Xbox Division Records Best First Quarter Sales Ever

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Back in July, I wrote about how Microsoft’s Xbox division set both a new annual and fourth quarter sales record. Well folks, it’s back at it like a bad habit, this time recording its best ever first quarter revenue performance among other highs.

As the Xbox Series X|S generation approaches its first year anniversary (geez already) and Xbox Game Pass attracts players ahead of major title launches like Forza Horizon 5 and Halo Infinite, Microsoft’s gaming top-line is as strong as its ever been.

The Washington-based consumer tech conglomerate recently announced earnings results for its first fiscal quarter of the 2022 financial year, which runs from July to September. Within, the company shared how gaming revenue grew 16% since this time last year. That equates to nearly $3.6 billion in sales, a record Q1 high.

With this latest trajectory, Xbox as a whole has now achieved double-digit sales growth in each of the past six quarters.

While executives shared little to no specifics on Xbox Game Pass subscriptions or hardware units for consoles, they did provide certain color around gaming in this quarter on a conference call with analysts.

According to Chief Executive Officer (CEO) Satya Nadella and Chief Financial Officer (CFO) Amy Hood, the company is continuing to attract new gamers and retain those it established during the pandemic. This was a “record first quarter for monetization and engagement” per Nadella, while Hood said the firm “shipped more Xbox Series X|S consoles than expected, even as demand exceeds supply.”

One thing that management didn’t specify is Xbox Series X|S comparison to prior generations, which it did last quarter when they announced it was the fastest-selling in history. Does that mean it’s no longer the case, or did they just not specify it? Hardware sales for Xbox rose 166% since this time last year, implying its best first quarter by revenue based on estimates backing into it historically. We don’t actually know other than how well it’s translating to dollar sales.

Let’s look further at what numbers the company did report, namely how they translate to certain trends.

Taking a look at the earnings slides provided by Microsoft, gaming revenue grew that 16% compared to last year’s first quarter. Or $3.593 billion in dollar sales, to be exact. Compare that to the prior record holder: last year’s $3.1 billion in Q1. This was of course before the Xbox Series X|S launch in November 2020 and the ZeniMax deal closure in March 2021, so growth is certainly anticipated. Microsoft guided a “low double digit” increase, thus the result came in above forecast.

In terms of categories within gaming, Xbox Content & Services i.e. software and subscription rose slightly at 2%. A modest gain. Based on friend of the site’s Welfare’s historical math at the Install Base forum corroborated by yours truly, that translates to $2.88 billion. A low yet steady growth rate here makes sense and was in-line with Microsoft’s forecast. Last year was a few months into stay-at-home restrictions. This time, declines in third-party weren’t enough to offset increases in Xbox Game Pass subs plus first-party software.

Xbox Hardware continues to be a substantial growth driver naturally, rising 166% on high demand for the supply-constrained Xbox Series X|S family of devices and a low comparison last year. Backing into dollar sales, it’s roughly $710 million which is the best Q1 for console revenue since 2016.

What I like to do after learning quarterly figures is expand to annual, it helps identify more macro trends. That’s where my chart comes into play, mapping out total revenue and showing splits between the two sub-segments. Microsoft’s gaming revenue over the last 12 months is approaching $16 billion for the first time in history. The latest result is $15.86 billion, 77% via Xbox Content & Services. This is happening due to the combination of studio investment, rising first party game output plus the ecosystem play of subscriptions and cloud offerings.

Unfortunately as I’ve mentioned in the past, Microsoft doesn’t drill down into exact profit metrics within gaming. That doesn’t mean I can’t infer, of course!

The More Personal Computing overview slide describes operating income growth of 7% for this category that contains the Xbox business, which is lagging the 12% revenue growth. That’s driven by a shift towards gaming, notably notoriously lower margin consoles. Expenses rose 15%. This mix shift and margin decline signifies costs associated with financing the gaming business, a research and development focus plus marketing of products like new Xboxes, Game Pass and software in the back half of this year.

At this juncture, I’m disappointed in Microsoft’s decision to hold back any sort of details on its flagship exclusive. Which isn’t a single game. It’s Xbox Game Pass.

There was speculation recently after Take-Two Interactive boss Strauss Zelnick threw out a figure of 30 million subscriptions during a panel with Xbox lead Phil Spencer, who reiterated 18 million as the latest figure. Which everyone knows is outdated from way back at the beginning of this calendar year. There were rumblings it hit 22 million a few months back, albeit unconfirmed.

A potential reason for Xbox playing coy is a recent finding by Axios showing that for the year ending June 30th, Xbox Game Pass subscriptions rose 37%. Below the company’s internal estimate of 48%. While it makes sense this is less than the 86% for the year ending mid-2020, I’m curious if Microsoft is hesitant because of these speculative figures. Nearly 40% growth is actually a really impressive figure. Combine that with Nadella’s comments about best ever engagement, why not give an update? It’s just unclear where it stands now on number of subscriptions. Or really any other specific engagement indicators other than Nadella’s vague comments.

Flipping over to hardware, the big question remains: How many units of Xbox Series X|S consoles are in the market right now?

Last quarter, I shared how a reliable industry estimate for Xbox Series X|S was roughly 6.5 million units. Given the notable hardware growth alongside supply considerations, does that mean it’s now more than 8 million? I believe so, though really wish Microsoft was as transparent as its peers in this department. Good news is companies are selling-thru to customers (or scalpers, I know) whatever they can produce, which is the important barometer.

Speaking of competitors, it’s a bit tricky to run comparisons until both Sony and Nintendo report their September-ending quarters scheduled for tomorrow, October 28th then November 4th respectively. (You should know that from my latest earnings calendar!) Using June figures, Nintendo’s trailing annual gaming sales totaled $15.56 billion while Sony’s reached $24.35 billion. Microsoft and Nintendo are virtually neck-and-neck, though it’s not a perfect comparison until next week. While this provides perspective, the real trend is how records are being met or set constantly in this environment. It’s indicative of player retention and ongoing supply for manufacturing components.

One additional tidbit as part of Microsoft’s 10Q regulatory filing is a further breakdown of the ZeniMax/Bethesda acquisition. The total cost ended up being $8.1 billion for the deal that closed back in March, above the previous estimate of $7.5 billion. I’m not sure if the company has shared this before, it’s the first time I caught the exact figure. Earnings from ZeniMax have been included in More Personal Computing since closing. Xbox is investing in development of key future Bethesda titles like Starfield, Indiana Jones and even The Elder Scrolls VI, so I expect increased expense trends to continue.

Before wrapping up, I wanted to quickly review Microsoft’s overall company results.

It generated a whopping $45.3 billion in revenue during Q1, implying growth of 22%. $13.3 billion of this from More Personal Computing. Trickling down to gaming, this means the Xbox division contributed around 8% of total company sales.

On the profit side, Microsoft saw $20.2 billion in operating income. That’s 27% higher than this time last year, and the first time it’s surpassed $20 billion during any quarter. These are record times, driven by its cloud business and enterprise offerings. It’s also the reason why the firm can invest in certain areas, including Xbox.

The upcoming quarter will be an eventful one for Microsoft and its gaming business alongside the industry as a whole. It’s the coveted holiday quarter in various parts of the globe, which is an intense time for releases and hardware promotions. The company expects Xbox to have yet another record-setting performance.

“In gaming, on a high prior year comparable that included the launch of our new consoles and strength across Xbox content and services, we expect revenue growth in the high single-digits,” said CFO Hood during the forecast portion of the conference call.

Assuming the mid-range of that estimate, around 7% to 8%, that’s upwards of $5.4 billion during the holiday quarter. That would comfortably achieve a record second fiscal quarter, beating out last year’s $5.02 billion.

So, can Xbox top that? Yes. It will. Personally, I’m forecasting 10% or even higher for the broader gaming sub-category.

Within, Microsoft said Xbox Content & Services should grow in the “mid teens.” If we put that at exactly 15%, it’s $4 billion. That would be over $500 million more than last year’s total, and yet another historical high for a Q4. I can certainly see that happening, with software and services driven by key title launches like the aforementioned first-party releases then multi-platform favorites like sports titles, Call of Duty: Vanguard and Battlefield 2042.

Xbox Hardware will be the more intriguing result to me as it’s a full year into the new generational cycle. Microsoft doesn’t issue formal estimates for hardware, though it’s easy enough to back into it making these prior assumptions. Based on its other guidance, hardware sales could reach $1.3 billion. That would be slightly down since the launch quarter of Xbox Series X|S, when it was over $1.5 billion. This is totally dictated by supply since major discounting won’t happen yet. Which is why the effort towards Xbox Game Pass and cloud are so integral to the firm’s broader strategy.

Well, that’s a pretty big quarter for Microsoft overall and within Xbox. Record results, generic comments and plenty of forecasts to chew on for the future. What did you think? Are you also disappointed by a lack of transparency? Do you predict it will hit upcoming targets?

Check back soon for other write-ups and I look forward to chatting on social media soon. Thanks for reading!

Comparisons are year-over-year unless otherwise noted.

Sources: Axios, Welfare via Install Base Forum, Microsoft, Xbox Twitter (Image Credit), Yahoo Finance.

-Dom

Microsoft’s Xbox Division Sets New Annual Sales Record in 2021

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During Microsoft’s fiscal fourth quarter results presentation yesterday for the period ending June 2021, the massive American technology conglomerate shared how its gaming division is faring amidst the global pandemic and early in this latest console cycle. This presentation revealed how the Xbox team achieved a handful of impressive records.

First, Microsoft’s gaming revenue for the trailing 12-month period back from Q4 is its highest in reported history. The Xbox division generated nearly $15.4 billion in annual sales. That’s 33% higher than the same 12-month period this time last year, when it was almost $11.6 billion.

That makes this the second quarter in a row that annual gaming sales were above the $15 billion threshold for Microsoft, showcasing how both hardware momentum and subscription expansion are boosting results even as third-party software contributions slow from highs in 2020.

In terms of the new generation of Xbox Series X|S platforms that launched late last year, Chief Executive Officer (CEO) Satya Nadella said on the earnings conference call they are the fastest-selling boxes in the 20-year history of the Xbox brand. These have “more consoles sold life-to-date than any previous generation” according to Nadella. This led to Xbox Hardware growth of 172% during Q4, with the caveat being of course this compares to a low point at the end of a prior generation.

Which is notable especially in terms of the current hardware supply environment for all manufacturers. Xbox is selling every single box its suppliers can make, as consumer interest far exceeds production capabilities right now. I anticipate this will continue for the foreseeable future, at least through the next fiscal year ending in mid-2022.

Parallel to the hardware performance is that of gaming software and related services, represented by the Xbox Content & Services sub-segment. This is the one notable lackluster portion of the report, with a fourth quarter decline of 4%. Increases in Xbox Game Pass and first-party releases couldn’t outpace declines in third-party.

Speaking of the Xbox Game Pass service, unfortunately Microsoft executives didn’t share updated figures for its paid subscriber base. Last count it was officially 18 million as of 2020 year-end, though more recent media reports have estimated the figure at upwards of 23 million as of April. My current estimate is 25 million, though I imagine Microsoft would share that milestone so it might be just below it for now.

Knowing these records and high level performance, I’ll now dig a bit into underlying numbers and executive comments.

If you pop open these gallery images above, you’ll see a.. number of insights.

First, the annual revenue figures for Xbox based on reported growth. Overall, gaming revenue for Microsoft rose 11% in Q4 bolstered by a major contribution from hardware and subscriptions. Based on historical sales figures, this equates to roughly $3.74 billion in quarterly revenue. That’s the highest sales ever for Xbox during a fiscal fourth quarter i.e. April to June.

Aggregating this quarterly figure into annual results and you’ll see the trend line for 12-month revenue is at that record $15.4 billion level. Even if slowing its growth trajectory, there’s no denying Microsoft’s combination of hardware launch and ecosystem play are at least pumping up Xbox’s top-line.

One note. Technically the quarterly result for gaming revenue is currently an estimate based on growth figures reported in Microsoft’s earnings slides. The company hasn’t formally filed its 10K with the Securities & Exchange Commission (SEC) where it reveals exact gaming revenue figures. It should be very close.

(Update: Microsoft posted its annual filing on July 29th. 12-month gaming revenue reached $15.37 billion, essentially spot-on.)

For context here, how does this compare to peers in the industry?

Well, since I know you checked out my July to August 2021 earnings calendar, you’ll see both Sony and Nintendo report their respective first quarter results next week. So using recent annual figures from March 2021, Sony’s Gaming & Network Services segment reached over $24 billion while Nintendo’s overall sales totaled roughly $12 billion at the time. Essentially, Microsoft sits between the two other hardware manufacturers. And all of them are doing very well lately.

Unlike its competitors, Microsoft doesn’t reveal profit metrics for its Xbox segment. That doesn’t mean we can’t infer from what it does share. Might get technical here, bear with me. The broader More Personal Computing business unit, of which Xbox is a part, saw operating income of $4.87 billion in Q4, up from $4.09 billion. However, gross margin percentage declined 1% since last year due to a shift to gaming. Margin as a metric basically accounts for expenses deducted from total sales.

Now there’s a variety of factors impacting profitability within this segment. Suffice to say that a slight dip in margin percentage caused by this shift means gaming was a bit less profitable than others here which are Windows, Devices and Search Advertising. It’s impossible to back into exact numbers, unfortunately.

Xbox is selling every single box its suppliers can make, as consumer interest far exceeds production capabilities right now. I anticipate this will continue for the foreseeable future, at least through the next fiscal year ending in mid-2022.

When it came to growth during Microsoft’s latest Q4, Xbox Series X|S hardware was certainly the star.

The aforementioned 172% growth for Xbox Hardware is the result of simply high demand meeting limited supply. It’s effectively the best it can be right now, as Xbox consoles are consistently selling out.

With Xbox Series X|S being the fastest-selling in the company’s history, how does that translate to unit sales? Well, we don’t exactly know formally because Microsoft stopped sharing these a while back.

Still, there are estimates out there. Friend of the site and analyst at Niko Partners Daniel Ahmad attempts to estimate units shipped for Xbox Series X|S at roughly 6.5 million since November 2020. Aligned with Nadella’s comments, this figure would outpace the prior record holder of Xbox 360 at 5.7 million starting in 2005 plus 2013’s Xbox One with roughly 5 million shipments across the same 6-month span.

Which makes sense, especially given recent performance in its largest market of the United States. The Xbox platform had its best June month ever according to The NPD Group, as I wrote about recently. Definitely check out that piece to see more specifics.

The other sub-segment within gaming is Xbox Content & Services, which saw somehwat mixed results during the fourth quarter.

Revenue here was 4% lower than this time last year, mainly because of software published by third parties available on the Microsoft store or retailers. This makes sense because the prior four quarters all experienced growth above 30%. It was bound to revert from those prior peaks.

Amidst this decline, executive comments still indicate expansion in services and player interest in particular. Chief Financial Officer (CFO) Amy Hood noted the team saw “strong engagement across the platform” during Q4.

The management team said Xbox Game Pass is “growing rapidly” while referencing certain statistics, similar to those we’ve heard in the past about how subscribers play and spend more than their non-member counterparts.

There was specific mention of cloud gaming this time, a service that Xbox has embedded within its top-tier Xbox Game Pass Ultimate and expanded to more countries in recent months. While not specific, Microsoft said that “millions” are streaming to their various devices.

What this mix of results and comments around Xbox Content & Services tells me is that last year was really fantastic during the height of pandemic quarantine orders, the audience base is still there yet spending less than that time especially on software. Subscriptions are propping it up, which is exactly what the team wants from pushing ecosystem and its robust Xbox Game Pass library.

Growth could slow a bit near-term for the Xbox division. I do think the baseline has been reset by newer audience members plus lapsed gamers sticking around and spending lately, which will help comparing growth against those high points last year.

Taking a step back to the company overall, Microsoft posts some staggering results in the scheme of things. Over $46 billion in fourth quarter revenue, an increase of 21% and well ahead of analyst estimate of $44.2 billion. Operating profit of $19.1 billion is 42% higher than this time in 2020, leading to an earnings-per-share figure above consensus as well.

Then what’s next after this record year for Xbox? Beyond healthy guidance for the firm overall, gaming is expected to grow into the first quarter of fiscal 2022.

“We expect revenue growth in the low double-digits,” said Hood in reference to gaming. “Console growth will again be constrained by supply. And on a strong prior year comparable, Xbox content and services revenue should grow low single digits.”

I can see that, consistent with its release schedule and hardware inventory limitations. There’s no flagship first party launches until Halo Infinite, and even that has a nebulous holiday release at present. There’s higher profile third party multi-platforms like Madden NFL 2022 from Electronic Arts in August and NBA 2K22 in September, which will contribute on the content side. There’s also a slew of new versions, smaller or indie titles in the coming months. The Ascent. 12 Minutes. Psychonauts 2. Hades and Microsoft Flight Simulator on console.

It might be tricky for Xbox to match the sales highs of the last 12 months, given the previous global stay-at-home situations and leading into a new console generation. Growth could slow a bit near-term for the Xbox division. I do think the baseline has been reset by newer audience members plus lapsed gamers sticking around and spending lately, which will help comparing growth against those high points last year.

Xbox Hardware will be strong, even if supply increases at a slower rate than originally anticipated. I believe subscriptions will keep pace, though am tapering expectations on content and software spend until the quarter ending December.

All in all it’s big results for 2021, like we’re seeing most places in the games industry. The question becomes where will it go from here.

Feel free to reach out here in the comments or on social media with your reactions or questions. Thanks for visiting!

Sources: Microsoft Investor Relations, The NPD Group, Wu Yi (Photo Credit).

-Dom

The Top 10 Highlights of Gaming’s Biggest Show: E3 2021

DomsPlaying

It’s over already?

The build-up to gaming’s annual Electronic Entertainment Experience (E3) gala lasts for what seems like forever. We make our predictions and get probably way too excited. Then the multi-day show and surrounding week-long event cycle is a whirlwind of information pushed by publishers, developers and hardware manufacturers big and small, plus a plethora of enthusiast media presentations and general coverage.

And it’s over before we know it.

During that time, it’s a rush. There are so many conferences and games in and around E3, as companies try their best to carve out their sections to capture a super engaged audience ready for cool, new stuff. Sure, it’s scattershot in this digital format. Sometimes unclear which events are backed by the Entertainment Software Association (ESA), who organizes E3, or which are on their own. Good news is that it’s all gaming for about a week straight. If you weren’t glued to the internet, I’ve got you covered.

2021 presented a number of challenges for the organizers and hosts plus all of the people working hard to make games while adapting to a COVID world. E3 went digital, and the results were certainly mixed when it comes to consistency and quality. I mean, it’s tough to make things during a pandemic.

That’s not to say there wasn’t a ton of great stuff across huge triple-A publishers, excellent indie presentations and informative interviews or panels. While I won’t cover everything, I’ll do my best to hit the major trends and most impressive reveals.

Congratulations to all the teams that did have something to show this year. It’s an accomplishment on its own to put yourself out there. I hope you get some temporary and much-needed rest before making that push to finish your projects.

Here are the ten biggest highlights from E3 2021, plus a little bonus for good measure.

#1: Xbox & Bethesda Games Showcase

This year’s Xbox & Bethesda show was illustrative of effort across an entire generation of investing in a directional shift for Microsoft’s gaming division. The single biggest exclusive that team Xbox has isn’t Halo Infinite or Starfield. It’s Xbox Game Pass. Out of 30 games shown, 27 are hitting the subscription service which will also soon be available in even more places. Headliners included a blow-out on Halo Infinite, cinematic trailer for console exclusive Starfield, stunning reveal of Forza Horizon 5, August release date for Psychonauts 2 plus an awesome deep dive into S.T.A.L.K.E.R. 2. The Outer Worlds 2 from Obsidian had arguably the best “non-trailer,” poking fun at games that are revealed with nothing to show. Then its finale was Arkane’s secret vampire project, entitled Redfall.

The theme of Microsoft’s conference was reminding everyone that Game Pass is the best value in the industry. How it’s making games more accessible on different devices. In particular the team boasted a number of notable third party hookups like Back 4 Blood, launching day one into Game Pass later this year, in addition to a sequel to one of my favorite games of 2019, A Plague Tale: Requiem in 2022. 12 Minutes, Atomic Heart, Somerville and Replaced are all day one titles. Then there’s existing games like Hades, Among Us and Yakuza: Like a Dragon hitting the service.

Packed with released and future content at a brisk pace, I didn’t even mention Battlefield 2042 and Far Cry 6, Xbox & Bethesda showed exactly what a console manufacturer slash major publisher should do at E3. And did I mention there was Game Pass? Hit up Xbox Wire for more details.

#2: Nintendo Direct & Treehouse Live

Nintendo usually bookends an already hyped event on the final day, showcasing its projects during a curated Direct video then launching right into gameplay segments on Treehouse Live. While there was nothing from Animal Crossing or Pokémon and zero hardware other than the collectible Game & Watch: The Legend of Zelda, the Japanese publisher and console maker did have a ton to like and a little bit for everyone. Including long-suffering fanbases.

Top billing was of course the sequel to The Legend of Zelda: Breath of the Wild which shared gameplay bits interspersed with cinematics, divulging that the skies above Hyrule will be an important part, prompting fan theories galore. Nintendo is targeting 2022 for that, perhaps to coincide with a certain console iteration. Fighting for biggest surprise of E3 overall was Metroid Dread, the first proper Metroid game in a decade set to be released in October, resurrected after its disappearance over fifteen years back. Even Advance Wars is hitting Switch in the form of the Advance Wars 1+2: Re-Boot Camp collection.

Mario Golf: Super Rush, Monster Hunter Stories 2: Wings of Ruin and The Legend of Zelda: Skyward Sword HD all had segments since their respective launches come over the next few weeks. Switch’s back half of 2021 lineup is rounding out as well, seeing as Nintendo announced WarioWare: Get It Together! in September and Mario Party Superstars in October. Third party exclusive Shin Megami Tensei V drops in November. Sprinkled in were segments on Life is Strange, Danganronpa, Just Dance 2022 and even Fatal Frame: Maiden of Black Water. Ubisoft crossover Mario + Rabbids Sparks of Hope made its second appearance of E3 here.

All in all, Nintendo showed strongly with its theme of rapid pacing, quality exclusives and ongoing partnerships for Switch that appealed to various swathes of its audience. Well, except for Bayonetta fans. Read a full recap here.

#3: Indies, Indies Everywhere!

It was nearly overwhelming trying to follow along with all the amazing mini-showcases featuring or solely focusing on independent creators this year. Guerrilla Collective. Day of the Devs. Future Games Show. Indie Game Showcase. ID@Xbox sections. Devolver Digital. And more. Indies positively stole the week in this digital format, the most consistent and wide-ranged showing ever for that slice of the industry. The best part of this format is that indies can share, or even capture, the spotlight and instantly hit the radar of fans and even people that might not normally check them out.

Between titles already announced and brand new reveals, I can’t count how many indies I want to play after the past week. Off the top of my head I can list over a dozen that are worth exploring. 12 Minutes, Black Tail, Bramble The Mountain King, Death’s Door, Happy Game, Harold Halibut, Lake, LifeSlide, Loot River, Lost in Random, Moonglow Bay, Replaced, Sable, Sifu, and Tunic. There’s way more, appealing to all tastes because that’s the forte of there being so many talented creators working in the space. Some even have limited time demos out on Steam or Xbox platforms.

That’s the beauty of the indie scene, and I’m ecstatic that smaller teams can hang with the so-called “big guns” this time of year. Perhaps even outshine them.

#4: FromSoftware’s Elden Ring

This one should be no surprise. Shoot, I dedicated an entire article to it right after its reveal last week.

In the most substantial get for Geoff Keighley and Summer Game Fest Kickoff Live last Thursday, FromSoftware shared an Elden Ring trailer for the first time since 2019. Right after, publisher Bandai Namco pushed press materials and screenshots that delved even deeper into the dark fantasy role-playing game, a collaboration with A Song of Ice and Fire writer and Game of Thrones showrunner George R.R. Martin. It temporarily satiated the appetite of the core gaming discourse online, with analyses and investigations into what it will end up being when it’s out in January 2022. A release target that’s way sooner than expected.

And for good reason. An open area soulslike made by the masters of the genre with different biomes, bespoke dungeons, towering bosses amidst the usual expert environmental design expected of FromSoftware. Especially if Elden Ring can strike a balance between story and lore, which is usually opaque in the developer’s prior titles, it could end up as the showpiece for games of its kind.

Right now, it’s 100% my most-anticipated upcoming release. I’m nowhere near alone in that regard.

#5: Summer Game Fest Kickoff Live

Tying in with the prior entry on this list, Summer Game Fest Kickoff Live marked the unofficial beginning of “E3 Week” as Geoff Keighley and his talented team produced a jam-packed stream featuring game reveals, musical performances, celebrity guests and, of course, that Elden Ring finale.

What’s great about anything Keighley does, including The Game Awards, is that he leverages industry relationships to make inclusive events that blend commercial and hardcore, and he just knows how to put on a show. His passion is evident immediately, and the sheer breadth of content is usually there. Since it’s not actually affiliated with E3 or any major console manufacturer, this is a place mostly for third parties and independent labels. This year’s stream featured Tiny Tina’s Wonderland, Metal Slug Tactics, Hideo Kojima’s Death Stranding: Director’s Cut, Jurassic World Evolution 2 (introduced by Jeff Goldblum), Salt and Sacrifice, Two Point Campus and even a new publishing label from Koch Media called Prime Matter.

Admittedly this one didn’t have the best pacing, with a notable lull in the middle. Luckily it started strong and was able to crescendo in the back third, not unlike its couple of great musical performances. Especially Japanese Breakfast singing over the serene gameplay of Sable. Following along was a fun way to begin the festivities, mainly because of production value and the know-how of its organizers. Visit the website for a replay.

#6: Ubisoft Forward

From a pure presentation standpoint, Ubisoft is one of the best in my opinion. Engaged hosts, snappy segments and often times gameplay features right after teaser trailers. Even if the content was a bit lighter than usual this year, for obvious reasons during a global pandemic, the massive French publisher’s event contained multiple intriguing projects.

Pre-show started with updates on already out titles like Watch Dogs: Legion, For Honor, The Crew 2 and a crossover between Teenage Mutant Ninja Turtles and Brawlhalla. Which was all an appetizer for the main course. Rainbow Six Extraction, the co-op first person shooter that previously had the unfortunate subtitle of Quarantine, featured both a trailer then gameplay demo. Guitar teaching software Rocksmith+ and annualized dance franchise Just Dance 2022 performed here. In the most intense and honestly fun showing, multiplayer extreme sport title Riders Republic brought a lot of energy. Every time I see that game, I’m more interested in trying it.

Ubisoft talked about how 2020’s Assassin’s Creed Valhalla will get another year of updates, implying that the next mainline game is a ways out. It showed a segment on its Film and Television content, then Far Cry 6 and the formal reveal of Mario + Rabbids Sparks of Hope. That “one more thing” moment came in the form of Avatar: Frontiers of Pandora, setting a release window for this action-adventure game as next year. We’ll see about that!

While nothing mind-blowing, Ubisoft’s lineup is about ongoing support and consistency of franchise appearances. The lack of Prince of Persia, Skull & Bones and Beyond Good & Evil 2 is unfortunate. Splinter Cell was only mentioned in passing, as is the case lately. It was still the most robust single third party publisher event this E3 season, and a full rundown can be found here.

#7: Wholesome Direct

The winner of this past week for “best vibes” totally goes to Wholesome Direct, an indie developer showcase strictly focused on the most chill, upbeat of new releases. There were at least 70 games shown, all of them non-violent and positively charming.

It’s hard to pick out individual games from so many, and it was really more about getting to see an entire showcase where everything was so darn cheery. But here are some that stood out to me. Lake is a narrative game about a delivery driver returning to her hometown. Moonglow Bay is colorful and set in a fun fishing town. Snacko is a simulation game about being a cat. Behind the Frame is a story puzzle game using art as its delivery method. Letters is a choice-based story about pen pals.

Admittedly, some are pretty self-explanatory. You battle as cakes in BattleCakes. Unpacking is a meditative, reflective game where you unpack boxes. The player cooks yummy meals in Soup Pot. In Skatebird.. well, you skate as a bird, of course!

And last but certainly not least was Pupperazzi. Yes. This is a game about taking photos of cute dogs. If that doesn’t sell you on the entire concept of Wholesome Games, I don’t know what will. Its website has lots of deets.

#8: Halo Infinite

Of all the games shown that aren’t named Elden Ring, Xbox’s Halo Infinite was probably the single most important single showing for a company presenting at this year’s E3. During the aforementioned Xbox & Bethesda show, a large chunk in the middle was dedicated to the latest mainline game in the Halo franchise since 2015’s divisive Halo 5: Guardians. While 343 Industries has been providing monthly updates on the upcoming project, this was its chance to perform on the big stage. Especially after a disastrous trailer last year.

And this time, it did. Not only was there a cinematic story trailer in which Master Chief talks to an artificial intelligence that isn’t named Cortana, who is allegedly dead now, 343 also showed off ample footage of the multiplayer mode.

One huge element of the multiplayer is that it’s free-to-play, breaking down the usual barriers to entry of purchasing a full-priced title. Even those without Game Pass can play at no cost. Xbox confirmed that both campaign and multiplayer will launch at the same time.

The most curious part to me is that Microsoft is still playing coy with a launch date for Halo Infinite, what everyone expects to be its flagship 2021 title. After all the E3 coverage, it’s still listed as Holiday. As that time approaches without a firm date, the more skeptical I become that it will be out this year. For now, I’ll take them at their word.

#9: Guardians of the Galaxy

Finally, a big surprise! (Well, almost.) When talking major publisher showcases, Guardians of the Galaxy was in fact the most surprising of all reveals to me. Even if it leaked ahead of time. Before the event, Square Enix said a new game from Eidos Montreal would headline its digital event, and this was it. In conjunction with Marvel Games, the Canada-based team is making a game based on the oddball superhero crew.

What shocked me most is that it’s a single-player narrative action game where the player only controls Peter Quill aka Star-Lord, in his adventures with a misfit crew that includes Rocket, Groot, Gamora and Drax. Not only did Square Enix play a cinematic trailer showing the classic witty banter between these characters and story setup, it had a lengthy gameplay demo as well.

Combat is third-person action with Star-Lord using his blasters and jet boots to face against alien foes. The player can command each member of the team, almost like a special move. Rather than someone controlling every character like Marvel’s Avengers, this is solely a solo experience.

There also looks to be at least some narrative depth when it comes to choices and decision-making, where Star-Lord can decide to agree with one crew member over the other. How much that will dictate how things play out is anyone’s guess, but it’s a great system in concept.

Bonus points here for a release date of October 26th across all current and prior generation consoles, PC plus Nintendo Switch via cloud version. I’m looking forward to the usual humor and gallivanting across the stars from the Guardians later this year.

#10: Forza Horizon 5

What a ride it’s been! Speaking of, Xbox finally revealed what the rumors suggested: That Forza Horizon 5 is this year’s racing game from Playground Games, and it’s heading to Mexico. This was single-handedly the most gorgeous title shown across the entire week, featuring fast cars, stunning vistas and beautiful backdrops for the open world driving franchise that’s arguably the best in its genre.

2018’s Forza Horizon 4 is still popular these days, so many were anticipating what would come next. Now we know, as Playground boasts its “largest and most diverse world.” Features include dynamic weather and an “ever-evolving landscape.” It boasts a campaign mode plus co-op and competitive play, with classic game modes plus fun new ones such as bowling and piñata breaking.

Where it gets ridiculous is on the technical side. HDR. Raytracing. Photogrammetry, where the team takes photos or video of the actual locales in Mexico and somehow, I think using magic, translates all that data into realistic visuals with insane graphical fidelity within the game space. Then there’s all the cars, including the Mercedes-AMG Project ONE that’s featured in the gameplay sections.

Forza Horizon 5 was voted most anticipated game *overall* at the E3 Awards. Nearly unheard of for a racing game. Not only that, it’s out in November! We won’t have to wait long to see this beauty in action.

Bonus Game: Battlefield 2042

It’s bonus time. While technically revealed right before even Summer Game Fest, Battlefield 2042 was featured prominently at certain showcases including Xbox.

I believe the latest military spectacle shooter published by Electronic Arts has the most trailer views of any game revealed in the past week or so, currently at upwards of 15 million for the trailer at its official YouTube channel alone. Development team DICE shared a gameplay segment during Xbox & Bethesda’s stream, boasting futuristic weaponry, weather effects and a ton of outlandish multiplayer moments. Battlefield 2042 is the first mainline game in the franchise since 2018, and it’s proving a popular revitalization at least according to general interest during its announcement phase.

The much-anticipated and technically impressive shooter will certainly be a focus of Electronic Arts’ EA Play digital event on July 22nd. For now, head to its website for the latest info.

There you have the ten biggest stories from E3 2021 and a bonus to boot. A unique show in the scheme of things, but not without its amazing spectacle and awesome reveals. Judging by how long my gaming “watchlist” is compared to this time last week, I’d say it was still a good one.

Now it’s time to start planning for next year’s show, which is scheduled to be back in Los Angeles, California. In person! No word on dates yet.

What was the highlight of the show for you? How did your predictions go? Which showcase was your favorite? Do you prefer the digital format?

Be safe, and see you next year for more E3 coverage!

Sources: Company Press Websites & YouTube Channels, Entertainment Software Association (ESA)

-Dom

E3 2021 Preview & Predictions Spectacular

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It’s the holidays in June!

For gamers, that is.

After skipping last year due to obvious reasons, the Entertainment Software Association (ESA) is back hosting gaming’s biggest annual event. This time it’s rebranded to the Electronic Entertainment Experience (E3) and presented in an all new digital format.

Admittedly everything is a bit scattershot especially since the ESA is leaning on companies to schedule their own times, plus there are events happening around it that aren’t necessarily associated. (They like to stay close to capture that engaged audience, of course). It’s really the general season that counts, giving everyone a reason to celebrate all the new reveals, trailers and inevitable surprises.

During this piece, I’ll be covering previews and some (potentially bold) calls for various publishers that have formally announced their participation. Then will wrap up later with miscellaneous bets and random thoughts.

Here’s a rough calendar of events, subject to change. Then it’s time to get into the good stuff, and go on record with all my predictions!

  • Thursday, June 10th: Summer Games Fest.
  • Friday, June 11th: Netflix Geeked Week, Koch Primetime, IGN Expo.
  • Saturday, June 12th: Guerilla Collective, Wholesome Direct, Ubisoft Forward, Gearbox, Devolver Digital.
  • Sunday, June 13th: Xbox & Bethesda, Square Enix, PC Gaming Show, Future Games Show, Warner Bros.
  • Monday, June 14th: Take-Two, Capcom, Mythical Games, Freedom Games, Razer, Limited Run Games.
  • Tuesday, June 15th: Nintendo Direct & Treehouse Live. Bandai Namco. Yooreka Games, GameSpot, E3 Awards.

Koch Primetime (Friday, June 11th)

What We Know: Koch Media, a subsidiary of Embracer Group and overseer of Deep Silver, is hosting its first showcase actually before the start of E3 proper as part of Geoff Keighley’s conveniently-timed Summer Games Fest. Making the lives of predictors everywhere easier, Deep Silver already announced there will be no news on its biggest franchises: Dead Island, Saints Row, Metro or TimeSplitters. And honestly, Koch has been stingy with any information about what will actually be shown. It’s probably the publisher we know the least about when it comes to its streaming event. I mean, its tagline is actually “We Know Something You Don’t Know.” Okay then.

What I Predict: So, what the heck does that leave for the show? I expect something new from space shooter Chorus, currently slated for this year. Monster Energy Supercross 4 and MotoGP21 from Milestone are likely contenders. Iron Harvest and Phoenix Point with upcoming console releases are also a good bet. Here’s the long shot: We know Koch recently signed a co-publishing deal with Starbreeze for Payday 3. While it’s a long ways off, announced for 2023, let’s say we’ll get some sort of brief tease for that as well since it’s an important opportunity for both companies.

Ubisoft Forward (Saturday, June 12th)

What We Know: French publisher Ubisoft’s annual event really kicks off E3 weekend, and it’s always well-produced and hosted by pros. Beginning with an hour-long pre-show showing updates for existing titles For Honor, Trackmania, The Crew 2, Brawlhalla and Watch Dogs: Legion plus more, the team will then shift focus to upcoming games Far Cry 6, recently slated for October, then undated titles Rainbow Six (Formerly Quarantine) and Riders Republic. Both Assassin’s Creed Valhalla and the ever-present Rainbow Six Siege will have updates then Ubisoft Film & Television is scheduled to share more about its content.

What I Predict: Ubisoft claims there will be “a few additional surprises” during this Forward. What could they be? I’m thinking this is definitely where we learn more about the free-to-play Tom Clancy’s The Division: Heartland. Beyond that, I’m not nearly as confident. There’s a very slight chance that the recently-delayed Skull & Bones will make an appearance, it really needs some sort of showing to reassure folks that it’s on track. There’s infinitesimal odds of Beyond Good & Evil 2. And I don’t think Prince of Persia: Sands of Time will be there. I am in fact anticipating a new project reveal, even if a tease or title card. Might even be a new virtual reality experience. Though I’ve got bad news in that it, in all likelihood, won’t be a mainline Splinter Cell game.

Xbox & Bethesda Games Showcase (Sunday, June 13th)

What We Know: Without Sony’s participation this year, arguably the biggest event will be Xbox and Bethesda’s joint presentation. Microsoft described the focus as being Xbox Game Studios, Bethesda plus third party collaborators. It technically hasn’t confirmed any individual titles, though that doesn’t mean there aren’t those guaranteed, or close enough, to be present. Halo Infinite will have a blow-out. It legitimately can’t have a poor showing, especially since it’s the flagship title for Xbox’s late year calendar. Forza Horizon 5 location reveal and trailer are nearly a lock. Psychonauts 2 from Double Fine is a shoe-in for both gameplay and formal launch date, which I expect to be very soon. July’s The Ascent should be here. Then there’s Starfield from Bethesda, which will almost certainly be displayed in some form even if no release window. Rounding it out will be a lot from Xbox Game Pass and the ID@Xbox indie program, naturally.

What I Predict: Within that hour and a half, there’s a lot of room for unknowns. I’m thinking this would be a good time to see Halo Infinite multiplayer. And, yes, a battle royale mode which I believe absolutely has to be there right away to compete with modern F2P counterparts like Apex Legends and Call of Duty: Warzone. There will be a major Xbox Game Pass partnership. I’m calling Electronic Arts’ new Battlefield launching into the service. Betting that Rare shares how its new IP Everwild is shaping up, then maybe a quick technical showpiece from Senua’s Sacrifice Hellblade 2. Avowed from Obsidian is a good call. I’m not sure Perfect Dark reboot or State of Decay 3 will be present, same with Fable. Then, what’s new from internal teams? I bet we learn what Compulsion Games is up to recently since We Happy Few is already three years old by now. The big one will be (another) Wolfenstein 3 from MachineGames. Yes, I know the team is working on an Indiana Jones project. Wolfenstein is just too significant a part of the portfolio to be overlooked if it’s in any stage of progress to be shared publicly.

Square Enix Presents (Sunday, June 13th)

What We Know: Japanese publisher Square Enix will present Square Enix Presents and, as you can see above, we already know the highlights of what it’s presenting. Headliner is a “world premiere” from Eidos Montreal. More from Babylon’s Fall is guaranteed, September’s Life is Strange: True Colors will be there and, yes, Crystal Dynamics will keep on supporting Marvel’s Avengers with its upcoming Black Panther content.

What I Predict: With the show hitting a runtime of 40-minutes, Square Enix is teasing the old “and more” to keep us guessing. First off, leaks indicate that Eidos Montreal is building a Guardians of the Galaxy action-adventure game. Easy prediction there. More footage from Life is Strange: Remastered is highly likely. Forspoken is the new project from Luminous Productions, I think there will be a small section on that. Project Triangle Strategy should get an actual title that’s probably just Project Triangle. I’d imagine there will be at least one mobile title featured. Something Dragon Quest, after its recent event. The big question comes down to Final Fantasy (doesn’t it always with Square Enix)? Last we saw PlayStation 5 timed exclusive Final Fantasy XVI was around December. But I really think the company would lead with that as the headline if it was ready to take center stage, so I’m not sure it will be there in a major capacity. Or Final Fantasy VI Remake Part 2, for that matter.

Take-Two Interactive (Monday, June 14th)

What We Know: Not much at all other than Take-Two Interactive, owner of Rockstar Games and 2K Games, will be a part of the schedule for a Diversity, Equity & Inclusion Panel Discussion.

What I Predict: To me, this 100% means Take-Two Interactive isn’t sharing anything new at E3. Rumors point to Firaxis working on a strategy game in the Marvel universe while third party partner Gearbox Entertainment is cooking up a spin-off Borderlands entry called Wonderlands. While I’d absolutely flip out if the word BioShock was even uttered next week, don’t get hopes up. This sounds like a quick appearance.

Capcom (Monday, June 14th)

What We Know: Capcom is another one of these parties simply listed on the ESA’s website as having a “presentation” with no details whatsoever. The company hasn’t posted any specifics or teases, its investor relations website was merely updated with a new event called E3 2021 that links back to the same ESA page.

What I Predict: Knowing this, I expect another quick block with limited potential for new reveals. Monster Hunter Stories 2: Wings of Ruin is launching a month from now on Nintendo Switch and PC, so I bet it’s the feature here. Resident Evil Village released in May as its flagship title in the series this year, while March’s Monster Hunter Rise has already seen a couple updates to flesh out its endgame content. I’d say we see more from at least one of these. Going forward, I don’t expect much in the way of new or remade Resident Evil reveals or something from series like Mega Man or, God forbid, Dead Rising. And I’ll probably have to keep on waiting for my new Capcom fighting game prediction to come true. One day!

Nintendo Direct & Treehouse Live (Tuesday, June 15th)

What We Know: On the final day of E3 2021, Nintendo will step into the limelight and look to steal the show with its 40-minute Direct then three hours on gameplay details for select Switch titles. Though the company hasn’t said exactly which games will be there, there are certain titles that are almost guarantees. Mario Golf: Super Rush launches weeks after the event, so lock that in during both portions. Game Builder Garage will already be out by then, however I think Nintendo reminds everyone of that here. The Legend of Zelda: Skyward Sword HD hits in July, I’d be shocked if we don’t see gameplay. A bit further out is Pokémon Brilliant Diamond & Shining Pearl scheduled for November, which should be at least highlighted during the Direct. Plus there will be indies and ports galore, a staple of Switch ever since publishers recognize how well it’s selling.

What I Predict: Note how I haven’t mentioned the elephant in the room: The New Nintendo Switch Advance Pro Plus XL, or whatever the upgraded hardware iteration is going to be called. That’s because I don’t believe Nintendo will announce hardware during E3, and it’s almost too late to reveal it beforehand now. It will instead reserve that for a future, separate Nintendo Direct digital event. Which also means that a lot from The Legend of Zelda: Breath of the Wild sequel is up-in-the-air. My guess is a cinematic trailer with hints of gameplay footage during the Direct, though no hands-on time and a generic release window of Early 2022. In terms of other franchises, I’m skeptical of Metroid Prime 4 or Bayonetta 3 showing up in any meaningful capacity. Splatoon 3 looks far enough along that I could see even hands-on campaign play shown off. Pokémon Legends: Arceus now has a date of January 28, 2022, earlier than expected. So let’s say there’s a trailer for that here. Then there’s Nintendo’s classic “one more thing” moment. Mario Kart 9? Unlikely. Donkey Kong? Solid maybe. My inclination is a strong Super Mario Odyssey 2 tease, ending with a release window in 2022.

Miscellaneous Previews & Predictions (June 10th to June 15th)

What We Know: Well, there’s certainly going to be a lot more shown during E3 and its surrounding showcases and panels that I can’t possibly cover everything here. Warner Bros. will be there, focused on Back 4 Blood. Bandai Namco is assuredly bringing Scarlet Nexus. 24 Entertainment will show off its impressive Naraka: Bladepoint. A slew of third party and independent games via things like PC Gaming Show and Future Games Show plus enthusiast media coverage including IGN Expo and GameSpot’s Play For All Showcase. There are too many titles to name that we know should be there, especially with more of a focus on indie teams. Personally, I hope indies like 12 Minutes, Oxenfree II: Lost Signals and She Dreams Elsewhere will be somewhere. One indie title we know won’t be is Hollow Knight: Silksong. Unfortunately.

What I Predict: Here’s where I swing for the fences and have a bit of fun. You’ve probably been waiting for me to say this: What about Elden Ring! Bandai Namco has a slot late on the final day, and I’m calling it for real: This is where the legendary FromSoftware will finally bless the gaming world with its secretive soulslike, role-playing collaboration with George R.R. Martin. And it will be glorious. Now, what else? Will Hideo Kojima make a surprise showing during Summer Games Fest with his upcoming title? I actually think there’s a small yet not insignificant chance, given his bromance with Keighley. Will Microsoft acquire another studio? I wouldn’t count on it. Finally, in my wildest prediction yet, I bet that gamers will get along and not be disappointed by anything all week!

All in all, even as spread out as this year’s digital events will be, I’m just looking forward to having a few days dedicated to celebrating the industry and the hard-working people that grind it out every day. This is a special moment for them, those covering it like yours truly and everyone in the audience.

What about you? Which games are you most excited about over the next week or so? Are you willing to go on record with your most massively bold predictions? Feel free to share here or Twitter, especially as the big show approaches.

Good luck to all the teams showing off their games during this season. It’s an exciting time. Enjoy your E3 everyone, and be safe.

Sources: Company Websites, Entertainment Software Association, Saniya on Twitter @saniyaga for the clean schedule image.

-Dom

Sony & Microsoft Gaming Division Sales Launch To New Record Highs

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Two of the biggest gaming console manufacturers and technology companies reported recent financials back-to-back, and both of them set their own impressive new records in the process.

Sony, purveyor of PlayStation among other consumer electronics, reported full annual results earlier today while Microsoft and its Xbox division shared fiscal year 2020 3rd quarter figures yesterday.

(I hope you knew that because you checked out my latest earnings calendar already!)

Each report proves that traditional gaming is as popular as ever, racking up record sales figures and providing other insights into how the biggest players in the industry are reacting to the pandemic in terms of customer demand, part supply for hardware and development activity for software.

For instance, both companies just reported the highest ever revenue from their respective gaming divisions. Sony’s Gaming & Network Services (G&NS) segment, which houses its PlayStation brand, achieved annual sales above $24 billion for the first time ever. Microsoft has a shorter history in games, which means it’s been reporting figures over less time. Even so, it also reached a significant milestone with Xbox gaming revenue for the past 12 months moving past $15 billion for the first time since it began reporting that particular split.

Time to take a look into the reports, highlighting the records and notable figures along with trends that I spotted while reviewing the stats. And get ready for some super fun charts!

Overall for the year ending March 2021, Sony reported nearly 9 trillion yen in consolidated revenue, which equates to roughly $82.8 billion. This is an increase of 9% since 2019, and a beat compared to analyst estimates. Biggest contributors were significant increases in the aforementioned G&NS plus Financial Services unit while Sony Pictures saw declines due to lack of theatrical performance in a tough ongoing environment for films.

Yearly operating income for the firm as a whole rose 15% to 972 billion yen, or just under $9 billion. Driven by performance in PlayStation, Electronics Products & Solutions in addition to Music segments then offset by decline in Imaging & Sensing Solutions. While a double-digit increase, profit actually missed analyst estimates for the year.

(Yup. Sony has a lot of businesses.)

Focusing within G&NS i.e. the PlayStation division, this is the firm’s leading contributor in recent years. Total sales reached 2.66 trillion yen or roughly $24.44 billion, which is up 34% since last year and a record result for this unit during a full year. Operating income jumped 44% to $3.15 billion. This is the first time this particular business moved past $3 billion in annual profit, marking yet another record high.

Of course underlying these results is the PlayStation 5 launch back in November, a console which shipped 3.3 million units during its second fiscal quarter on market. That brings lifetime shipments after two quarters to 7.8 million, Sony’s best console launch ever as it surpasses the 7.6 million of PlayStation 4 back in fiscal 2013. I had estimated between 3.1 and 3.3 million PlayStation 5 shipments for the quarter, so it’s in-line with expectations and honestly an impressive result given the chip shortage and production constraints plaguing console makers right now.

“Supply has not been able to keep up with extremely strong demand for PlayStation 5, although constraints on the supply of components, especially semiconductors, is expected to continue this fiscal year,” said Chief Financial Officer Hiroki Totoki on the Sony conference call.

As presented in the below gallery, the notable part of this particular console transition for PlayStation is how well growth across all sub-categories is contributing to ongoing performance during a time where older hardware isn’t moving as many units and new consoles are constrained on the supply side of the equation despite massive demand. Digital Software and Add-On Content are both up 44% while Hardware jumped 39% in 2020, showing how players are consistently supporting software offerings and additional expansions or downloadable content on both prior and current generation.

Signaling an industry shift that’s been ongoing for a while and accelerating during the pandemic is digital split for PlayStation software, which hit an all-time best 65% compared to 53% in 2019. Implies nearly 2 out of every 3 games purchased for its platforms are now downloads.

Full game software unit sales reached 339 million during fiscal 2020, up from 276 million in 2019. Out of that, first party titles published by Sony contributed 58.4 million compared to 49.2 million last year. Signaling an industry shift that’s been ongoing for a while and accelerating during the pandemic is digital split for PlayStation software, which hit an all-time best 65% compared to 53% in 2019. Implies nearly 2 out of every 3 games purchased for its platforms are now downloads.

Swapping to user engagement, subscribers to Sony’s PlayStation Plus service rose 15% to 47.6 million. Monthly Active Users (MAUs) across all of PlayStation Network dipped a bit, now at 109 million compared to 114 million a year prior. Still, the rise in PlayStation Plus paid memberships is a more significant contributor to the gaming segment, pushing Network Services sales up 14% year-over-year.

Turning back to PlayStation 4 hardware for a moment, Sony shipped 1 million units of this now legacy console in its last fiscal quarter ending March. That brings lifetime sales to just over 116 million, maintaining its second spot on the all-time home console sales list. While this slowing momentum implies that it will never come close to the lofty 155 million lifetime sales of the historic PlayStation 2, it proves that there will be sparse demand for the immediate future and could realistically hit 120 million next fiscal year at this pace.

Looking into the future for Sony overall, the company starts its fiscal year 2021 sales forecast at an 8% increase over 2020 while projecting a 4% decline in annual operating income. The sales increase should be bolstered by a bounce-back for Sony Pictures plus continued performance of PlayStation and electronics categories. Profit will be negatively impacted by higher costs in development of games alongside other divisional declines.

In terms of gaming, Sony guidance shows a similar theme for the PlayStation business in that sales should increase 9% yet profit will show a bit of weakness, dipping 5% year-on-year. Hardware unit sales will naturally increase as supply broadens, as long as the global chip shortage doesn’t get any worse. And manufacturing costs will lighten as the production process is refined. Though consistent with the recent trend of game delays, Sony expects 3rd party games to contribute less in fiscal 2021 and that includes the coveted add-on content revenue stream.

In terms of a hardware unit projection, Sony executives played a bit coy on the conference call. CFO Totoki reiterated the expectation to ship “above 14.8 million” PlayStation 5 units during the fiscal year from April 2021 to March 2022. Which would bring lifetime to 22.6 million, ever so slightly above its predecessor’s 22.4 million during the same time frame. Basically saying to anticipate a slight increase this early in the generation. My first full fiscal year estimate is 15 million, with a tilt towards the downside if supply doesn’t strengthen quickly enough.

On the software front, Sony is intent on investing in its studios plus other partnerships as has been its successful strategy. The way PlayStation creates value and entices people to buy its hardware is by launching high quality games, especially from those talented studios that it owns. Naturally, it’s pumping dollars in order to attract talent.

“In terms of costs, we plan to increase development, personnel and other costs in our in-house studios by approximately 20 billion yen ($184 million) year-on-year as we further strengthen our in-house produced software,” said Totoki. “To enhance our software offering, we intend to continue investing in or partnering with external studios in addition to aggressively investing in our in-house studios.”

And I tend to agree with Sony’s overall and PlayStation guidance, though I remain tentative on the supply side of hardware and on first party launches like Horizon Forbidden West and God of War Ragnarok despite this strong ongoing investment. For example, I don’t project that both of these major titles will be out in the next 12 months. I expect only Horizon to release in fiscal 2021, perhaps even during the January to March time frame as holiday still seems like a tight deadline.

Moving to Sony’s main competitor in the traditional console space at least in Microsoft, it’s obviously a much broader company with enterprise cloud and Azure driving a bulk of its performance. So unfortunately it shares less details on its gaming results. Still, there are significant statistics and executive quote that guide towards where it’s at in its play towards ecosystem and services alongside its Xbox Series X|S console launch.

Note that these are quarterly numbers and compared to a year ago unless otherwise specified, since Microsoft reported its third quarter fiscal year 2021 figures.

In the quarter ending March, the company overall generated nearly $42 billion in revenue which is up 19%. Operating income increased 31% to $17 billion. It beat analyst estimates on both sales and earnings-per-share. Intelligent Cloud revenue reached over $15 billion, as the foundation of Microsoft’s business.

The Xbox division falls under its More Personal Computing (MPC) segment, which itself contributed $13 billion in sales and operating profit hit $4.6 billion. These 9% and 27% increases respectively were bolstered specifically by gaming results.

Drilling down into gaming alone, total revenue was $3.53 billion during January to March. That’s the first time a 3rd fiscal quarter recorded over $3 billion in sales, and a staggering increase of 50%. It accounted for 27% of revenue from MPC segment, a strong moment for a business that’s accelerating especially given the success of Xbox Game Pass and certain first party games like the ever-present Minecraft.

Xbox Content & Services, which basically means software plus subscriptions, alone grew 34% due to strength across the board in third party titles, Xbox Game Pass subscriptions and first party software.

“People are turning to Xbox more than ever to play and chat with friends, and we saw record engagement this quarter, led by strength on and off-console,” Chief Executive Officer Satya Nadella noted on its conference call. “With Game Pass, we are redefining how games are distributed, played, and viewed. Just last week, we added cloud gaming via the browser, expanding our reach across PC and mobile.”

What this quote and the results reveal is that Microsoft’s holistic strategy of attracting players to its ecosystem as opposed to a singular device is starting to pay major dividends. The team at Xbox is indifferent as to where someone plays its game or accesses its services. Just as long as they do.

Curiously, Nadella and team didn’t share new figures for Xbox Game Pass subscriptions. Back in January, Microsoft reported that the figure was 18 million. Rumors are that this figure is upwards of 23 million as recently as last week. Which would be consistent with Nadella’s remarks and recent Xbox Content & Services double-digit growth.

On the Hardware side, revenue more than tripled since this time in 2020 due to the start of a new generational cycle. Demand for Xbox Series X|S is vastly outstripped supply, the latter of which seems to be more significantly constrained than even the PlayStation 5.

Chief Financial Officer Amy Hood echoed the sentiment. “In Gaming, we continued to see record engagement and strong monetization across our platform, as well as demand that significantly exceeded supply for our Xbox Series X and S consoles,” she said.

Still, Microsoft isn’t sharing unit sales figures or giving any indication other than growth statistics for its hardware sales. It’s tricky to estimate, though friend of the site and Niko Partners Analyst Daniel Ahmad estimated that the Xbox Series X|S shipment figure was at 3.5 million last quarter. That would be slightly less than its predecessor the Xbox One, which did 3.9 million in its launch quarter.

I won’t put an exact number on it because it would be a complete guess, though wouldn’t be shocked if Microsoft shipped a couple million last quarter given the current inventory environment.

Annual gaming revenue jumped 46% since this time in 2020 plus achieved a record, the first time ever that yearly gaming sales at Microsoft crossed the $15 billion milestone.

Above gallery contains relevant information here, plus a handy chart that I’ll get into now.

Expanding to a longer timeline, gaming sales for Xbox totaled just over $15 billion for the trailing 12 month period ending March 2021. Annual gaming revenue jumped 46% since this time in 2020 plus achieved a record, the first time ever that yearly gaming sales at Microsoft crossed the $15 billion milestone. The recent direction under Head of Xbox Phil Spencer’s leadership of expanding to new audiences and devices isn’t just a concept, it’s proving to be a sound business decision.

One caveat here is that the $7.5 billion acquisition of ZeniMax happened during the quarter, so its contributions began in early March. Which definitely allowed for its record results. And is exactly why Xbox paid handily for it.

In terms of Xbox software, performance of first-party titles came in above expectations. Minecraft in particular, which recently saw MAUs increase 30% to 140 million. That’s an absolutely ridiculous number of people signing in every month on average for a game that’s over a decade old. Microsoft also shared that Minecraft creators have generated $350 million from over a billion downloads of mods, add-ons and experiences on the platform over the years.

Moving towards the future and guidance, Microsoft provides a specific number for its three broad segments then general comments about individual businesses. MPC revenue next quarter will be upwards of $13.6 billion and $14 billion.

“In Gaming, we expect revenue growth in the mid-to-high single digits. Significant demand for the Xbox Series X and S will continue to be constrained by supply,” said CFO Hood. “And on the strong prior year comparable, we expect Xbox content and services revenue to decline in the mid-to-high single digits.”

This is similar across both Microsoft and Sony, in that consumers will be buying as many pieces of hardware as they can produce. I’m most intrigued by software output for Microsoft, which I think will be quite stagnant until Halo Infinite later this year (which I’m fairly confident won’t be delayed again). So the question comes down to first party output combined with third party partnerships for Xbox Game Pass, the latter of which has been strong lately with games like Outriders and MLB The Show 21.

I anticipate Xbox Game Pass partnerships and console demand to drive results into the last quarter of Microsoft’s fiscal year ending June 2021, as opposed to any significant first party output. Minecraft will always be consistent, at least. Additional titles from its owned studios will come later, especially with Bethesda now incorporated into the mix and Halo Infinite looming as the flagship Xbox console exclusive later in calendar 2021.

Thanks to everyone for stopping by and checking out this analysis. Company reports have more details if so inclined, and I’m always active on Twitter for conversations around these results or my predictions. Would be interested to hear your perspective as well. Be safe!

Note: Exchange rate used for Japanese Yen to U.S. Dollar is as of today. 0.0092 JPY to 1 USD.

Sources: Daniel Ahmad (Niko Partners), Jez Corden (Windows Central), Microsoft, Newsweek (Image Credit), Sony.

-Dom

2020 Year-in-Review: Five Most Impressive Gaming Companies

DomsPlaying

Behind all the numbers and corporate speak, companies are people. And it’s those people that worked hard to design, create, polish, quality check, publish and distribute hardware, games, products and services during a tumultuous year that was 2020.

This category is meant to celebrate the teams of hard-working folks at companies with the most impressive lineups or multitude of successes. Later categories will focus on smaller, indie studios and publishers. This is reserved for the stand-out performers, often publicly-traded. We’ll hit all segments of the industry with the Year-in-Review.

No time to waste, right into the awards!

Activision Blizzard, Inc (United States)

While I don’t always agree with its business practices or monetization strategies, there’s no denying the sheer output of Activision Blizzard during 2020. Between new ventures in owned franchises, integration across Call of Duty titles plus the reintroduction of beloved catalog titles, its teams delivered multiple launches amidst the work-from-home demand of the coronavirus pandemic.

The internal teams Treyarch Studios and Infinity Ward collaborating to integrate last year’s excellent Call of Duty: Modern Warfare and Warzone free-to-play battle royale with November’s Call of Duty: Black Ops Cold War was a massive, if not ludicrous, undertaking. Then, put out continuous free updates with its seasonal content model, delivering new maps, weapons and a battle pass every few months. As of now, there’s both cross-play and cross-progression across these titles, nearly everything accessible to players on various platforms. The franchise overall reached $3 billion in net bookings during the 12 months ending December, proving upside of this adjusted business model.

Not to mention, finally, its Activision unit dug into the vaults of its storied IP library to produce Tony Hawk’s Pro Skater 1+2, a remade collection of two skating classics by Vicarious Visions, then a new entry in a long-running series: Toys for Bob’s Crash Bandicoot 4: It’s About Time. Fans have been calling for the company to leverage its back catalog for a long time, so these decisions should satisfy.

Blizzard’s output has been notably lower the past couple years, with Overwatch 2 and Diablo IV in the pipeline. Yet it still released a new expansion in the World of Warcraft legacy called Shadowlands, a release that moved 3.7 million copies in a single day to briefly achieved the fastest-selling PC launch ever back in late November (before CD Projekt’s Cyberpunk 2077 broke its record shortly after). Blizzard’s even received positive early impressions for mobile game Diablo Immortal!

Oh, speaking of mobile. There’s King, one of the most consistent labels within the field. It was mainly about consistent output this year across all three sub-divisions of the American publisher, and its teams deserve a shout out for delivering on these tight deadlines.

Microsoft Corp (United States)

As you’ll see here and a bit later, it’s time to celebrate the people behind the start of a new generation. That’s the main reason why Microsoft and its Xbox staff members easily make the cut. Those who worked through a pandemic to design, engineer, produce, market and ultimately distribute the Xbox Series X|S family.

Project Scarlett, as it was once dubbed, had a formal reveal late in 2019 as the Xbox Series X, and then 2020 happened. Team Xbox had to shift to a more virtual campaign for rolling out, plus deal with the delay of its flagship title Halo: Infinite. They successfully completed this effort in November at the launch of not only the higher-end Series X but the entry level, digital-only Series S as well.

Even without something at the scope of Halo, Xbox platforms saw plenty of worthwhile games and allowed smaller projects to shine. Ori and the Will of the Wisps from Moon Studios is one of the year’s most exceptional. Obsidian Entertainment’s Grounded attracted 5 million players to date and introduced clever new ideas in accessibility. Microsoft Flight Simulator from Asobo Studio reinvigorated a beloved, dormant franchise. It was one of the highest-rated games of 2020, just recently surpassing 2 million players.

Gears Tactics, Call of the Sea, Battletoads, Tell Me Why and Wasteland 3 rounded out the year’s lineup of games on Xbox. Shoot, Microsoft even somehow nabbed the local console launch of Phantasy Star Online 2. While perhaps lacking in triple-A experiences, there was plenty to enjoy.

Shortly before the new consoles, it updated the Project xCloud branding to Xbox Cloud Gaming and launched a formal beta alongside Xbox Game Pass Ultimate in September. It’s now available across 22 countries, with at least four more planned in the future. It’s a compliment to the traditional delivery model, meant to propagate the idea of ecosystem and connection. And it’s a damn fine service from personal experience.

Then there’s the continued growth and appeal of Xbox Game Pass, which snagged a partnership with Electronic Arts’ EA Play membership service as a way to expand its catalog. Recent rumors point to the potential inclusion of Ubisoft games, too. At last count, Game Pass had 15 million paid subscribers, up from 10 million earlier in 2020.

Lastly, in perhaps the biggest news drop of the year for the company and even gaming overall, Microsoft announced the purchase of ZeniMax in September for $7.5 billion. This is the parent company of the historic Bethesda Softworks, home to a number of development teams behind long-running franchises like Fallout, DOOM, Elder Scrolls, Wolfenstein, Dishonored among others. The upside of these games being exclusive to Xbox platforms, or at least having content exclusive to them, is massive. Like, industry-changing massive.

Microsoft’s annual gaming revenue exceeded $12 billion for the first time ever as of its quarter ending in September. While 2020 was light in the major exclusive department, it did feature two new consoles, a major studio acquisition and an expansion of its services. It’s laying the foundation for the upcoming decade, heavily investing in ecosystem in a more holistic approach than competitors.

Nintendo Co Ltd (Japan)

Yep. Nintendo is back on the annual list. During a year where its flagship game ended up being an Animal Crossing, not necessarily the biggest of sellers historically, and competitors debuted shiny new consoles, the Japanese developer and publisher was consistent in sales, output and quirky innovation, leading to its Switch hybrid hitting multiple milestones as the year’s most sought after hardware.

Steadfastness and fun, that’s Nintendo.

Animal Crossing: New Horizons was the headline-grabber here in 2020. The cute, animated life simulator’s launch in March coincided with the start of quarantine, a somewhat bittersweet serendipity that led to it achieving the fastest-selling launch ever for a Switch title at 11 million copies in under two weeks. It exceeded the *lifetime* sales of all other games in the series within 11 days. Then 13 million in 6 weeks.

Since then, it’s moved over a staggering 26 million units to date, already making it the second best seller on Switch behind only Mario Kart 8 Deluxe (a game in itself that saw exceptional momentum last year). Beyond the sales stats, it’s the single Nintendo-published game that served as a virtual safe haven for people to meet and hang out while the pandemic kept them physically distant.

It wasn’t the only notable software from Nintendo during 2020, even if the schedule was lighter than past years on big exclusives. Paper Mario: The Origami King is one of the most joyful and heartfelt games of the year, even if overlooked by general consensus. Its Hyrule Warriors: Age of Calamity collaboration with Koei Tecmo was a surprise critical darling, a musou prequel to The Legend of Zelda: Breath of the Wild. Remakes of older titles like Pokémon Mystery Dungeon: Rescue Team DX and Pikmin 3 Deluxe strengthened its annual lineup.

Then there’s the celebration of Mario’s 35th anniversary, where Nintendo launched a bevy of products related to the plumber’s birthday. Super Mario 3D All-Stars brought three prior gen games to Switch, even if underwhelming in their lack of modernization. Free to download Super Mario Bros. 35 pitted almost three dozen players at a time in a sort of Mario Royale competition. Mario Kart Live: Home Circuit continues in the company’s tradition of innovation, as a live version of the cart-racer. Game & Watch: Super Mario Bros. was the next entry in the collectible type of physical consoles. While I don’t like how some of these are only available for a limited time where the end happens to coincide with Nintendo’s fiscal year end, seeing them acknowledge the anniversary with such fervor was welcome in a difficult year.

Of course there’s the story of how Switch hardware continued to sell gangbusters and set records along the way. It reached 68.3 million units in September, vaulting past Super NES, Xbox One and the original Nintendo Entertainment System (NES) all during 2020. It was the best-selling in the U.S. by units during the coveted November time slot at 1.3 million units, outpacing the shorter supply of the PlayStation 5 and Xbox Series X|S. This marked a record 24 straight months atop the monthly hardware chart by retail unit sales.

All of this led to another stellar year for Nintendo, commercially and generally critically. Its financial situation hasn’t been this solid since 2009, measured by both revenue and operating profit. While it didn’t reveal much in the way of titles like the sequel to The Legend of Zelda: Breath of the Wild, Metroid Prime 4 or Bayonetta 3 last year, as long as Switch is in supply and the team consistently produces quality releases in its own special way, it will likely be a repeat in 2021.

NVIDIA Corporation (United States)

As far as higher-end PC gaming goes, NVIDIA was the backbone of 2020.

Its recognition here stems from the introduction of its latest line of graphics cards, the GeForce RTX 3000 series, plus continued success of its GeForce Now streaming service and a monumental acquisition deal.

The difference in its RTX 3000 card series compared to prior generations is real-time ray-tracing, a fancy way of saying “really cool lighting” techniques that happen while playing which make light sources, reflections and shadows pop when implemented correctly.

I won’t get bogged down in the tech nitty gritty here, there are other sites for that. Suffice to say these graphics cards built on its new Ampere architecture set the standard for performance across the mid and top end of the market. The beefy RTX 3090 and 3080 GPUs debuted in September, then RTX 3070 started in October. December brought the more affordable RTX 3060 Ti.

Critical consensus during reviews was outstanding. The series was lauded for advancements in 4K resolution, Deep Learning Super Sampling (DLSS) to boost frame rate performance and general ray-tracing capabilities. The tough part unfortunately was supply to the market, no doubt impacted by manufacturer yield issues, availability of parts and the pandemic at large. Even with the staggered schedule, scalpers and bots were usually first to order leaving regular consumers either without cards or resorting to secondary sources. Good news is sky-high demand. The tough part is the company said stock will increase next year, though it may take a few months, and scalpers will still be there.

In another major launch for NVIDIA, it formally kicked off its public beta for game streaming service GeForce Now back in February across North America and Europe. It’s really cool tech from the sound of things, though I haven’t tried it myself. Supports cloud gaming on laptop, PC, Mac, SHIELD TV and even Android phones or tablets. What’s nice is it connects to existing library on certain storefronts, although certain publishers have blocked using it with their games. Once NVIDIA figures out incentive to get publishers on board and launch in more territories, it could very well be the ideal option for cloud gaming.

Beyond its latest set of graphics cards and streaming offering, NVIDIA’s RTX technology suite is pushing audio, recording and streaming advancements too. Its RTX Voice feature beta started in April 2020, a module used to improve sound quality when using one’s PC for calls. This was then replaced by Broadcast app during the Fall, which featured new functionality for noise removal and virtual background while streaming.

Oh. There’s also the groundbreaking deal where NVIDIA announced its intention to purchase ARM from SoftBank for $40 billion in cash and stock. ARM is a major player in processors and intelligent computing, which would lead to a combined entity pushing research into artificial intelligence and super-computing. It’s expected to close within the next year or so, though certain investors have speculated it might be blocked by regulators in the United Kingdom. If it does go through, it’s a significant deal within the tech and computing industries.

Back in September, NVIDIA said it set records for quarterly revenue and profits. Sales jumped 57% year-on-year. Its share price reflects the ongoing financial success, more than doubling in 2020. If the American graphics card and chip maker can ensure supply of its latest product suite and close on its ARM deal, 2021 could be another historic year.

Sony Corp (Japan)

Our final entry in the list of impressive companies in 2020 is none other than Sony. Of course. PlayStation 4 achieved new sales records. PlayStation 5 became a huge (quite literally), landmark tech product. Its laundry list of exciting new games offerings both book-ended a generation and set the stage for this future one, with advancements in narrative, performance and accessibility options. The gaming teams at Sony continue to set the industry benchmark for both hardware and software, and deserve recognition for doing all of this during one of the most difficult times in modern history.

The Japanese consumer tech conglomerate started the year with the reveal of the PlayStation 5 logo, then dove into more about its new generation box and its brand new DualSense controller throughout the year.

At the same time, PlayStation 4 continued its commercial success. The second best-selling home console ever maintained decent enough momentum in its final year, reaching nearly 114 million in units shipped as of October. Bolstered by third-party exclusives like Final Fantasy 7 Remake, Persona 5 Royal and Nioh 2 in addition to flagship first-party titles like The Last of Us Part II and Ghost of Tsushima alike. Many of which are mainstays on year-end award lists and, more importantly, internal teams like Naughty Dog worked to set a new gold standard for accessibility features.

Then comes November, the PlayStation 5 launch. It was a big one, literally and figuratively. Sony’s approach is more towards defining the new generation with a new form factor, revamped controller and select games solely for the latest box as opposed to the fully backwards compatible strategy of its main competitor. Admittedly Sony acknowledges that it can’t ignore the millions and millions of PS4 owners, so there are plenty of cross-gen games. Even if its messaging was murky.

Headlined by Insomniac Games’ Marvel’s Spider-Man: Miles Morales and Demon’s Souls from Bluepoint Games/Japan Studio, the PS5 launch lineup was smartly supplemented by joyful surprises like Asobi Team’s Astro’s Playroom and The Pathless by Giant Squid. As part of Sony’s shift towards cross-generational consistency, it also offered a suite of legacy games via the PlayStation Plus Collection to PS5 buyers.

This dedication to exclusive software and new feature sets plus a competitive price led to PS5 being the fastest-selling global launch in brand history, beating out its predecessor. Sony didn’t said by how much at the time. A recent report suggests that the first four weeks reached 3.4 million consoles shipped. (Unofficial for the time being.) Domestically in the States, NPD Group said PS5 achieved the highest launch sales of any console in tracked history during November as measured by both units and dollars, again besting the PS4.

While services like PlayStation Now are somewhat lagging and the future of its virtual reality program is up in the air, Sony’s late PS4 support and movement into the new generation with PS5 marked a transitional year during which it consistently delivered memorable experiences and solid sales results. Out of the five companies on the list, it probably has the most upside for 2021.

Here we are at the end of yet another 2020 Year-in-Review piece. Check back to the megapost for more. Be safe, all!

Sources: Company Investor & Media Sites, Digitimes, NPD Group.

-Dom

Forget Console Wars: Sony & Microsoft Can Both Win Next Generation

DomsPlaying

Congratulations, gaming fans. You can do it!

All of you.

After Sony’s somewhat messy reveal yesterday of many things PlayStation 5 plus Microsoft’s announcements last week regarding the Xbox Series X|S platforms, the foundation of gaming’s next console generation are starting to fall into place.

With these announcements and a subsequent trickle of details, both manufacturers are solidifying their individual strategies. Sony with its more direct platform marketing and big-budget exclusive software compared to Microsoft’s two-tiered hardware plan plus service as an ecosystem play.

And I believe that both of these can, and will, work out for them.

Starting with Sony, the Japanese tech giant shared that the PlayStation 5 base version starts at $499 with a Digital Edition set for a quite competitive $399. The only difference being the latter doesn’t have a physical disc drive. Both release on Thursday, November 12th in seven markets, then November 19th in the remainder. Launch lineup includes games like Demon’s Souls and Marvel’s Spider-Man Miles Morales (which now has an Ultimate Edition with a remastered version of 2018’s Marvel’s Spider-Man), with the most notable point being increased prices compared to last generation. The broad video game price increase is officially underway.

Sony’s showcase also had brand new announcements like Final Fantasy XVI from Square Enix and Warner Bros’ Hogwarts Legacy then capped off teasing a new God of War title in development from its Santa Monica Studio. Overall, it was a tight, informative presentation albeit missing a number of key details for things like software release windows and pre-order timing.

Messaging from Sony has been all over the place in the time since this reveal. First off, Sony allowed retailers to dictate when pre-orders went live despite saying that they would provide “plenty of notice” previously. Also in the past, executives like Sony Interactive Entertainment’s President & CEO Jim Ryan have stressed how the company believes in generations. That is, targeting games for strictly the new console as opposed to cross-generational type releases.

Then yesterday, the garbled communication accelerated. The team said PlayStation 5 games including Marvel’s Spider-Man: Miles Morales, Sackboy A Big Adventure and even next year’s flagship graphical powerhouse Horizon Forbidden West will also have PlayStation 4 releases. An inconsistency with seemingly its underlying strategy of established generations. Now, this makes all the sense in the world from a business standpoint. There are 112 million PlayStation 4 consoles in the wild, most owners of which won’t upgrade for a number of years. A clean-break generational move is antiquated in 2020, when backwards compatibility and maintaining a library is important.

Early adopters are going to buy the shiny new box regardless. It’s more about people six months or years from now that will determine the trajectory of sales. These companies have to consider those just as much as the enthusiasts.

In another twist, Ryan said in a couple interviews with media that the overall catalog of games is less significant than having “new, great” software offerings. Combine this with the massive $100 million or more budgets for its first party projects, Ryan doesn’t think that launching games into a subscription service is sustainable.

The irony is that I believe bridging the gap between PlayStation 4 and PlayStation 5 is one of the reasons why Sony can be successful in the upcoming cycle. Maintaining continuity with its legacy owners and their libraries will allow people to upgrade without fear of losing access to their favorite games, especially with many titles being live services now and not providing clear upgrade paths. Early adopters are going to buy the shiny new box regardless. It’s more about people six months or years from now that will determine the trajectory of sales. These companies have to consider those just as much as the enthusiasts.

Another reason I believe Sony can achieve is competitive pricing, especially the Digital Edition at $399. This model comes without sacrifice in the power department, it’s just that it only allows for digital downloads. Sony apparently had locked in the idea of getting at least a version to the same launch price of PlayStation 4, and they succeeded. The question comes down to availability, and anecdotal evidence says the digital version is much harder to find despite Sony saying that the PlayStation 5 will have more units overall at launch than its predecessor.

Finally, and it’s no secret, Sony’s software prowess is near unparalleled in modern game development. Its studios are among the most talented in the business. With projects like Horizon Forbidden West and God of War 2021 in the pipeline from internal teams, Sony seems to be leveraging a similar software strategy as last generation in quality, single-player experiences.

It’s also making key partnerships with external publishers, such as the aforementioned deal with Square Enix for Final Fantasy XVI console exclusivity plus its work with Bluepoint Games on major remakes, to round out the portfolio. There’s also a new service offering as part of its PlayStation Plus membership: PlayStation Plus Collection, where legacy titles will be available for PS5 owners.

That’s how Sony can win. Solid hardware pricing to sell volume of both editions, new foundational games on console then PlayStation Plus and even PC on the back end down the line. It just needs better and more honest messaging, clean up the pre-order process ahead of November and share information on upgrade paths like it has with Marvel’s Spider-Man: Miles Morales in that the game moves with players from PS4 to the upcoming generation.

Switching to its main competitor in Microsoft of course, its Xbox Series X and Xbox Series S consoles debut a bit earlier the same week on November 10th in a simultaneous global launch, for $499 and an utterly aggressive $299 respectively. Both are also available via what’s called the Xbox All Access financing program, for $34.99 and $24.99 per month each. This comes with a subscription to Xbox Game Pass Ultimate, an immediate library of software. Which is a key part of enticing especially new buyers, not having to drop so much money up front like generations of the past.

As I’ve stated before, the American software and cloud conglomerate’s modus operandi is ecosystem and services. Lowering the barrier to entry, offering games and subscriptions on a variety of devices beyond its consoles, embracing cloud as a complement to traditional gaming plus connecting everything in its Xbox brand. Its Xbox Game Pass catalog of games monthly subscription service is arguably the best value in the industry, considering that all new first party titles launch simultaneously into the service on their retail date.

Then there’s Project xCloud. Microsoft formally launched the cloud streaming offering just earlier this week for Xbox Game Pass Ultimate members in various countries for use on Android phones and tablets. It’s a play on the future direction of the industry. Despite some critics prognosticating otherwise, I don’t believe it’s a replacement for traditional games. It’s a complement that will offer yet another way to play console and PC quality software. Which means it won’t cannibalize sales, it will be accretive to the business line.

“We really built this strategy around that – play the games you want, with the people you want, on the devices you want or already have,” said Phil Spencer, Head of Xbox. “The high-level goal for us is can we build a platform where more people want to play more games more often?”

What this means is that Microsoft is foregoing one-time purchases up front to make it up in volume, monthly fees and player engagement. It hopes to monetize on an ongoing basis, and keep people in the ecosystem whether using hardware, PC or even mobile via cloud.

So, what does this have to do with winning? Everything.

A holistic approach makes Microsoft less dependent on core hardware sales and major, blockbuster exclusives than ever before. Its hyper-competitive pricing tier for Xbox Series S gives the most realistic entry point for various slices of the market: lapsed gamers, those on the fence about an upgrade and even PlayStation owners looking for a way to try games not available on that platform. Sure, the company is chalking up a loss on hardware and even generating less revenue up front with service discounts. It’s still built up a user base of 10 million strong for Xbox Game Pass as of last month, many of which have or will renew even when their discounts expire. And according to various accounts, this leads to people not just playing more games but also buying them, bumping up software sales alongside the subscription.

Xbox has also been much better about messaging and marketing, sending a clear signal with both its pricing and retail packaging. Its social media team is on fire, rolling with the punches during leaks and summarizing perfectly the contrast between its console models. While some argue that offering two models with similar names is confusing, I strongly disagree and think that tech consumers are more knowledgeable than that in the age of multiple iPhone models and countless TV iterations. The pricing alone tells the story: Xbox Series S is for those looking to enter next gen at an affordable price, Xbox Series X is for the enthusiasts that are much less sensitive to cost.

A holistic approach makes Microsoft less dependent on core hardware sales and major, blockbuster exclusives than ever before. Its hyper-competitive pricing tier for Xbox Series S gives the most realistic entry point for various slices of the market

The main question (and it’s a big one, no doubt) surrounding Xbox is its software lineup, at least early in the cycle. Without games like Halo Infinite, Forza Motorsport or Senua’s Saga: Hellblade 2 at launch, it will lean more on smaller titles like The Medium from Bloober Team and Ebb Software’s Scorn, older first party games like Gears 5 and Gears Tactics plus external, multi-platform releases such as Assassin’s Creed: Valhalla and Destiny 2: Beyond Light. With the amount of studio acquisitions and announced games like the aforementioned bunch plus Rare’s Fable and Everwild, I anticipate a more beefed up portfolio within two years of launch. Which is really the time that’s most make-or-break for sales.

Microsoft is one of the world’s largest companies, and while Xbox is a key brand segment, it’s a small portion of the overall business. We’re still talking about an $11.5 billion or more annual revenue generator here, one where Microsoft is clearly investing in parallel to its Cloud offerings. The firm can sustain a hit from discounted Xbox Game Pass and All Access programs, as long as the opportunity is there to keep players over time. These are meant to build up the audience base and benefit over the longer term, even if shorter term it appears to be slower than its competition.

As noted throughout, we now know how both Sony and Microsoft are throwing down aggressive pricing this holiday season for some powerful next generation boxes. Both are investing internally, mapping out marketing, purchasing studios and making partnerships in attempts to win mind-share and, most importantly, dollars.

Sony promises more PlayStation 5 consoles at launch than PlayStation 4, offers an enticing Digital Edition upgrade for PS4 owners while also solidifies a more impressive launch lineup of software even if its messaging has been jumbled. Microsoft’s message has been direct: Its Xbox Series S is the most affordable of the bunch and both consoles are available via a financing option for folks that might not want to pay up front or have been impacted financially by coronavirus.

It’s not quite time yet for my detailed forecasts, though this piece should give an early indication of where I’m at in that I expect both manufacturers to sell out of launch stock then move into the later years of this generation with unique offerings that absolutely will attract buyers. Even some that will overlap. If I had to pick, I’m slightly more bullish on Sony’s prospects especially if they can supply enough Digital Editions to the market at that extremely attractive $400 point.

That doesn’t mean its competition can’t also win. Each has something the other doesn’t, which means victory is attainable for all. Most of which, console gamers. Even if they’ll probably continue to fight among themselves for eternity.

Stay safe all. Thanks for reading!

All prices reference above in U.S. Dollars. Local pricing available at manufacturer websites.

Sources: Fast Company, GamesIndustry.Biz, Microsoft, Sony, TechRadar, Washington Post, Xbox Wire.

-Dom