Star Wars Jedi: Survivor & PlayStation 5 Blast to the Top of April 2023 Circana U.S. Games Sales Report

It’s beautiful outside here in the Tri-State. To me, that’s the perfect opportunity for everyone to enjoy another sales recap!

This time it’s April’s domestic games industry spend report from tracking firm Circana, formerly known as The NPD Group.

Last month, a solid boost from hardware and various premium game releases weren’t enough to offset lower or flat performance elsewhere. This downward movement in key areas resulted in a 5% decline for total spending.

In fact, this past April closely resembled last year’s headlines.

At that time, Lego Star Wars: The Skywalker Saga was the top-selling game. Hardware also generated growth, although overall sales dipped in the high single-digits.

This year it’s Star Wars Jedi: Survivor blasting to the top of the premium software charts. Unfortunately, every sub-section within Video Game Content except for non-mobile subscription sales exhibited declines, meaning that even with new launches, people spent less on gaming.

Just like last year, Video Game Hardware was the only category to move upward in April, bolstered by big gains from Sony’s PlayStation 5, the month’s best seller by revenue, and Nintendo Switch which led by units sold.

“It’s good to see all the new games in the Top 20,” wrote Circana’s Mat Piscatella. “But Lego Star Wars: The Skywalker Saga and Elden Ring provided a tough year ago comparison.”

There were certainly good signals, like consistency in console supply and a healthy number of AAA title launches. Still, mobile continued to struggle, Xbox is nowhere to be found plus inflationary pressure in the market remained. Folks chose other forms of entertainment, perhaps adjacent to gaming like seeing an awesome The Super Mario Bros. Movie, or simply went outside to touch grass, basking in the burgeoning springtime weather.

Historically, April was still a solid result even for overall sales. Here’s a closer look at these monthly figures and, further down, a set of predictions as the industry looks ahead to a Zelda-filled May.

United States Games Industry Sales (April 2nd – April 29th, 2023)

Referencing the above gallery, in totality, people spent $4.12 billion in games during April which is 5% less than the same month in 2022. The annual spend amount is currently trending down a modest 2%, to $17.71 billion. That’s actually a marked improvement since the first quarter as I wrote about in March, when the annual figure was trending towards 5% lower.

April was already the third month this year to experience a decline. The only exception was February due to a substantial boost from Hogwarts Legacy. Last month’s soft result was attributed to a decline in the broadest category of Content, which includes software, add-on, subscription and related spending. Essentially, while people bought more consoles, they spent less on the things they play on those devices. Peripheral spending was consistent, at least.

Focusing on the Content segment, sales dipped 6% in April to $3.6 billion. This means it made up 87% of the overall figure, compared to 88% last year. Within 2023 to date, Content sales are currently down 4%, to $15.11 billion.

Mobile contributes a major portion of Content sales, and Circana’s report said that spending trends were “relatively stable” compared to March. This doesn’t tell a whole lot. All we know is mobile is one of the sub-categories that declined year-on-year because, unfortunately, the report doesn’t get more granular. The top five earners for mobile during April were Candy Crush Saga, Roblox, Royal Match, Coin Master and Gardenscapes.

The story within premium software was new games. Titles launched in April occupied seven of the Top 15 slots on the overall chart.

Star Wars Jedi: Survivor leading April was a super impressive win for Respawn Entertainment and Electronic Arts, considering it went on sale two days before the tracking period ended. Even with that short amount of time, it’s already the 4th best-selling title of 2023. As a quick comparison, its predecessor Star Wars Jedi: Fallen Order launched in second behind only Call of Duty: Modern Warfare in November 2019 during a hectic pre-holiday rush.

April’s runner-up was Dead Island 2, another new launch. It’s a great start for the long-awaited zombie slasher from Dambuster Studios and Deep Silver, which is immediately the year’s 6th best-selling game. This domestic performance reflects its global success, as it sold over a million units within three days on market. Way back in September 2011, the original Dead Island started in 3rd.

Further down, Electronic Arts had another Top 10 finisher in April with PGA Tour at #7. Capcom’s popular Mega Man Battle Network, which surpassed 1 million units globally as the fastest-selling title in Mega Man history, ranked at #8. The latter was the month’s top-selling title on Nintendo Switch as a platform.

In a rare appearance for Microsoft’s Xbox brand, Minecraft Legends started in 11th place. Compare this position to Minecraft Dungeons, which debuted in 15th back in May 2020. These are certainly impacted by the lack of Xbox Game Pass in these kinds of charts, because it’s not realistic to break out spending for individual titles on the service.

The last of the new releases in April were Final Fantasy I-VI Bundle from Square Enix at #14 then Nintendo’s Advance Wars 1+2 Re-Boot Camp one spot down at #15. While the latter’s performance seems lackluster at first, it’s actually pretty good since Nintendo doesn’t share digital. It was the month’s 3rd best-selling title on Switch.

For the 2023 ranks to date, the main movement happened because of Star Wars Jedi: Survivor and Dead Island 2 slotting high on the list, thus pushing two PlayStation console exclusives out of the Top 10: The Last of Us Part 1 and God of War: Ragnarök.

Check out the full charts below.

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

  1. Star Wars Jedi: Survivor
  2. Dead Island 2
  3. MLB: The Show 23^
  4. Resident Evil 4
  5. Call of Duty: Modern Warfare 2
  6. Hogwarts Legacy
  7. PGA Tour 2023
  8. Mega Man Battle Network Legacy Collection
  9. FIFA 23
  10. Mario Kart 8*
  11. Minecraft Legends
  12. Elden Ring
  13. Minecraft
  14. Final Fantasy I-VI Bundle
  15. Advance Wars 1+2: Re-Boot Camp*
  16. New Super Mario Bros.*
  17. The Last of Us Part 1
  18. Pokémon Scarlet & Violet*
  19. Madden NFL 23
  20. Super Mario 3D World + Bowser’s Fury*

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

  1. Hogwarts Legacy
  2. Call of Duty: Modern Warfare 2
  3. Resident Evil 4
  4. Star Wars Jedi: Survivor
  5. MLB: The Show 23^
  6. Dead Island 2
  7. Dead Space Remake
  8. FIFA 23
  9. Madden NFL 23
  10. Elden Ring
  11. The Last of Us Part 1
  12. God of War: Ragnarök
  13. Mario Kart 8*
  14. Minecraft
  15. Pokémon Scarlet & Violet*
  16. Fire Emblem Engage*
  17. Forspoken
  18. Sonic Frontiers
  19. Octopath Traveler II
  20. NBA 2K23*

Hardware continued as the bright spot in April’s announcement, as it’s been lately due to stock being consistent and ongoing demand from potential buyers. This segment grew 7% last month to $367 million. It’s up 18% for the year to date, earning upwards of $1.82 billion.

Driving April’s bump were double-digit dollar gains for both PlayStation 5 and Nintendo Switch, as compared to the corresponding time in 2022. PlayStation 5 clearly continued its momentum from March, when it moved past PlayStation 4 sales when launch-aligned here in the States, leading the company to achieve its global annual hardware target when it reported fiscal results recently.

Importantly for this consumer report, not only are inventories present, people are consistently looking to snatch up both consoles to play aforementioned new releases and evergreen experiences alike. The $367 million of April is the best hardware spend for an April month since around the start of the pandemic in 2020, when it was $420 million.

When measured by dollars generated, PlayStation 5 was top dog for April driven by its loftier price tag. Nintendo Switch came in second place by this metric.

Flip that around if using units as the measure: Nintendo Switch sold the most units, while PlayStation 5 was runner-up. This is mainly due to the introduction of The Legend of Zelda: Tears of the Kingdom’s OLED model, which had a “very strong” start according to Piscatella.

Expanding to 2023 right now, PlayStation 5 is currently leading by both dollar sales and units moved. As it’s easy to see, Nintendo Switch is second by both of those.

What’s also clear is a distinct lack of contribution from the consistently-third-place Xbox Series X|S. While it’s partly because of Microsoft’s shift away from a hardware focus towards ecosystem and subscription, I’m slowly becoming more concerned with Xbox’s performance as compared to peers. Console sales are moving in the wrong direction, even alongside Nintendo’s long-in-the-tooth Switch.

CEO of Microsoft Gaming Phil Spencer made some rather divisive comments recently in an interview with Kinda Funny, discussing the brand’s current spot within the industry and hardware cycle. I commend Spencer for fielding questions at a tricky time for Xbox, with declining console revenue and a disastrous start for Redfall. What irked me is two-fold. He’s been singing a similar “we have to do better” tone for years, even generations, now. The trajectory isn’t great, even if there are momentary high points like Forza Horizon 5 and Hi-Fi RUSH. Then, certain quotes here have a defeatist slant which is never something people want to hear from a brand’s ambassador.

The boss man seemed almost reserved to the fact that Xbox isn’t picking up market share. Sure, there’s no silver bullet that will turn the tide. Yet lacking a consistent output of exclusive titles and not appealing to the core gamer is unacceptable. I’d love to see a media outlet dig into the underlying fundamentals of the business, hardware in particular, because supply should no longer be an issue. Its earnings reports and regional results imply consumers are balking at picking up Xboxes, which is quite concerning even if that’s the smaller portion of Microsoft’s gaming revenue.

Alright. Rant over. Back to my regularly-scheduled conclusion of April’s recap.

The final segment of Accessories was, somehow, exactly the same as last year’s monthly figure at this time: $158 million. This means it turned positive for 2023 to date, moving up 1% to $779 million.

While not as pronounced, Accessories are running somewhat parallel to how Hardware is faring. Plus, it’s feeling the impact of premium peripherals. The higher-priced PlayStation 5 DualSense Edge Wireless controller in black repeated as the monthly best-seller. The premium pad is also 2023’s top-selling accessory right now.

Similar to the past couple months since its debut, there’s no mention of Sony’s PlayStation VR2. February’s release for the device looks much more like a soft launch now, both literally and commercially, mainly because it’s currently available only via Sony’s own storefront.

Last month’s general performance was decent, even if it’s the second straight yearly decline for an April month since maxing out back in 2021. It was a good time for big hitters like Star Wars and Dead Island franchises, plus Sony and Nintendo benefited from an improving hardware environment.

Personally, I’m keeping a close eye on mobile to determine when, or if, it can bounce back to provide a net benefit to content output. Right now, the industry is mainly being supported by blockbuster launches and console availability, especially as subscription spend normalizes and matures.

Shifting focus towards May, this might be the easiest prediction segment I write all year:

It’s Nintendo’s time to shine. (Zel-duh.)

For Hardware as a category, Switch is fully set to break PlayStation 5’s currently monthly streak on dollar sales, as I expect the hybrid device to lead by both revenue and units.

The Legend of Zelda: Tears of the Kingdom will undoubtedly be May’s best-selling software, even without digital. I mean, it’s already sold 10 million units during its first weekend alone, 4 million of which was in the Americas. The only other title on a Nintendo platform to ever reach the 10 million threshold in three days was November 2022’s Pokémon Scarlet & Violet, and that’s really two games counted as one!

This means that Tears of the Kingdom is not only the biggest Zelda launch of all time, beating out its predecessor, it’s the single fastest-selling software on a Nintendo platform in the history of Nintendo platforms.

What other new launches might chart? Take-Two Interactive’s LEGO 2K Drive is an intriguing one later this week, as I see Top 10 potential on the brand recognition alone. I don’t think the aforementioned Redfall from Xbox & Bethesda has even a remote chance, and I’m pessimistic on Daedalic Entertainment’s The Lord of the Rings: Gollum as well. Most publishers smartly moved out of Nintendo’s way.

Within Accessories, the official retail launch of PlayStation VR 2 could bump up the accessories portion. Will it? I’m not sure, though I’d bet spending will at least be flat again.

All of this will lead to overall domestic spending growth in May, I’d say in the mid-single digits with upside into the teens.

“May should be fun,” Piscatella said, sharing my sentiment. “Subscription growth continues to slow. PlayStation VR2 coming to retail [is] happening not a moment too soon.”

I recommend checking out his Twitter thread for Circana’s full report. Until next time, be well everyone. Thanks for reading!

*Digital Sales Not Included

^Xbox & Nintendo Switch Digital Sales Not Included

Sources: Capcom, Circana, Kinda Funny, Nintendo.

-Dom

Nintendo 2023 Q3 Report Shows Switch Lifetime Sales Passing 122M to Become 3rd Best-Selling Gaming Hardware Ever

It’s time for the last holiday recap of the big three gaming console makers, as I’ve previously covered a shaky quarter for Microsoft and Sony’s record-setting result.

Nintendo posted its third quarter fiscal 2023 announcement in Japan today. The company’s still exhibiting strength when compared to most recent years, though exercising caution going forward into the same tricky macroeconomic environment that many consumer tech firms are facing.

While hardware shipments are slowing as Switch moves towards its sixth birthday next month, the hybrid reached a new milestone this quarter and passed the sales of two legendary devices in the process.

The company shipped 8.25 million Switch units in the three months ending December, now achieving 122.55 million across its lifetime. That moves it above Sony’s PlayStation 4 and Nintendo’s own Game Boy/Game Boy Color which reached 117.2 million and 118.69 million, respectively.

It’s now behind only PlayStation 2 and Nintendo’s DS handheld line on the all-time list, making it the 3rd best-selling gaming hardware to date. It’s technically 2nd on both home console and portable lists if breaking them out individually. I don’t remember anyone saying this would happen when it launched back in 2017. I was among the most upbeat on its prospects. This is the type of monumental run that’s near impossible to predict.

Also contributing to Nintendo’s solid quarter was the historic launch of Pokémon Scarlet & Violet. After shipping an unreal 10 million units during its first three days on market, it’s now crossed another milestone at 20.61 million shipped between its November start and year-end.

Not only is this the fastest-selling Pokémon release ever, it has better initial sales than any game ever released on a dedicated Nintendo device. This monstrous start makes it already seventh place on the Switch best-sellers list, outpacing huge catalog titles like Super Mario Party and Ring Fit Adventure.

“For the months of October through December 2022 which encompass the holiday season, the effects of shortages of semiconductors and other components was largely resolved, and shipments generally went according to plan,” management said in prepared remarks. “However, unit sales were down compared to the same period last year, when Nintendo Switch – OLED Model was released.”

“Shipment volumes for software generally went according to plan. The release of new titles including Pokémon Scarlet and Pokémon Violet contributed to unit sales, but overall software unit sales declined year-on-year, affected to an extent by the decline in hardware sales.”

Even with generally softer hardware output, Nintendo’s top-line is proving resilient when scanning the past decade. Especially considering the sort of inflationary pressures facing consumers and a lineup lacking major titles outside of Pokémon. I’ll now move into the underlying numbers, then a look ahead to guidance and predictions for the months ahead.

I pulled the above gallery of slides from Nintendo’s Q3 report, where it showcases 9-month performance in the period ending December. I’ll back into the quarterly figures, then illustrate trends over a longer period of time as well.

Revenue for the three months ending December 2022 came in at $4.68 billion, down 8% since last holiday. Operating profit experienced a more precipitous dip, moving down 25% to $1.39 billion. Two of my charts in the next section map out movement over time.

Taking this into account, sales for the fiscal year to date have declined a modest 2% to $9.5 billion. Income from operations is trending down 13%, to $3 billion.

Executives said sales dipped slightly despite the yen’s depreciation, primarily because of semiconductor shortages in the earlier quarters and component parts impacting hardware supply. Still, that top-line figure is more resilient than expected, achieving the second best Q3 sales since back in fiscal 2010. Even quarterly operating profit is the third best since that same year, despite the recent double-digit decline. Demand for a spanking new Pokémon generation certainly helped.

I’ll now dig into the current product category mix that impacted last quarter. Leading the charge was Hardware, at nearly 51% of the split. Compare that to 54% this time last year, when Nintendo was shipping more units to retailers. This means software moved from 46% during last year’s December quarter to 49% now, bolstered by the proportion from first-party being 85% of the total. From a geographic standpoint, Americas is 43%, the same as last year. Nearly 25% of Nintendo’s sales came from Europe, down from 27%. Japan made up most of the difference, contributing 24% versus last year’s 21%.

Expanding to see how the latest quarter affects annual sales, check out the second set of charts in the next gallery. Nintendo’s annual sales are currently trending towards $12.25 billion, effectively flat year-on-year. It’s been hovering around a similar value since mid-fiscal 2021. Which proves that, even with a down quarter, annual revenue has been consistent. On the other hand, annualized operating profit dipped to its lowest level in ten quarters, at $3.9 billion. Higher expenses and the yen’s movement are its biggest headwinds.

Similar to recent articles, I’ll list a quick comparison to industry peers. Tencent is the world’s biggest gaming company by sales, currently at $25.8 billion. PlayStation’s record holiday led to $22.84 billion in annualized revenue, its best to date. Microsoft ranks next at $15.56 billion, though could be upwards of $19 billion to $20 billion if it acquires Activision Blizzard this year. That’s based on the latter’s $7.53 billion annual figure reported yesterday, accounting for overlap and redundancies. Nintendo slots here at $12.25 billion, noticeably hamstrung by recent exchange rate shifts. However, Nintendo is currently more profitable than Sony’s PlayStation division when using the latest 12 months, earning $3.9 billion compared to $2.11 billion. Likely due to the cost of producing more PlayStation 5’s and developing AAA titles like God of War Ragnarök.

On the hardware front, this segment continues to cool. Although Switch is showing its age from both a commercial and spec standpoint, it’s still not quite near the end of its life just yet. Nintendo is committed to this device, and is still planning out its transition to the next one.

Unit shipments for Switch during the three months ending December totaled 8.25 million, compared to 10.67 million last holiday, or 23% lower. That brought the current 9-month total for this fiscal year to 14.91 million. At this same point in fiscal 2022, the figure was 18.95 million which implies a 21% decline. Interestingly, that’s the same percentage decline between 2021 and 2022.

Out of the units shipped through Q3 this year, 5.22 million were base model Switch. That’s down a whopping 56%, mainly because of the shift towards the OLED model being the standard version. The OLED model shipped 7.69 million in the last 9 months, nearly double the 3.99 million of its debut year since it started in October 2021. As for the Lite counterpart, sales through the third quarter declined 37% to 2 million units.

Referencing the aforementioned lifetime figure of 122.55 million, it’s approaching all-time best-selling gaming console territory. Can Switch really become the top seller? Well, it would have to beat out two devices in order to earn the crown. Which is a tall order.

After launching in 2004, Nintendo DS ended its life years later as the best-selling handheld device ever, achieving 154.02 million in sales. Almost two decades later, no portable has even come close. Then, the all-time leader right now is Sony’s PlayStation 2, which hit stores in 2000 and skyrocketed to 159 million throughout its tenure. Thus, Nintendo has to ship between 31.47 million and 32.45 million more Switch to reach these heights. If Switch’s successor launches in Late 2024 or Early 2025, that leaves seven to eight quarters for this to happen. An average of 4 to 4.5 million per quarter. While I do think it’s probably attainable, I don’t think I’d bet on it.

Shifting back to this recent report, Nintendo shared insight into numbers around Switch sell-thru to consumers. (Until now in this article, I’ve been talking about units shipped to retailers.) Executives say that people continue to have a “diversification of motives” for purchase, which includes first-time buyers or upgrades to OLED. Even so, sell-thru declined compared to last year, as it did in 2022 as well since it’s been trending downward after peaking during quarantine days.

It stands to reason that, while there’s still an appeal to grab a Switch especially at a retailer discount, fewer people are doing so which signals a nearly saturated market. Combine that with inventory difficulties and a lower average selling price, and we’re seeing a natural downswing in units produced plus revenue generated.

Software shipment data held stronger than hardware for Nintendo, mainly because of just how much demand there was for Pokémon and certain legacy titles reached new sales thresholds.

During the quarter, Switch software sales totaled 76.71 million. Compare that to 85.41 million units last year, thus a 10% decline. Across the three quarters ending December, software units were 172.11 million, down 4% against last year’s 179.29 million.

Software sales over Switch’s lifetime are drawing toward an incredible milestone. Last quarter, overall Switch software was at 917.59 million. Now, it’s 994.3 million. Nearly one billion games sold for the device since 2017! It’s likely cleared that by now, and we’ll know by exactly how much when the company reports next quarter.

During the latest 9-month period, the hybrid featured 27 titles that have sold a million units or more within that time period. Out of that, 19 were published by Nintendo. The remainder were third-party titles. Over the same length of time in fiscal 2022, the amount was 29 in total, 22 of which were Nintendo. Quality software remains the major appeal for Switch, even if existing users are purchasing them as opposed to new console owners.

November’s Pokémon Scarlet & Violet drove today’s results, as mentioned. It’s sold-thru 18.2 million copies to consumers over seven weeks. As if it wasn’t clear how ridiculous its start was, this stat will really put it into perspective: After mere weeks on sale, these are already the fourth best-selling titles ever in the franchise. That’s across all releases since Pokémon Red & Blue kicked things off in the mid-90s! I expect by the end of Switch’s time, it could be the best-selling Pokémon to date. We’re talking one of the biggest entertainment franchises in history! Truly unreal.

Bayonetta 3 hit stores in October as the other new release, and it’s officially a million seller. Developed in conjunction with Platinum Games, the action title started at a hair over 1 million, reaching 1.04 million during the period. That’s equivalent to lifetime sales of its predecessor’s port onto Switch, which hit the platform in February 2018.

Beyond the brand new games, Nintendo provided updates to those launched in earlier quarters during fiscal 2023. Splatoon 3, which splattered series records with its 7.9 million unit start back in September, has since passed the 10 million milestone, settling at 10.13 million. June’s Nintendo Switch Sports sold-in an additional 2.46 million units in the holiday months, scoring 8.61 million to date.

Additionally, the best-selling racing game ever in Mario Kart 8 Deluxe sped past yet another mile marker this quarter. This time it’s the 50 million mark! Shipping 3.59 million units in Q3, it’s now at exactly 52 million lifetime. Two other high sellers achieved new milestones as Super Smash Bros. Ultimate smashed 30 million and Super Mario Odyssey jumped past 25 million, to 30.44 million and 25.12 million respectively.

Beyond software sales numbers, Nintendo tends to give tidbits around engagement and user base statistics. Back in September, Nintendo Switch Online reached 36 million paid members. I’ll update this section if the company shares an updated figure. Otherwise, the “statistic” of Annual Playing Users, which measures the number of accounts that have opened a single Switch game over the past 12 months, rose to an all-time high of 112 million in December. It was 106 million in Q2. So, the vast majority of Switch owners still use it at least once a year. Shocking revelation!

Despite the outlined financial and unit sales reductions, Nintendo had quite an impressive third quarter as compared to recent years. Especially for revenue. Nintendo Switch beat out two iconic gaming device families for lifetime sales and Pokémon Scarlet & Violet had a frankly ridiculous performance. No doubt there are signals that parts of its business are coming down off recent highs, yet Nintendo has the sort of quality software lineup to soften the blows of hardware slowdowns.

Moving into the final quarter of its fiscal 2023 period, management shared updated guidance in today’s announcement. This is where a bit of nervousness creeps in, yet I’m not as concerned for the overall health of Nintendo’s trajectory. Especially given where it was during the dire straits of the Wii U years, this looks almost as rosy as ever.

Intriguingly, just after raising financial targets last quarter, executives reverted back to lower estimates this period. They adjusted their revenue forecast down 3% to $11.73 billion, implying a 6% decline since last fiscal year. Similarly, operating profit guidance was revised downward 4% to $3.52 billion. Even so, these updated figures would be the third best annual results since fiscal 2010.

Then for the second quarter in a row, Nintendo reduced annual Switch shipment guidance. Management now anticipates 18 million shipments, down 5% from Q2’s 19 million. That means the firm has to produce 3.09 million between January and March to end the fiscal period. Personally, I think it’s now a bit too conservative. My bet is it beats the target, moving upwards of 19 to 19.5 million, which is slightly below my target from three months ago.

Along the same lines, Nintendo lowered its annual software estimate 5 million units, or 2%, to 205 million. This is where I’m more skeptical, mainly because of a light slate in the three months ending March. A good portion of the 32.89 million needed this quarter to achieve that target has to be follow-on sales of things like Pokémon and Mario Kart. New releases that will also drive this include Fire Emblem Engage, which launched a couple weeks back, Kirby’s Return to Dream Land Deluxe later this month then March’s Bayonetta Origins: Cereza and the Lost Demon. These aren’t chart-toppers or anything.

One lingering question of course is might Advance Wars 1+2: Re-Boot Camp launch in the coming months? While Nintendo still has it as TBA in its reporting, alongside the likes of Metroid Prime 4, there’s speculation recently based on retailers that it could hit market soon, which could bump up software results. I remain cautious, the same way I’m thinking Nintendo will narrowly miss its latest annual software sales guidance.

“Sell-in of hardware units during the third quarter was generally in line with expectations,” management said. “However, hardware sell-through during the holiday season did not perform as expected, and therefore the unit sales forecast for the fourth quarter has been modified. The software unit sales forecast has been modified as well, largely due to taking into consideration the modification of the hardware unit sales forecast.”

Near the beginning of next fiscal year, May’s The Legend of Zelda: Tears of the Kingdom is clearly the biggest launch for Nintendo in quite some time. It will be a massive success and compete for best-selling premium title of the year globally and in areas like Japan, though perhaps not domestically on The NPD Group’s lists since Nintendo doesn’t share digital sales here.

In an exceptional bit of news that bucks the industry trend lately, as many firms are laying off workers, Nintendo plans to raise employee salaries by 10% for those that work in Japan. Reuters reports this decision by management as inflation grips the local economy. While it will certainly increase costs, it’s the right way to maintain talent that drives its best-in-class output.

To showcase that output, the company is hosting its first Nintendo Direct of 2023 tomorrow. The 40-minute long presentation will primarily focus on Switch titles launching in the first half of the calendar year. I’m looking forward to seeing what’s there for Zelda, which ports Nintendo announces and any indication of future first-party announcements in what might very well be the final year of Switch.

Time flies!

Speaking of having fun, thus ends my latest big results recap of the season. What is your initial reaction to Nintendo’s results? Have you bought a Switch and contributed to that lifetime total? Will it reach that annual target? Are you betting it will be the best-selling console of all time eventually?

For now, feel free to leave a comment or hit me up on social media. Remember my earnings calendar thread for companies reporting this quarter across gaming, technology and media. Thanks as always for reading! All the best.

Note: Comparisons are year-over-year unless otherwise mentioned. Exchange rate is based on reported average conversion: US $1 to ¥136.39.

Sources: Company Investor Relations Websites, NBC News (Image Credit), Reuters.

-Dom

Annual U.S. Games Industry Consumer Spending Declines 5% in Final NPD Group Sales Report of 2022

Better late than never!

Data firm The NPD Group has shared its final games industry sales report for 2022 tracking spending in the United States. Within, it showed a modest sales decline since last year. Mostly expected during the start of a regression towards pre-pandemic values after an all-time best the prior year. There was resilience in the final quarter as bigger games hit market and supply concerns eased, minimizing the downward movement and making 2022’s $56.6 billion the second best year on record behind 2021’s $59.6 billion.

Not bad, all things considered.

During this piece, I’ll recap both the most recent monthly results and annual figures. Buckle up for an in-depth read.

December was one of the brighter reports compared to earlier months, ending a fourth quarter recovery that made full year figures look much better. The big holiday period was the second straight month where total spending increased, after a number of months either down or flat.

That’s even considering a very slight decline in the major category of Video Game Content, which measures software, mobile, subscriptions and related spending. Call of Duty, Pokémon and Madden NFL led the charge here, as often happens. For Video Game Hardware, the only category that grow in 2022 to a best-ever result, Sony’s PlayStation 5 console and Nintendo’s hybrid Switch both spent time atop the monthly rankings.

“Factors impacting 2022 spending included continued supply constraints of console hardware, a relatively light slate of new premium releases and macroeconomic conditions,” said The NPD Group’s Mat Piscatella.

As I’ve covered in the past, 2021 was the height of pandemic spending for many regions, including the States. 2022 proved to be the anticipated regression towards more normalized results, exacerbated by mobile weakness and inflationary pressure on people’s wallets. Still, Q4 showed there’s still substantial demand for big budget premium games and new hardware when it’s actually available at retail.

There’s also the cultural touchstone that was Elden Ring, nearly out-earning Call of Duty, which broke into the mainstream zeitgeist more than any FromSoftware game could ever do in the past. Combine that with annualized sports releases, a dual launch year for Pokémon and exceptional showings from Sony-published exclusives, and premium gaming helped offset mobile’s under-performance.

Check below for a full recap of each category last year and a look forward towards 2023.

United States Games Industry Sales (November 27th, 2022 – December 31st, 2022)

Total consumer spend on gaming within the U.S. rose 2% in December, to $7.58 billion. Driven by double-digit gains in the hardware category that more than offset losses elsewhere. This fits the growing trend along with October’s plateau and November’s increase towards growth.

That strength in the final quarter pumped up full year spending to $56.6 billion, which ended up being down 5% compared to 2021. Growth areas like console and subscriptions weren’t enough to out-gain losses in premium software and mobile, also hurting due to macro pressures like inflation.

The largest category of Content dipped a modest 1% in December, down to $5.55 billion. Which means it made up 73% of overall monthly spending, compared to 75% in November. Holiday demand and mobile regaining footing contributed towards the upside.

Speaking of mobile, this sub-segment returned to growth in December as geolocation, simulation, action and shooters gained ground. Still, 2022 became the first 12 months in tracked history where people spent less than the prior year on mobile. Shooters exhibited a most precipitous decline at 26% while casino gains proved popular, moving up 1%. Candy Crush Saga, Roblox and Coin Master were the year’s Top 3 earners here.

Call of Duty: Modern Warfare 2 repeated as December’s best-seller on the premium list, which it’s done each month since October’s launch. This led to Activision Blizzard’s military shooter earning the top spot on 2022’s overall rankings as well, as I predicted. That marks a staggering 14 consecutive years where a Call of Duty game was the country’s best-selling title.

Familiar faces continued on the premium best-sellers list for December as Pokémon Scarlet & Violet and God of War: Ragnarök generated the 2nd and 3rd most dollar sales, in that order. Elden Ring benefited from solid demand during the holiday season, returning to the Top 10 at #7.

Late year launches Need for Speed: Unbound and Crisis Core: Final Fantasy VII: Reunion started in 8th and 10th, respectively, a quite good showing considering the heavy hitters around it. The only other new title Callisto Protocol under-performed in 17th place, partially because its digital portion was not included. Even if downloads were considered, I’m skeptical it would have cracked the Top 10.

As mentioned before, Call of Duty: Modern Warfare 2 was the year’s best-seller. In fact, there were two Call of Duty entries among the Top 12 as people somehow retained interest in 2021’s Call of Duty: Vanguard. Then, Elden Ring and Madden NFL 23 rounded out the Top 3 for 2022. Sony’s PlayStation publishing arm had a sensational year with three single-platform games in the Top 13 and another developed title in the Top 10. God of War: Ragnarök finished ahead of bellwethers like Pokémon and FIFA while Horizon Forbidden West and MLB: The Show 22 scored Top 10 spots. Other observations include over-performance of Nintendo’s Kirby and the Forgotten Land floating to #14 and Sega’s Sonic Frontiers speeding up to #16.

Here’s a full look at the software lists for December and 2022 overall, including our first look at the top-grossing mobile titles.

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

  1. Call of Duty: Modern Warfare 2
  2. Pokémon Scarlet & Violet*
  3. God of War Ragnarök
  4. Madden NFL 23
  5. FIFA 23
  6. Sonic Frontiers
  7. Elden Ring
  8. Need for Speed Unbound
  9. Mario Kart 8*
  10. Crisis Core: Final Fantasy VII: Reunion
  11. NBA 2K23*
  12. Just Dance 2023
  13. Mario + Rabbids: Sparks of Hope
  14. Minecraft
  15. Super Smash Bros. Ultimate*
  16. Nintendo Switch Sports*
  17. The Callisto Protocol*
  18. Animal Crossing: New Horizons*
  19. Splatoon 3*
  20. Gotham Knights

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

  1. Call of Duty: Modern Warfare 2
  2. Elden Ring
  3. Madden NFL 23
  4. God of War Ragnarök
  5. Lego Star Wars: The Skywalker Saga
  6. Pokémon Scarlet & Violet*
  7. FIFA 23
  8. Pokémon Legends Arceus
  9. Horizon Forbidden West
  10. MLB: The Show 22^
  11. Mario Kart 8*
  12. Call of Duty: Vanguard
  13. Gran Turismo 7
  14. Kirby and the Forgotten Land*
  15. NBA 2K23*
  16. Sonic Frontiers
  17. Gotham Knights
  18. Minecraft
  19. Nintendo Switch Sports*
  20. Super Smash Bros. Ultimate*

Top-Selling Games of 2022, U.S., Mobile (Top Grossing):

  1. Candy Crush Saga
  2. Roblox
  3. Coin Master
  4. Royal Match
  5. Pokémon Go
  6. Evony
  7. Clash of Clans
  8. Homescapes
  9. Bingo Blitz – BINGO Games
  10. Jackpot Party – Casino Slots

The Hardware category is up next, as December generated upwards of 16% growth to $1.53 billion. I believe this might have been a record December month for the console category as inventories flooded the market during the holiday rush, notably from Sony’s suppliers. It also proves that demand is constant at this point in the cycle, which it really should be.

Expanding to the last 12 months as a whole, Hardware sales reached $6.57 billion, jumping up from $6.1 billion in 2021. The NPD Group did say this amount was an all-time best, an incredible achievement considering how slow this segment began the year.

PlayStation 5 leveraged better inventory to become the best-selling console by dollar sales during both December and 2022 as a whole. It was the first year since the new console generation in 2020 that Nintendo Switch didn’t lead on revenue. Big budget IP like God of War and Horizon plus a premium racing game in Gran Turismo 7 bolstered the console, alongside its higher price point that lifted up the revenue side. In the back half especially, Sony’s suppliers seemed to be the best at adapting in this supply environment to secure enough shipments to satisfy pent-up demand.

Even so, Nintendo Switch did win December and 2022 when measured by units, boosted by its more attractive cost and appeal to households that want more than one gaming device. While it didn’t have any pure flagship titles outside of Pokémon, a series which somehow launched two best-sellers in Pokémon Legends Arceus and Pokémon Scarlet & Violet, Nintendo always produces high quality titles that strengthen system sales as series like Kirby and Switch Sports amplified the lineup.

While the Xbox Series X|S came in third place during December and the year on all metrics, it held its own during a tough time for consoles. Microsoft continually cited how it had the best start of any Xbox console in history, albeit at a global scale. There were a few months in 2022 when it achieved second place, though its Series X model in particular seemed to be hit especially hard by supply challenges. The Series S doesn’t generate as much revenue, so Xbox doesn’t compete as much when it comes to monthly best-sellers even in its home market. Not to mention, its slate of first-party software was sparse, which didn’t help.

The general tone of the console business turned quite upbeat as the year went on, ending with a great December and up nearly double-digits for 2022. It’s also a positive sign of things to come, as I’m turning bullish on this portion of the market.

The final segment of Video Game Accessories saw the biggest declines during both December and 2022 as a whole. Last month, spending here dipped 2% to $503 million.

Unfortunately, The NPD Group didn’t share which accessory was the best-selling of the month. Lately it’s been a version of the PlayStation 5 DualSense controller, however there’s a chance that an Xbox game pad took home the win. I have a question out to the team for comment.

It follows that for the year, spending in this category fell 8% to $2.51 billion. Microsoft’s Xbox Elite Series 2 Wireless Controller ended 2022 as the year’s best-seller here, a popular upgrade choice for core players that benefits in comparisons like this because of a hefty price tag.

That’s a wrap on the final domestic sales report of 2022. It was a transitory year for the industry, as certain areas returned towards the mean while others under-performed. Mobile weakness, less premium AAA launches and a seemingly lower tie rate for peripherals all put pressure on the final figures. That said, historically it was still the second best annual spending in history so the industry is doing just fine. Easing supply concerns in the latter parts of the year and select premium titles helped keep the result high compared to prior years, even the likes of 2020.

“2022 finished strong, with improving performance in the category compared to a year ago following the May 2022 lows.” Piscatella said on LinkedIn. “With improving supply of console hardware – and a highly anticipated slate of new releases – 2023 looks like it could be a great year for the market.”

Looking ahead to the coming months, I wrote up a general 2023 predictions article earlier in the month. I’ll recap some of those points and touch on more domestic predictions.

When it comes to the overall consumer spending number for this year, I’m looking at virtually flat or an increase in the low single-digits. Assuming a 3% rise would bring 2023 sales to around $58.3 billion. I’m not anticipating another down year for mobile, and a more robust content calendar for AAA releases will bump premium output. Combine this with hardware availability and I’m thinking buyers will spend about what they did last year.

I’m forecasting Content will also be flat or up slightly. It starts with mobile, which should rebound, and continues with a busier software lineup than 2022. On the premium side, depending who you believe, there might be another annual Call of Duty title which I expect to be the best-seller if it does come out. Shoot, Call of Duty: Modern Warfare 2 could even repeat if it has a substantial expansion attached to it instead.

Other contenders include sports titles, of course. This year’s Madden game, in particular. In the next couple months, Hogwarts Legacy and Star Wars Jedi: Survivor will be massive and both will compete for a Top 5 finish. Nintendo’s major release is The Legend of Zelda: Tears of the Kingdom, slated for May, and should be Switch’s annual best-seller even if another Pokémon hits market. Sony’s flagship is Marvel’s Spider-Man 2, listed for launch in the Fall, which will set records for a PlayStation exclusive launch and will certainly be part of the year’s Top 5.

For Xbox, the story is Starfield which some people think will still be out before June. (Spoiler: It won’t.) It’s hard to predict where an Xbox Game Pass release ranks; I could see it as part of the Top 10. Elsewhere, Diablo IV will be a huge hit when it starts in June. I just don’t know if it competes for a Top 3 spot at the end of the day. Final Fantasy XVI is a wildcard. Ubisoft has a couple chances in Assassin’s Creed Mirage and Avatar: Frontiers of Pandora if they actually launch this year. Then there’s always a surprise or two.

Moving over to Hardware, it’s Sony’s year by a comfortable margin. I bet PlayStation 5 will be 2023’s best-seller on both revenue and units. It will lead most months by dollar sales, and split with Nintendo Switch on units depending on supply and titles i.e. May when Zelda debuts and whenever Marvel’s Spider-Man comes out. I also don’t expect a Switch hardware announcement, and I do think it will land in second place. Xbox can compete for second, I just remain hesitant on Microsoft’s conversion strategy.

Well, that about does it. What stands out to you during December and 2022? Surprised by any of the results? How did your predictions go? What’s in store for 2023? Drop a line here or social media!

I highly recommend checking out Piscatella’s thread on Twitter and the full report at the website here. Thanks for reading these throughout the year! Check back for the first recap of 2023 in a few weeks. All the best, everyone.

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

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

Sources: GeekWire (Image Credit), The NPD Group, Rokas Tenys (Image Credit), Video Games Chronicle.

-Dom

Monthly U.S. Games Industry Spend Increases for 1st Time in 2022 During November NPD Group Report

‘Tis the season.

Awards season? Well, technically yes. I’ll certainly be writing my Year-in-Review articles soon enough! And gaming’s biggest night in The Game Awards aired last week, showcasing the best of the year that was 2022.

What I really mean it’s when The Holiday Sale Season ramps up for video game companies and their efforts to push as much as they can to gamers everywhere. Any time people are shopping, I’m here to analyze sales results.

Because of that, today I’ll be recapping The NPD Group’s recent report on U.S. game sales during the highly-coveted month of November bolstered, of course, by Black Friday. It’s the time when manufacturers and retailers employ strategies to attract people to open those wallets.

And it was a very good month at that, especially in the context of 2022 so far. It’s the first month of the year in which monthly sales increased across the games industry. This is a huge data point given the general economic environment. It continued the strength from October, where buying leveled off after 11 consecutive months of declines.

Overall consumer spending on gaming rose 3% in November, signaling that easing inflation and better supply conditions for hardware proved to be tailwinds for the industry. Out of the three categories of Video Game Content, Hardware and Accessories, only Content saw a decline year-on-year mainly due to ongoing mobile weakness. Both Hardware and Accessories generated double-digit growth, the former boasting a substantial gain over last year’s figure.

There’s a few underlying reasons why November came in above expectations. First the release calendar has been stacked the past two months with commercial darlings, including the likes of Call of Duty from October then new titles in long-running series like God of War, Pokémon and, yup, even Sonic the Hedgehog!

Then, the improved stock of consoles, notably for Sony’s flagship PlayStation 5, is getting better at meeting consumer demand. Additionally, The NPD Group cited areas like non-mobile subscription spending, peripherals and digital full-game downloads on consoles spurring growth as well. All of these combined for a terrific month of higher sales.

On the premium software side, Call of Duty: Modern Warfare 2 continued its reign as the top-selling game during November, which it also accomplished the month prior around its debut. Just below that, three brand new games arrived within the Top 4: God of War Ragnarök, Pokémon Scarlet & Violet plus Sonic Frontiers. I’ll dive more into each later in the piece.

Within Hardware, PlayStation 5 was November’s best-selling console as measured by both dollars generated and units sold. Considering some discounting of its Xbox Series X|S competitor and the launch of mainline Pokémon games for Nintendo Switch, this win for Sony is quite impressive.

“I wasn’t expecting that we’d see any month with growth in 2022, but here we are,” said The NPD Group’s Mat Piscatella on LinkedIn. “Great new games sell really well. Would be great if more were released. The big uptick in new generation hardware supply sure helped too. Really fantastic month overall, especially when considering all the other market challenges out there.”

Here’s a look at the full report alongside my usual rundown. Get your hot cocoa ready!

United States Games Industry Sales (October 30th, 2022 – November 26th, 2022)

As shown in the info-graphic above, spending across all of gaming reached $6.29 billion in November, indicating the aforementioned 3% growth. Last year, this total was roughly $6.11 billion. For more context, November spending peaked at an all-time high back in 2020 when it reached upwards of nearly $7 billion.

Expanding to the year currently through 11 months, buying is still down 6% to $48.97 billion. Last year’s figure as of November was $52.19 billion.

The largest segment of Video Game Content hit $4.74 billion last month, or 75% of the total, which equates to a decline of 5%. In an ongoing surprise to those of us who track this regularly, mobile continued to drag down the category so much that things like premium games and other software-related sources weren’t able to offset its losses.

“Thanksgiving and Black Friday did not bring a reprieve as [mobile] spend during the week was down 5% year-over-year and 1% from 2020,” said Sensor Tower’s Dennis Yeh in the report. “Barring a meteoric (or catastrophic) final few weeks of 2022, annual U.S. mobile gaming spend should decease 1% – 2% from 2021.”

Mobile’s best-seller list was topped by the likes of Candy Crush Saga, Roblox, Royal Match, Coin Master and Clash of Clans. Indicators showed that casino, action and tabletop mobile titles ramped up in popularity during November, while role-playing and shooters were “struggling.”

Swapping to premium software, Call of Duty: Modern Warfare 2 repeated at the top spot during November and continues to be 2022’s leading seller. Activision Blizzard’s military shooter likely benefited from the launch of its Warzone 2.0 battle royale counterpart, plus it now has a full month of retail sales on the books. Nothing shocking about this particular result.

The first new release on November’s combined software list was God of War Ragnarök fighting its way to the 2nd spot. Comparatively, its predecessor in 2018’s God of War earned the top spot when it released in April of that year. Sony’s major exclusive for the back half of 2022 really only missed out on leading the month because it went up against the juggernaut that is Call of Duty.

PlayStation’s Game of the Year candidate is immediately among the Top 5 best-selling titles of 2022. This domestic success parallels its epic global start as the game shipped a staggering 5.1 million copies during its first five days. This is a record launch among first-party games in PlayStation history. Boy, that’s a whole lot!

Speaking of a great start, next up was the latest pair of Pokémon titles in Scarlet & Violet on Nintendo Switch which combine to reach 3rd place. A couple caveats being this includes full sales of both games, then excludes digital because Nintendo still doesn’t want to share that data. To compare against recent entries, Pokémon Legends Arceus started in first during (an admittedly less busy) January earlier this year while November 2021’s Brilliant Diamond & Shining Pearl also debuted in 3rd.

Pokémon Scarlet & Violet already occupy the 7th spot on 2022’s best-seller list. Beyond the domestic result, it’s a historic beginning for this game worldwide, shipping a whopping 10 million units within its first three days. That’s the fastest-selling on any Nintendo platform. Ever. Its monstrous launch set records for the series, Switch as a console and across Nintendo’s entire history!

Moving over to Nintendo’s 1990’s era rival in Sega, the #4 spot on November’s list went to Sonic Frontiers. It’s a rare appearance from the Blue Blur, as there haven’t been many mainline Sonic releases lately. Sonic Mania was a critical success back in 2017 then didn’t sell enough to chart at the time. This latest 3D platformer in Sonic Frontiers is turning out to be quite a fast seller, fittingly, moving 2.5 million copies worldwide within a month on sale.

Familiar names and big movers filled in the remainder of the overall ranks in November. Marvel’s Spider-Man: Miles Morales and Mario Party Superstars jumped back into the Top 10. The only other brand new title among the Top 20 was Tactics Ogre: Reborn slotting in at #17, which really is remarkable amidst plenty of big hitters.

Shifting to the 2022 list with just one month to go, Call of Duty: Modern Warfare 2 edges into first place. As expected. It’s the first time since Elden Ring dropped in February that FromSoftware’s masterpiece hasn’t held the year’s top spot. Past that, Madden NFL 23 has secured 3rd as Lego Star Wars: The Skywalker Saga moved down to 4th. MLB: The Show 22 seems to be impacted the most by new entries ahead of it, however it still retains a Top 10 position for now.

Check below for all premium software ranks for November and 2022 to date.

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

  1. Call of Duty: Modern Warfare 2
  2. God of War Ragnarök
  3. Pokémon Scarlet & Violet*
  4. Sonic Frontiers
  5. Madden NFL 23
  6. FIFA 23
  7. NBA 2K23*
  8. Gotham Knights
  9. Marvel’s Spider-Man: Miles Morales
  10. Mario Party Superstars*
  11. Elden Ring
  12. Animal Crossing: New Horizons*
  13. Mario Kart 8*
  14. Mario + Rabbids: Sparks of Hope
  15. Persona 5
  16. NHL 23
  17. Tactics Ogre: Reborn
  18. Minecraft
  19. Horizon Forbidden West
  20. The Legend of Zelda: Breath of the Wild*

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

  1. Call of Duty: Modern Warfare 2
  2. Elden Ring
  3. Madden NFL 23
  4. Lego Star Wars: The Skywalker Saga
  5. God of War Ragnarök
  6. Pokémon Legends Arceus*
  7. Pokémon Scarlet & Violet*
  8. Horizon Forbidden West
  9. FIFA 23
  10. MLB: The Show 22^
  11. Call of Duty: Vanguard
  12. Gran Turismo 7
  13. Mario Kart 8*
  14. Kirby and the Forgotten Land
  15. Gotham Knights
  16. Minecraft
  17. NBA 2K23*
  18. Nintendo Switch Sports*
  19. Marvel’s Spider-Man: Miles Morales
  20. Animal Crossing: New Horizons*

The biggest boost to overall spending last month came from Hardware as a category. Console sales rose a momentous 45% during November, reaching upwards of $1.25 billion. This is a stark contrast to the 10% decline during October, which was mainly driven by weakness in Nintendo Switch. Seems like Nintendo may have been holding shipments to attract buyers during the more competitive time frame, or people weren’t as interested until they began Black Friday and pre-holiday shopping.

This excellent monthly result means that 2022 sales have turned positive for Hardware. After trending down 2% as of October, this category is now up 6% for the year right now. It’s generated over $5 billion in sales through the first 11 months, compared to last year’s $4.74 billion.

Funny how that happens when people can actually buy a console if they want it! And the demand is certainly there, as strong as it’s been early in this generation.

Benefiting from a generous supply improvement, the PlayStation 5 earned the top spot in the segment during November by both dollars and units. By my count, that’s four months in a row where Sony’s newest generation has led the segment by both metrics.

Nintendo Switch came in second place by both metrics. While The NPD Group didn’t share growth statistics for individual platforms, like it had in recent months when Xbox and PlayStation families showed double-digit growth, I’d imagine that all three major platforms gained ground based on how the category fared.

After this latest monthly win, PlayStation 5 remains the best-selling hardware platform of 2022 in year-to-date dollar sales. Hanging in there in its own right, Nintendo Switch leads in units.

This dynamic of added availability, especially for PlayStation 5, combined with both an ongoing appetite and better buying power from consumers is providing a boon for hardware late in the year. The perfect time for it to happen for these manufacturers, because they are able to meet the demand during the crucial holiday months. Two years into the new generation, we’re finally seeing the supply side of the curve catching up to demand.

Another solid result during November’s report was Accessories, which often benefits when people spend more on consoles because they acquire peripherals and extra controllers. After moving down 8% back in October, this segment returned to positive territory last month netting $289 million in sales or 10% higher than this time in 2021.

That brings the year so far to $2 billion in spending on Accessories, which is currently trending down 9% due to weakness in earlier months.

Game pads and headset/headphone sub-categories in particular boosted Accessories as a whole during November. The top-selling peripheral last month was the PlayStation 5 DualSense Wireless Controller Galactic Purple, paralleling Sony’s win on the hardware side. While The NPD Group didn’t confirm explicitly, I’d bet Microsoft’s Xbox Elite Series 2 Wireless Controller remained the year’s best-seller due to its outsized price and revenue potential.

Taking everything from November, it was arguably 2022’s best sales result for the U.S. games industry. It’s refreshing to see sales growth again.

Last month was exceptional for consoles, as PlayStation and Xbox continue making up ground after a slower start plus Nintendo Switch is holding up well enough late into its life cycle. On the content front, mobile certainly presents a concern; for now, it’s premium sales of new and earlier games propping up that segment. And there was clearly a good amount of demand for peripherals late in the year.

Now, moving into the last month of 2022, it’s a crucial time that will determine where domestic sales end up for the year. I’m more upbeat than I was even a couple months back, even if I’m thinking we’ll see lower sales in 2022 than last year.

Which wouldn’t be bad at all. 2021 was a record year for domestic spending on games here after all, generating over $60 billion!

Unless December is a major surprise to the upside, I’m expecting total sales will be down for the year in the mid single-digits. Against last year’s $60.4 billion, assuming a 5% drop would bring 2022 to around $57.4 billion. This indicates a December month of roughly $8.4 billion, which would be an improvement since last year’s final month.

Even as a slight drop, almost $58 billion in spending would be a great result for 2022 given the economic challenges and downward pressure the industry has experienced most of this year. It’s not where the industry could be if supply constraints and a number of delayed games didn’t happen. The world is still dealing with a global pandemic during which working dynamics and supply chains shifted drastically.

As for individual predictions, again Call of Duty: Modern Warfare 2 will win December in the Content category. For 2022 in aggregate, I think the Top 3 top-sellers from November will hold serve and finish like that.

December will be much trickier for Hardware. Anecdotally I’ve been hearing more about Xbox Series X|S stock. We know Sony has been moving up its shipments. Nintendo is there for families and households looking for a better entry point. I’m guessing PlayStation 5 will lead December on both dollars and units, with Xbox Series X|S in second by dollars and Switch in second by units.

As for the year, PlayStation 5 will carry this late momentum to a win on revenue. Alongside, Nintendo Switch will take home the crown when measured by units.

So that’s the final thread I’ll be writing on NPD results during this calendar year, because December’s result will take place sometime in January. We’ll have to see how the predictions go, and if the industry surprises me as it often does!

If you want more on the report from The NPD Group, I recommend Piscatella’s thread that’s now on LinkedIn. He has more on platform charts and further details.

Hope everyone is safe and well going into the holiday season, and I’ll be back very soon with my Year-in-Review posts before diving into the new year. Thanks all for the continued support!

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

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

Sources: Newsweek (Image Credit), Nintendo, The NPD Group, PlayStation Twitter, Sega Sammy.

-Dom

Nintendo Switch Lifetime Sales Pass 114 Million In Upbeat Fiscal 2023 Q2 Despite Annual Hardware Target Reduction

It’s time for some Nintendo!

The latest of the big three console manufacturers to report this quarter, behind Microsoft and Sony, shared its fiscal 2023 second quarter results out of Japan earlier today.

I’d call it mostly upbeat, as both sales and operating profit experienced gains, yet it’s also dashed with cautionary signals and statistics. There’s upside, partially due to the yen’s continued weakness, while headwinds on the supply side and an aging life cycle show signs of a console business slowdown.

Headlines include how Switch passed yet another sales milestone this quarter while Splatoon 3 made quite the splash for consumers after its release in September. Especially in its local Japanese market.

On the hardware side, Nintendo Switch lifetime sales reached 114.33 million after the company shipped 3.22 in the three months ending September. It’s only the third home console to pass the 114 million mark. Still, Nintendo is somewhat uneasy about this portion of its business going forward, reducing in its annual unit sales forecast.

Splatoon 3 was the headliner for new software, shipping a whopping 7.9 million units in less than a month on market. That’s a record-setting launch for the franchise by a wide margin, plus the second fastest start of any Switch game this calendar year behind only January’s Pokémon Legends: Arceus.

Looking briefly at financial performance during the first six months of the current fiscal year, Nintendo’s net sales and operating profit rose 5% and under half a percent, respectively. While hardware unit sales are down 19% for the year so far, software sales are up almost 2% which shows the resilience of Switch buyers and reflects the ongoing appeal of Nintendo’s quality titles. Even amidst economic slowdowns and inflationary pressure.

Thus, executives decided to increase their forward-looking forecast for both net sales and profit metrics other than operating income, the latter of which kept constant. As the Switch pushes into the late part of its life cycle, Nintendo remains upbeat on consumers buying content for it, especially given the upcoming calendar including a sizeable impact from Pokémon launches this holiday season.

“Although software sales accounted for a larger percentage of overall sales for our dedicated video game platform business, and first-party software accounted for a larger percentage of overall software sales, the gross profit margin remained at the same level as the same period last fiscal year.” the company wrote in its slides. “This was due to the addition of Nintendo Switch OLED Model to the hardware lineup with its lower profit margin compared to other models, and the increase in component costs due to factors such as the semiconductor shortage.”

Check below the folder for a full dive into Nintendo’s business during Q2, including company guidance and my personal predictions for the annual period ending March 2023.

Starting with Nintendo’s overall performance, net sales for the six months bumped up 5% to roughly $4.91 billion. Focusing strictly on the quarter ending September, this was up 16% to $2.61 billion.

As has been the case recently for Japanese companies, there’s currently an outsized impact from currency fluctuations which hits those that operate globally even more than the average. Currently, around 72% of Nintendo’s business is outside of Japan. Because of this, the company said the impact of exchange rate changes on first half net sales was upwards of around $480 million. Backing that out, revenue for this time might even be down 5%.

Personally, I tend to stick with the gross number because currency impact is something that’s faced by all global companies. It’s still good to understand how much it’s affecting a company’s business when a given local currency is dropping as precipitously as the yen.

Alright, enough of this currency exchange rate lesson. Shifting now towards operating profit, this particular metric rose slightly in the first half to around $1.65 billion. Strictly for the second quarter alone, it amounted to $887 million which grew more than 18%.

Essentially this shows how both net sales and operating profit increased by double-digits during Nintendo’s second fiscal quarter.

What kind of product category mix was underlying this movement? Well, for Q2, software amounted to almost 60% of total sales compared to 55% this time last year. It follows that hardware sales dipped to 40%, down from 45%. This reflects the shift away from Switch console contribution as the cycle matures, plus the challenges of production the manufacturer and its suppliers have faced lately.

“While hardware unit sales declined by volume year-on-year due in part to the semiconductor shortage, overall hardware sales increased mainly due to the depreciation of the yen.” the company’s slides noted. “Looking at our mobile and IP related business, royalty income remained stable, but income from smart-device content declined.”

To better understand the quarterly movement in sales and profitability within a broader context, you’ll see the first two charts below illustrating this movement over time and the next two are annual figures. It was the second best quarterly output in the last decade plus. Twelve-month trailing numbers are moving back in a positive direction. Nintendo’s business is proving to be resilient, notably due to high quality game releases plus the aforementioned currency movement, plus hardware is still selling when it’s hitting retail. Not to mention, people that bought Switches during the pandemic still seem to be spending on games.

How do Nintendo’s latest numbers stack up to the biggest industry peers and their gaming businesses? While Tencent doesn’t report until later in the month, its latest annual revenue was $24 billion. Sony’s gaming business generated $20 billion, while Microsoft’s Xbox division topped $16 billion. Nintendo is up next, with its current annual sales figure at almost $13 billion. However, Nintendo’s profitability is vastly superior to PlayStation; the former has generated more than twice as much operating profit in the last 12 months, $4.43 billion compared to under $2 billion. PlayStation’s investment in the new PlayStation 5 line of consoles, the Bungie acquisition and ramping developments in software and virtual reality are chomping a serious chunk of its bottom line.

Nintendo’s hardware business is clearly slowing in terms of share and shipments, however there are a number of bright spots showing that Switch’s life cycle is far from complete. In fact, it’s going to hit major milestones in the near future.

During the first six months of fiscal 2023, Nintendo shipped 6.68 million Switch units. This is 19% lower than the same period last year, when it was 8.28 million. The drop can be attributed to the base model, which produced 2.23 million units against last year’s 6.4 million. Obviously the OLED model saw tremendous growth considering it launched in October 2021. As it replaces the base version, it now makes up over half of Switch’s total unit sales.

The lifetime unit sales of 114.33 million is up 21.46 million since September of last year, when it totaled 92.87 million. Switch has maintained its respective spot as the third best-selling home and portable console of all time. The popular hybrid is closing in on Sony’s PlayStation 4, the second best-selling home console in history, which ended production recently at just over 117 million. Even further, the 118.69 million of Game Boy and Game Boy Color is also in sight.

By the end of Nintendo’s financial year in March 2023, if not the holiday quarter, the Switch will occupy the second spot on the all-time list for both home and handheld hardware. What a run! And it’s not nearly done.

All of these are based on the number of units shipped to retailers by Nintendo. Additionally, the company shared some insight into how it’s selling-thru to consumers. Compared to the July to September time frame last year, Switch is selling-thru at the same rate. From what I can see on Nintendo’s slides, sell-through last year was roughly 3.4 million units of Switch in the quarter and just slightly less this time around. Even though shipments declined by roughly 15% this Q2.

This was attributed to demand being stable, and the introduction of Splatoon 3 alongside its more ongoing titles that still attract interest. That second part especially is the driver of Nintendo’s ongoing attractiveness to buyers, and investors, plus its financial performance. Consistent demand for its hardware products bolstered by key exclusives, especially as the technology gap with modern consoles continues to widen.

Speaking of games, Nintendo Switch software unit sales rose a bit in the six month period, moving up 1.6% to 95.41 million. For the quarter ending September alone, it was exactly 54 million. Compare that to 48.6 million in the same 3 months last year and this reiterates what makes the company so consistent.

On the fiscal year so far, Switch has seen 15 titles ship a million copies or more. Eleven of these so-called “million-sellers” are published by Nintendo itself while the remainder are via external partners. While this is down from 18 in the same period last year, it’s still a healthy amount of games hitting this coveted milestone.

Unit sales for Switch games lifetime have now crossed the massive 900 million milestone. To be exact, 917.59 million games have shipped for the console. That figure was at 681 million this time last year, meaning over 236 million games have sold in the past year. It’s hard to put these numbers in perspective, other than to say that’s a heck of a lot. While it won’t quite hit 1 billion this fiscal year, it will certainly eclipse that the following year.

In the new release realm, Splatoon 3 blasted its way onto the market in September with that 7.9 million copies sold number. That includes 5 million from Japan alone! To help put this in perspective, here’s how its predecessors started during their first respective quarters: Splatoon 2 sold-in 3.61 million in 2017 while 2015’s original Splatoon debuted at 1.62 million.

First month sales of Splatoon 3 are already more than halfway to the 13.3 million lifetime figure of Splatoon 2! It’s already among the Top 20 best-selling titles published by Nintendo on Switch to date, coming in at #18. It’s truly become one of Nintendo’s flagship entries, and the biggest commercial success of its new IP this generation.

The other new title showcased in Nintendo’s earnings was Xenoblade Chronicles 3. Since its launch in late July, it’s accumulated 1.72 million in units sales. While that might not sound like a lot in the context of other Switch games, this is an exceptional result for the Xeno universe. Back in 2017, its predecessor Xenoblade Chronicles 2 started with 1.31 million and was the top-selling title ever for developer Monolith Soft at the time. Now, Xenoblade Chronicles 3 has captured that crown.

In other record-breaking news, Kirby and the Forgotten Land sold-in an additional 2.61 million units during Q2, making its lifetime total 5.27 million. This is substantial because it’s now the best-selling mainline Kirby game of all time, outpacing the 3.98 million of 2021’s Kirby Star Allies. Keep in mind, this is a 30-year old franchise in collaboration between Nintendo and HAL Laboratory. What a fantastic success story!

Elsewhere, Nintendo Switch Sports is now the 20th best-selling Nintendo-published title on Switch, reaching 6.15 million units. Mario Strikers: Battle League passed the 2-million mark, settling at 2.17 million. Then there’s more impressive milestones from Mario Kart 8 and Animal Crossing: New Horizons, which seem to stand out every time I write an article on Nintendo. Mario Kart 8 zipped past the 48 million mark, somehow selling 1.59 million in the quarter to reach 48.41 million lifetime. Animal Crossing: New Horizons is the latest in the 40 million club, achieving 40.17 million to date.

This is where I like to provide updates on subscription numbers for Nintendo Switch Online or any sort of engagement statistics from the company. And now I can! Nintendo’s corporate briefing, updated a day after its earnings report, said that Nintendo Switch Online now has 36 million members. Compare that to 32 million in September 2021. Also, the company noted that the (frankly made up) metric of “Annual Playing Users” rose to 106 million. It was 104 million last quarter.

Considering the macro environment right now and pressure on consumers from areas like inflation and the appeal of other entertainment verticals, Nintendo’s Q2 performance was mostly promising. Especially when looking at the quarter on its own, rather than the six months, which revealed double-digit gains for important financial metrics. As Switch approaches its sixth birthday in the midst of various economic challenges, the console and its games still hold mass market appeal.

Alongside, Nintendo provided updated guidance for the remaining six months of its fiscal year.

The company now expects to generated 3% more, or upwards of $12.3 billion, in annual net sales. This would be a modest 3% decline compared to the prior year. It also maintained its operating profit target of $3.73 billion, indicating a 16% decline.

“While there is a gradual improvement in semiconductor and other component supplies and a recovery trend in hardware manufacturing for Nintendo Switch, taking into consideration production and sales performances thus far, we have modified the Nintendo Switch hardware sales units forecast for the fiscal year,” said the company’s slides. “By continually working to front-load production and selecting appropriate transportation methods in preparation for the holiday season, we will work to deliver as many Nintendo Switch systems as possible to consumers around the world.”

Thus, Nintendo now expects to ship 19 million Switch hardware units in the year ending March 2023. That’s down from 21 million it expected last quarter. For reference, it shipped 23 million in the prior fiscal year. Based on the 6.68 million already on market in the six months ending September, that leaves 12.32 million during the back half. Most of that will have to come during the holiday period.

My forecast last quarter saw 20 million on the lower end. Based on where supply has been and Nintendo’s conservative tilt, I’m formally pulling down to a range of 19.5 million to 20 million.

And no, I don’t expect its price to increase.

The company’s estimate for annual software unit sales remained the same at 210 million, which would be down from 235 million in fiscal 2022. As I wrote last quarter, I’m a bit skeptical it can reach this mark. Especially now that The Legend of Zelda: Tears of the Kingdom has a May release.

Mario + Rabbids: Sparks of Hope and Bayonetta 3 launched a couple weeks back, though both remain more niche than many of their counterparts or mainline entries. The real drivers will be, of course, Pokémon Scarlet and Pokémon Violet. The franchise seems immune to over-saturation and sells big on a consistent basis. I’m expecting a grand entrance for these, with a potentially record-setting start. Otherwise, Nintendo’s slate in the coming months is light. Even the Super Mario Bros. Movie isn’t out until April!

The last item I’d like to mention is Nintendo’s announcement of entering into a joint venture with long-time partner DeNA Co. Ltd. Both companies have collaborated on the technical side of Nintendo’s account system along with mobile offerings since 2015, and this latest venture will even be a Nintendo subsidiary due to its size and capital structure.

“Based on the expertise accumulated over the seven plus years and the experience of co-developing
multiple services based on Nintendo Account, Nintendo and DeNA will advance their partnership and
establish a joint venture company.” said the company’s announcement. “With the objective to strengthen the digitalization of Nintendo’s business, the joint venture company will research and develop, as well as create value-added services to further reinforce Nintendo’s relationship with consumers.”

I welcome this sort of team-up, and really anything that can bring Nintendo’s digital capabilities and online services closer to its competitors.

With that, this concludes my third big recap of the last couple weeks. What stood out to you with Nintendo’s latest announcement? Do you think it can meet or exceed its latest targets? Are you planning to buy a Switch or any games in the coming months? Drop a line her or on Twitter, I’m always down for a discussion!

Feel free to hop back over to my earnings calendar to stay current, as there’s plenty of action still to come this season. Thanks y’all for visiting and I hope everyone is doing well!

Note: Comparisons are year-over-year unless otherwise mentioned. Exchange rate is based on reported average conversion: US$1 to ¥133.93.

Sources: Company Investor Relations Websites.

-Dom

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sources: Company Investor Relations Websites, The NPD Group.

-Dom

Nintendo’s Annual Results Decline Slightly Amidst Hardware Shortages During The Company’s Best Year Ever for First Party Software Sales

Everyone that’s seen my latest earnings calendar knows the deal!

Nintendo is up next for this usual series of earnings recap and reaction articles for major gaming companies, this time focused on its annual results for the fiscal period ending March 2022.

While Switch hardware momentum slowed a bit, software is as strong as ever. In fact, stronger than ever.

As part of its report Tuesday, the Kyoto-based video game developer and publisher shared a variety of statistics around its yearly results. Software shipments from a units standpoint rose 2% last year. The firm even reported its highest level of first party software sell-through to consumers for a single platform.

And it’s had a lot of platforms since it entered the games business way back in the 1980s!

Its most recent in the Switch has been a commercial darling since launching in March 2022, spurring growth after the dark days of its failed Wii U console. While it didn’t see as much hardware success as fiscal 2021, it still achieved management’s latest shipment estimate plus had the second highest annual sell-through since it hit market outside of that first year.

Nintendo’s results, which saw dollar sales slow in the single digits and operating profit remain virtually the same, fits the industry theme of reverting to more normalized spending habits. Even if down from highs of last year, this was still its second best annual financial performance in more than a decade.

“Regarding Nintendo Switch, we will continue to convey the appeal of all three hardware models to maintain a high level of sales momentum and expand the install base,” the company wrote in its report. “Other software publishers also plan to release a wide variety of titles, and we will work to strengthen sales through the combination of existing popular titles and a continuous stream of new titles.”

Before moving into the full report, I want to highlight a recent article on Nintendo from friend of the site Kat Bailey at IGN. Entitled “Inside the Growing Discontent Behind Nintendo’s Fun Facade,” this investigative piece digs into the company’s culture and workplace conditions, notably its treatment of contract workers. It’s a rare peek behind the curtain, as relevant as ever considering how well the company is doing. Once you get done here, I highly recommend reading Kat’s fantastic coverage.

It’s time to dig into the nitty gritty.

On the financial side, Nintendo shared that net sales declined 3% to $15 billion. Operating profit lowered ever-so-slightly to almost $5.3 billion. Both of these were the second best amount respectively since fiscal 2010, came in above forecast and fit with the general theme of mean reversion.

These two metrics are displayed over time in the charts above, showing a slight contraction for both from highs a year back.

Splitting out by region, Americas was the leading contributor at 43%. That’s down slightly from 42% last year. Europe’s allocation remained consistent at 25% while Japan moved down from 23% to 21%. The remainder of countries outside these regions made up 10% of 2022’s total.

Nintendo shared insights into product category mix as well. Software sales contributed 52% of dedicated video game platform sales, while hardware made up the remaining 48%. That’s flip-flopped versus last year, when software was 47% and hardware comprised 53%. This shows the balance of Nintendo’s business exposure, plus a lean towards games in a time where console shipments lagged on the supply side.

Similar to my article on Microsoft’s latest financial report, here’s a rundown of how Nintendo stacks up to industry peers when it comes to the latest annual results. Tencent reports later this month, though most recently had an industry best $27 billion from gaming. Microsoft’s Xbox division posted $16.5 billion. Factoring the pending Activision Blizzard deal, it could be upwards of $23 billion to $24 billion depending on cost savings, etc. Unfortunately, both of these companies don’t break out profit from games. On the other hand, Sony also reported results today featuring $24.4 billion in revenue then $3 billion in operating profit. Thus, while Nintendo’s overall sales aren’t as much as these others, it’s currently more profitable than the PlayStation brand.

Digging into the aforementioned softening hardware sales, the Switch sold 4.11 million units during January to March which amounted to an annual total of 23.06 million. While that’s down 20% from the 28.83 million of fiscal 2021, it’s still the second best 12 months on record and exactly in-line with the company’s most recent guidance of 23 million. It’s worth noting this was revised downward twice from an original call of 25.5 million, signaling extended supply challenges.

Lifetime Switch console sales now stand at 107.65 million. An annual dip was expected given both the life cycle timing and global semiconductor shortage, it was just a question of how much. Tending to lean conservative, Nintendo’s initial guidance for the year ending March 2023 is an even lower amount of 21 million. That’s effectively returning to the amount of fiscal 2020, its third full year on sale.

Now that there’s three Switch models, Nintendo shares performance for all of them individually. The standard model is still the most popular of course, contributing 13.56 million to the year’s total. That’s down 33%, mainly due to the introduction of the OLED version which shipped 5.8 million boxes since hitting retail in October 2021. Finally, Switch Lite declined 57% to 3.7 million units in fiscal 2022.

Shifting into the Switch software category, Nintendo sold 235 million Switch games in the year ending March 2022. This is 2% higher than the almost 231 million of a year ago. First party games made up almost 80% of the platform’s annual software sales. Which essentially means 4 out of every 5 titles sold on Switch is published by Nintendo.

This sort of increased performance, happening as hardware sales slip, mainly proves how new and existing console owners keep buying games at a higher rate than even last year’s peaks. Which makes sense for a company known for its quality of output.

This annual growth led to lifetime software sales on the platform hitting 822.18 million. It was at 587.12 million back in March 2021.

Nintendo Switch ended fiscal 2022 with 39 “million-selling” titles during the fiscal year alone. This was at just 29 last quarter! For the year, 26 were published by Nintendo while 13 came from third-parties. Last year, Switch experienced 36 million-sellers: 22 from Nintendo, then 14 from external partners. A clear sign of catalog strength and what I call the “Switch Effect” on new titles in franchises normally considered as niche.

A couple headline releases during the latest quarter helped drive this consistency on the exclusive software side.

January’s Pokémon: Legends Arceus was the highest profile of the bunch, moving 12.64 million copies so far. That’s the third best start for a Pokémon game on Switch behind only 2019’s Pokémon Sword & Shield at 16 million and the nearly 14 million of Pokémon Brilliant Diamond & Shining Pearl last November. Truly an excellent beginning for Legends Arceus, which sold-through 11.4 million of those shipments, considering it’s a single release in a franchise that historically puts out two titles at a time.

Kirby and the Forgotten Land released towards the end of this period, rounding out the company’s first party slate for the fiscal year ending in March. It hit 2.65 million units shipped in those handful of days alone. Not only that, the cute 3D platformer sold-through over 2.1 million copies to buyers. This is undoubtedly the fastest-selling mainline Kirby in history; it will almost certainly pass the franchise’s best-seller of 1992’s Kirby’s Dream Land at 5.13 million last count.

Expanding to earlier catalog launches, Mario Kart 8 Deluxe naturally maintains the top spot on the all-time Switch best-sellers list. Bolstered by new downloadable content, the game originally out in 2013 shipped nearly 2 million in January to March alone! That pushes it above 45 million copies lifetime, 45.33 million to be exact, as one of only a few games ever to hit this milestone.

Animal Crossing: New Horizons moved an additional million copies in the quarter, no biggie, to continue as the second best-selling Switch title with 38.64 million to date. Super Smash Bros. Ultimate stays in third, selling 770K units to fight past 28.17 million in aggregate.

Since launching at that nearly 14 million copies mark in November 2021, Pokémon Brilliant Diamond & Shining Pearl extended to 14.65 million as of March. That makes it the 8th best-selling Switch game and 2nd best-selling Pokémon title on the hybrid platform. Exercise experience Ring Fit Adventure raced past the 14 million milestone to date, legging out an additional half million units and rounding out the Top 10 Switch best-sellers.

Speaking of milestones, Metroid Dread is already the top-selling Metroid game of all time. While it only shipped 160K units during January to March, combining that with the massive start last October puts it at 2.9 million copies or just above the 2.84 million of 2002’s Metroid Prime. Talk about having a ball!

Elsewhere, Mario Party Superstars shipped 1.45 million in the quarter, ending it at 6.88 million. The Legend of Zelda: Skyward Sword HD pushed another milly, now at 4.22 million lifetime. Both of these contributed to that ever-expanding million-seller list for this past fiscal period.

Wrapping up various miscellaneous indicators and tidbits of information, Nintendo indicated digital dollar sales rose 4.5% to $320 million. Downloads accounted for 43% of software sales for the year, same as during 2021. Its digital contribution is lagging the wider industry standard, which has been around 50% or more depending on the publisher or manufacturer, however that’s always been the case for Nintendo. It’s much more reliant on traditional retail sales than others.

In a bit of bad news for analysts, Nintendo still doesn’t report many player engagement statistics. The company has made up this statistics dubbed “Annual Playing Users” which really just means the number of accounts that logged into a Switch during a given year. Last year, this figure reached 87 million. It recently achieved management’s goal of passing 100 million by March 2022, ending at 102 million.

You’ll notice this isn’t the most descriptive of metrics. It’s very much a parallel to the number of Switch hardware units out there. It doesn’t reveal too much. I’d much prefer to know more about monthly active users or revenue per user. Wishful thinking in this context.

Another area with a distinct lack of information was Nintendo Switch Online, the company’s somewhat rudimentary online offering. There’s no update on subscribers, a figure that hit 32 million back in September 2021. All management said was sales of add-on content for Animal Crossing: New Horizon and Mario Kart 8 Deluxe “grew” this past year.

With Nintendo, I’ll take what I can get.

As Nintendo closes the books on another year, it’s clear there’s currently limited downside on financial performance because it keeps fans purchasing software even when hardware is taking a hit from international semiconductor shortages, limited part availability and higher cost to produce consumer technology. This is the sixth fiscal year for Switch after all, as it will end the 2023 period just after celebrating its 7th birthday.

Looking ahead, the company’s forecast is conservative. I think rightfully so, even with a slate of anticipated titles in successful franchises.

In fact, the forward looking guidance is quite familiar. It’s literally the same exact numbers as last year. Nintendo expects revenue to decline 6% to $14.2 billion, while operating profit should dip 16% to $4.45 billion. As displayed by my earlier charts, these will still be healthy numbers in the perspective of the last decade or more.

“If COVID-19 interferes with production or transportation in the future, this might impact the supply of products. Other unpredictable risks to the development and marketing of products and services also continue to exist,” the company’s press release read. “In addition, the production of products might be affected by obstacles to the procurement of parts, such as the increase in global demand for semiconductor components. The consolidated earnings forecast is based on the premise that we will be able to secure the parts needed for the manufacture of products in line with our sales plans.”

Starting with that hardware guidance for the 12 months ending March 2023 of 21 million, I believe it’s a reasonable expectation. It would be down 2 million from the 23 million achieved this year. Right now, based on chipmaker leaders globally and experts saying shortages may last until even 2024, I’m targeting 20 million to 21 million Switch shipments in my models.

The elephant in the room is: What about new hardware? Will there be an update? Could the company produce yet another revision?

Well, Nintendo’s upper management has made a slight yet important tonal shift on that topic. As recently as last quarter, President Shuntaro Furukawa hinted how there’s no successor in sight because the current Switch is mid-way in its life cycle. Today, during a question and answer session after the earnings press release, he declined to even comment on Nintendo’s next hardware.

Personally, as has been the case for a while, I’m not a believer in a Switch Pro or even any upgrade until the successor which I expect to be a “Switch Part 2” with the same fundamental features and various improvements. I believe Nintendo’s strategy will lean on new releases, catalog software and online packs for at least the next two years. Supply conditions alone mean console generations will be longer than ever, so my current forecast is January to March 2024 for the company’s next hardware.

I’m much more upbeat on the software slate and monetary contribution from this business segment going forward, as Switch owners keep proving they want to buy games. Especially given Nintendo’s track record of mostly quality titles, then partnering with others to enhance its platform especially via independent games. From a unit standpoint during the year ending March 2023, it expects software sales to decline 11% to 210 million. I believe it will be higher.

So, what are the flagship upcoming games that will drive this resilience?

First, those with dates. Nintendo Switch Sports kicked off a couple weeks back. Mario Strikers Battle League and Fire Emblem Warriors Three Hopes are scheduled for June, while Xenoblade Chronicles 3 moved up to July. Splatoon 3 is the latest with an actual date attached, launching in September. These all seem locked in, I’d be surprised if they shift.

Pokémon Scarlet & Violet don’t have a date, but rather “Late 2022” as the window. I’ll assume November, and GameFreak will certainly hit that given the franchise’s usual cadence. Bayonetta 3 is much more in flux with a nebulous 2022 window. I’d be surprised if that doesn’t slip to calendar 2023.

In what’s currently the biggest pending Switch game, and the most annoying to write, The Sequel to The Legend of Zelda: Breath of the Wild was recently delayed to Spring 2023. Could that make this fiscal year? I’m betting March 2023.

Then there’s the curious case of Advanced Wars 1+2: Re-Boot Camp, which was supposed to be out by now yet pushed back in light of the ongoing Russian invasion of Ukraine. That and Metroid Prime 4 are listed as “TBA” in Nintendo’s reporting. I expect the former might launch sooner than latter, while the latter won’t be for a while more and thus won’t contribute to the upcoming fiscal period.

There’s also how Shigeru Miyamoto told everyone on Twitter how the Mario movie was also delayed out of holiday season. Was the plan to have a counterpart mainline Mario release to coincide with the film’s marketing? If so, will that also be moved?

I’m wagering there’s definitely a surprise or two that no one knows about, except those working on them. I am betting on that new Mario title, likely 2D, plus a rejuvenated franchise that no one is expecting.

Well, that’s the rundown on Nintendo’s most recent fiscal year. It’s a lot to cover during an eventful time for the company. What stood out the most? Were you surprised by the results or any of its forecasts? What might management be hiding from us as part of its fiscal 2023 lineup? Is this the year it reveals the Switch’s successor?

I’m always available here and social media for discussion. Be well, and stay safe all!

Note: Comparisons are year-over-year unless otherwise mentioned. Exchange rate is based on reported conversion: US $1 to ¥112.34.

Sources: Company Investor Relations Websites, IGN, The NPD Group, Nikkei Asia (Image Credit).

-Dom

Elden Ring’s Huge February 2022 Debut Isn’t Enough to Offset Fourth Straight Month of Declines for U.S. Game Sales

Everyone truly is playing Elden Ring, it seems. At least that’s what the data says!

Still, despite FromSoftware’s latest masterpiece plus a variety of major releases, consumer spending on the U.S. games market declined during February 2022 according to the latest report from The NPD Group. That’s the fourth straight month of lower sales, attributed to supply pressure on the hardware front and slowing mobile momentum in the content segment.

Total consumer spending dipped 6% to $4.4 billion during February. Which checks out and really isn’t as bad as it sounds, considering this same period last year achieved a record result for a February month. A single-digit decline from all-time highs is quite a solid showing in the current environment of uncertainty.

The Video Game Content segment fell 4% since last year. This includes lower mobile spending, the first time mobile device spend has declined in a February since the pandemic started in 2020. There were a slew of newer premium titles charting like the aforementioned Elden Ring alongside Horizon Forbidden West, Dying Light 2 Stay Human and Total War: Warhammer III which all shared the Top 5 with January’s major launch in Pokémon Legends Arceus.

Nintendo Switch returned to its place as top earner within Video Game Hardware, the category with the most pronounced decline in February of nearly 30% year-on-year. Clearly semiconductor shortages and elevated input costs were a factor, which they will be this year and likely even further in to the future.

Content often goes as mobile and premium titles do, so seeing a dip means spending on recent launches couldn’t outpace mobile’s contribution. When it comes to hardware, and to an extent Video Game Accessories as the third major segment, inventory and availability is dictating results and who leads from report to report.

Not only were monthly sales lower than last February, the number for year-to-date is presently trending downward after January followed a similar decline. For the first couple months of the year, consumer spend reached $9.1 billion or 4% lower than the same time frame in 2021.

“Definitely seeing signs of a move away from the pandemic-fueled gaming surge that had been a part of the market since April 2020,” wrote The NPD Group’s Mat Piscatella on Twitter. “[The] question is where things settle in, and how many of the players added over the past 2 years stick around, and how engagement hours/spend change.”

Before I dive deep into the numbers, I want to say I stand with the people of Ukraine in their fight against Russia’s attempted takeover of their country and freedom. Everyone who has been displaced is in my thoughts. If you are interested in donating to relief efforts, here is a pretty robust list of charities.

Also, I hope everyone is safe and well as you start to return to workplaces, conferences and more in-person events. Even if it’s a small semblance of normalcy, it’s a welcome change. You’ll always have these recaps to keep you occupied whether at home or out and about!

It’s time to talk shop. Bring on the charts and figures.

United States Games Industry Sales (January 30th, 2022 – February 26th, 2022)

As I alluded earlier, The NPD Group reported February gaming sales in the States totaled $4.384 billion which is down 6% since last year’s (record) $4.671 billion. This was dragged down the most by hardware, though the other categories also saw notable declines.

Expanding to 2022 so far, total spending reached nearly $9.1 billion. That’s 4% lower than the first two months of last year. It’s a situation many of us expected, given the surge of domestic spending on games we’ve seen over recent history.

Video Game Content contributed 89% of all games industry spending in February, or $3.9 billion in dollar value which represents a 4% decline. Looking at this same category over the year to date, it’s at $8 billion and that’s also 4% off its 2021 highs. Leading all mobile titles by revenue were Candy Crush Saga, Roblox, Coin Master, Genshin Impact and Pokémon GO.

I mentioned briefly how mobile momentum is slowing. This sub-segment dipped almost 3% during February, the first February decline in a couple years. I’d say this is natural given where we are with things slowly opening back up, though I expect it to continue leading the Content category as people have access to mobile devices wherever they go.

When it comes to premium titles, Elden Ring earned the crown for both February and 2022 to date. Bandai Namco and FromSoftware’s latest open world action role-playing game is having the biggest launch in the developer’s storied history. For this domestic report, it had the best start of any game in the past year besides the behemoth that was Call of Duty: Vanguard. It’s already the 5th best-selling title of the last 12 months. And with just two days on sale during this period! Incredible.

Expanding globally, the companies announced just last night how the soulslike sold a staggering 12 million units worldwide since late February. I was way bullish on Elden Ring as one of the most anticipated titles ever across the industry. But I don’t know if anyone expected this, as it’s officially turned into much more of a mainstream success. And has done anything but Tarnish the developer’s rep. (Those playing will know!)

Second place in the month went to another open world title in Horizon Forbidden West, the sequel to 2017’s robo-dinosaur hunt Horizon Zero Dawn. The PlayStation 5 version of this exclusive made by Guerilla Games set a brand new first month record for titles on PlayStation 5 when measured by dollar sales, I believe outpacing Marvel’s Spider-Man: Miles Morales. It’s also the 3rd best-seller of 2022 right now. The original game hit upwards of 20 million copies lifetime, and I’m way optimistic on the prospects here over time. Even if it continues the trend of launching around an all-time great: Elden Ring now and The Legend of Zelda: Breath of the Wild previously.

January’s best-selling game Pokémon Legends Arceus captured the third spot in February, now with a number of weeks on market. Those there pocket monsters selling well, what else is new? Then, Techland’s Dying Light 2 Stay Human fought to #4, which is down compared to the original game that led the January 2015 monthly ranks. Still, it was enough for the zombie parkour experience to reach 6th for year-to-date. It’s worth noting both Pokémon and Dying Light 2 Stay Human do not include digital downloads. I don’t expect that would have made a difference for the latter. Maybe for the former.

Finishing up the Top 5 is Total War: Warhammer III mainly due to its strong PC push and Xbox Game Pass word-of-mouth boost. The strategy tactics game is also currently #8 on 2022’s list. I couldn’t find its predecessor anywhere on the chart during its September 2017 start, though I’m not sure if this is a record for the sub-franchise within the broader Total War saga.

All other games within February’s Top 20 were releases from prior months or even years. One that stood out to me was Grand Theft Auto: The Trilogy – The Definitive Edition, taking the 16th spot overall. That’s up from 57th in January. The now infamous remastered version of three Grand Theft Auto games seemed to have a boost in February at retail, since Take-Two Interactive is another publisher that excludes digital.

See below for premium software rankings for both February 2022 and the year so far.

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

  1. Elden Ring
  2. Horizon Forbidden West
  3. Pokémon Legends Arceus*
  4. Dying Light 2: Stay Human*
  5. Total War: Warhammer III
  6. Call of Duty: Vanguard
  7. Madden NFL 22
  8. Mario Kart 8*
  9. FIFA 22
  10. Minecraft
  11. Marvel’s Spider-Man: Miles Morales
  12. Mario Party Superstars*
  13. Animal Crossing: New Horizons*
  14. Super Smash Bros. Ultimate*
  15. Call of Duty: Black Ops Cold War
  16. Grand Theft Auto: The Trilogy – The Definitive Edition*
  17. NBA 2K22*
  18. Pokémon Brilliant Diamond & Shining Pearl*
  19. Far Cry 6
  20. The Legend of Zelda: Breath of the Wild

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

  1. Elden Ring
  2. Pokémon Legends Arceus*
  3. Horizon Forbidden West
  4. Call of Duty: Vanguard
  5. Madden NFL 22
  6. Dying Light 2: Stay Human*
  7. Monster Hunter Rise
  8. Total War: Warhammer III
  9. God of War (2018)
  10. Marvel’s Spider-Man: Miles Morales
  11. Mario Kart 8*
  12. FIFA 22
  13. Minecraft
  14. Mario Party Superstars*
  15. Animal Crossing: New Horizons*
  16. Pokémon Brilliant Diamond & Shining Pearl*
  17. Far Cry 6
  18. NBA 2K22*
  19. Super Smash Bros. Ultimate*
  20. Battlefield 2042

Last month, Video Game Hardware saw the most precipitous dip of the three primary categories as it declined 27% to $295 million. For perspective, console spend was above $400 million back in February 2021. The decline for 2022 so far is less severe, down 5% in the first two months to $685 million in aggregate. It certainly reiterates how difficult it is to find hardware, especially the top-end PlayStation 5 and Xbox Series X.

After PlayStation 5 took home January, Nintendo Switch was back as the leading platform by both dollars and units during February 2022. Microsoft’s Xbox Series X|S family of consoles secured the second spot, benefiting from the dual SKU approach since the entry level Xbox Series S is easier to find lately.

This flip-flopping of monthly winners on the console side is going to continue, because it’s all about who can come up with the most stock for a given time frame. Nintendo had a blow out holiday and inventories for Switch seem to be bouncing back after a slow January. Xbox Series S could push Microsoft to a win here and there. I’m still mostly impressed with Nintendo Switch entering its sixth year and still consistently putting up the best stats.

When taking the first two months of 2022 into account, it’s PlayStation 5 that leads all hardware by revenue however Nintendo Switch tops on unit sales. PlayStation 5’s strong post-holiday month was enough to hold off its competitors for the time being on dollar sales, benefiting from that premium price tag.

Really it’s just a matter of how long the supply situation lasts, and which company can secure its pipeline enough to keep consistent product on shelves. Nintendo held that title for February in a down month for domestic hardware spend overall, signaling we still have a long way to go in the everlasting semiconductor shortage.

Similar to its counterparts, the final segment of Video Game Accessories cooled during the month of February. Spending here was 7% lower than February 2021, reaching $180 million. It’s also the only category with a double-digit decline for 2022 to date, off 11% to $365 million.

This again isn’t as bad as it sounds because of where it was last year. At that time, various sub-categories within accessories saw their best February on record. That included Game Pads, Headset/Headphone and Steering Wheels. It’s tough to keep up to the best ever, especially when console sales aren’t picking up.

Out of all accessories sold, Microsoft’s Xbox Elite Series 2 controller topped the month. It’s also the best-selling accessory of 2022 at present.

One thing to keep an eye on here is the pace at which accessory spend is declining is currently worse than hardware. Another bystander of supply, and that’s even more pronounced when people aren’t purchasing many new consoles.

In certain recent reports, The NPD Group has shared some insights into virtual reality which is included in the accessories portion. I didn’t see any this time, likely because that’s more of a story during the holiday season or major product launches.

After a slower than usual start to the year, February welcomed a number of new premium games to market. It was a busy time for gamers looking to spend wisely because of just how many hit within weeks of one another. The biggest of those in Elden Ring is having a historic start, while others are certainly doing well in their own rights especially the Horizon and Total War series.

The unfortunate part is many of those same people also want to buy a fancy new console, yet probably can’t at legitimate retail. Nintendo was able to restock well in February, plus Microsoft’s Xbox Series S is propping up that particular family even if it doesn’t generate as many dollars because of its more affordable pricing. There’s certainly demand that’s going unfulfilled.

Even so, seeing single-digit declines from a record high February 2021 isn’t that concerning. In the context of recent years and even going back further, spending on the games industry is healthy.

“The last two years of significant growth have introduced gaming to new and returning audiences, have expanded the ways people engage with gaming, and have solidified gaming as a social gathering place for family & friends,” Piscatella said.

Shifting focus towards March, the last month of first quarter, and we see an equally busy calendar though I would argue less upside on the triple-A segment and spending as a whole. Square Enix boasts a number of titles: Babylon’s Fall, Triangle Strategy and Stranger of Paradise Final Fantasy Origin and I’m hesitant on all of them.

PlayStation’s flagship racing sim Gran Turismo 7 launched a couple weeks back, and has a legitimate chance at a Top 3 finish. Take-Two Interactive sports a heavy load: WWE 2K22, Tiny Tina’s Wonderlands plus yet another version of Grand Theft Auto V, this time for the current console generation.

Nintendo’s big game of the mouth, I mean month, is Kirby and the Forgotten Land. Plus the publisher has downloadable content for Mario Kart 8 Deluxe, both of which will perform well. I expect Kirby in particular to set records within the franchise, benefiting greatly from that Switch Effect.

For my quick set of predictions, I’m actually leaning towards Elden Ring repeating in March based on the number of weeks on sale plus its momentum isn’t going anywhere. I’m thinking Kirby secures Top 4 position, while Mario Kart 8 should move back into the Top 5 somewhere.

What console will lead March? Your guess is as good as mine. I like Nintendo Switch always, so I’ll say it wins March by both dollar and unit metrics. I’ve learned to not bet against Nintendo, even when I’m wholly unsure.

Did anything else stand out to you with February’s report? What do you foresee in March? Do you have any questions or comments? Feel free to reach out on social media. I also highly recommend checking out Piscatella’s thread on Twitter. Be safe and take care!

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

Comparisons are year-over-year unless otherwise noted.

Sources: Bandai Namco, The NPD Group, Xbox Twitter (Image Credit).

-Dom

Nintendo Switch Ships Over 100 Million Lifetime Units, Passing Wii & PlayStation During Nintendo’s Best Holiday Quarter Since 2009

While it didn’t announce any blockbuster deals or major investments like certain industry peers, Nintendo did just have a heck of a holiday.

That’s based on its fiscal third quarter announcement shared today out of Japan, where it passed a major milestone for its Switch hybrid console plus achieved its best Q3 results in over a decade.

A couple quick reminders. Nintendo’s filing is for the nine months between April and December 2021. Though I’ll dig into quarterly and trailing annual figures later in this piece. Then there’s the difference between sell-in versus sell-thru metrics. The former is shipment to retailers, while the latter is how many consumers ended up buying. Most of the talk here is shipments, unless specifically noted.

With those ground rules established, the big headline is how Nintendo Switch has officially passed 100 million units sold-in lifetime, now totaling 103.54 million. Fewer than five years after launch, this figure already exceeds the lifetime sales of both Nintendo Wii at 101.63 million and the 102.49 million of the original Sony PlayStation. Which is above all but the most bullish of analyst predictions, including mine. As upbeat as I was on Switch in 2017, I didn’t think it could attain Wii status.

Well, it has. Which means Switch is now Nintendo’s best-selling home console of all time. (Even if it’s also a handheld. Is that cheating?)

Considering this environment, moving 10.67 million Switch in the holiday quarter is an accomplishment and reflects demand for the latest OLED iteration. Still, Nintendo did revise its annual hardware forecast downward a bit. The company now expects 23 million in the year ending March 2022, off from 24 million last quarter which was already lower than original guidance of 25.5 million. Certainly reflects where production is at from an input availability and pricing angle. This guidance implies just over 4 million will ship in this current quarter.

On the first party software side, Nintendo had three major software releases with early success especially in a historical context.

Starting in early October, Metroid Dread has.. rocketed to 2.74 million units in just under three months. This is an incredible mark within the franchise, traditionally more a critical darling than commercial mover. For context, that’s almost equivalent to lifetime sales of the best-selling Metroid game in 2002’s Metroid Prime, at last count hit 2.84 million. It’s already above the original, which debuted on Nintendo Entertainment System in 1986 and accumulated 2.73 million lifetime.

Infamous party game and relationship killer Mario Party Superstars released in late October, reaching 5.34 million copies in its debut quarter. That’s slightly above Super Mario Party, which started at 5.3 million back in 2018. Prior to that, 2012’s mainline Mario Party 9 on Nintendo Wii hit 2.24 million in a couple quarters.

The biggest seller of Nintendo’s holiday period was, predictably, Pokémon Brilliant Diamond & Shining Pearl. The latest remake in the popular monster catching series amassed shipments of 13.97 million since November, immediately becoming the 9th best-selling title on Switch to date. Its launch quarter fell between two other Pokémon titles on Switch: Sword & Shield at 16.06 million in 2019 and the 10 million of 2018’s Let’s Go Pikachu & Eevee.

For a quick financial overview, Nintendo reported single-digit sales and operating income declines since the highs of last year’s same nine-month time frame. Net sales in the last three quarters dipped 6% to $11.89 billion, while operating profit lowered 9% to $4.26 billion. For perspective, that first number is actually the third best Q3 reported in company history from a sales standpoint.

Alongside this, the company upped annual net sales guidance 3% and operating profit by almost 8% for the year ending March 2022. That positivity reflects this stellar holiday quarter plus a more optimistic software forecast, both of which I’ll recap soon.

“Switch is just in the middle of its lifecycle and the momentum going into this year is good,” said Nintendo President Shuntaro Furukawa on the firm’s conference call. “The Switch is ready to break a pattern of our past consoles that saw momentum weakening in their sixth year on the market and grow further.”

I’ve got a lot to cover. Get cozy and read on!

Based on Nintendo’s reporting of the year so far, we can back into quarterly figures. During the three months ending December 2021, revenue reached $6.27 billion or 10% higher than prior year. Quarterly operating profit grew 10% as well, to $2.27 billion. One of the charts above shows these tracked over time. This was the best quarterly sales since $6.3 billion in 2009. Operating profit hasn’t been this high since the $2.66 billion back in 2008. We’re talking exceptional figures during the holiday period, all the more impressive given input scarcity on the hardware side.

The other two charts above show trailing 12-months i.e. the year ending in December going back in time. As of this latest update, Nintendo’s annual revenue closed in on $15.1 billion. That’s down less than a percent. Taking expenses into account, operating profit for the last year declined 3% to $5.33 billion. This is really more indicative of strength earlier during 2020 when Animal Crossing: New Horizons was everywhere rather than recent weakness.

In terms of regional split, Nintendo’s figures showed 43% from The Americas which was up from 41%. Europe accounted for almost 27% and Japan contributed 21%, versus last year when these were 26% and 22% respectively.

On the product category front, Hardware contributed more than half of sales at 53% of the total. Retail software was up next at 29%, while digital software comprised 9% of the pie. Subscriptions and Add-on Content then Mobile and IP Licensing filled in the remainder, at 7% and 2% respectively. Really this shows the continued importance of retail, both hardware and software, for Nintendo in particular as digital remains a much lower portion of its business than certain peers.

Speaking of, now that all of the “big three” have reported this season, it’s time for a final comparison. This time around, we’re also throwing in Tencent in recognition of its massive significance as the world’s largest gaming firm by revenue. As a reminder, Nintendo’s latest annual sales totaled $15 billion. This is very close to Microsoft at $16.28 billion, which was a record for Xbox. (Note this increases drastically when accounting for a $8.8 billion contribution from the pending Activision Blizzard acquisition.) Sony’s PlayStation division generated $26.66 billion and Tencent’s latest number, albeit back from September, was the highest at $27.3 billion. And it will be higher soon. Essentially, Nintendo’s annual sales are still the lowest of these however it’s actually much more profitable than PlayStation at least. Unfortunately, Microsoft doesn’t disclose profit from gaming.

Focusing on Nintendo’s major hardware segment, shipments were down 21% in the nine months ending December to 18.95 million. Within that, 11.79 million were base Switch while 3.17 million were Switch Lite. The new Switch OLED Model racked up 3.99 million sales in its debut quarter. Compare that to base model in 2017 of 2.74 million and Switch Lite’s 2 million in 2019. Technically both the original and Lite launched later in the quarter, so it’s not a perfect alignment. What this does indicate is the impact of newer iterations on ongoing sales, and buyers doubling up with multiple Switches per household.

As shown in one of the gallery slides above, Nintendo also shared statistics around sell-thru to consumers with Nintendo Switch moving past 100 million to date. Which means most of its shipments are going to buyers. This fiscal year is shaping up to be its second best ever, down only from the highs of last year during more restrictive quarantines.

“The outlook for semiconductors and other components has remained uncertain since the start of this fiscal year and distribution delays remain unresolved, so production and logistics continue to be impacted.” said Furukawa. “But even though product shortages in North America have continued, particularly since Black Friday, total global sell-through for April through December reached its second-highest level ever.”

This consistency of hardware purchasing is reflected in Nintendo Switch being the best-selling console of 2021 in the United States, United Kingdom and Japan according to local industry tracking firms. That’s during a battle with the initial year of a new console lineup for its competitors in Xbox and PlayStation, which are certainly feeling the sting of supply plus have higher price points on average.

Flipping over to Switch software, which made up that 38% of Nintendo’s dollar sales, the company said units shipped in the nine months ending December grew 2% since last year to 179.29 million. 85.41 million of that happened in the holiday quarter alone. Lifetime, software for Switch is at 766.41 million. Comments from the earnings call imply around half of software sales right now are catalog titles from prior periods.

From a shipment standpoint, there’s currently 29 “million-selling” software titles on Switch during this current fiscal year. That’s the number of titles shipping more than a million copies in this time frame. 22 of those are Nintendo first party, while 7 are from third party publishers. This time last year had the same number overall at 29, with 20 of them from Nintendo and the rest by external teams.

At the top end, Mario Kart 8 Deluxe is still the best-selling Switch title ever by a wide margin and driving those catalog stats. It actually just had its best holiday, shipping 4.61 million units towards a staggering lifetime figure of 43.35 million. This is a game that originally launched on Wii U almost eight years ago! With this sort of momentum, and still being bundled with Switch, unfortunately I don’t see a new Mario Kart until the next full-blown Nintendo console.

Animal Crossing: New Horizons maintains second place for Switch best-sellers at 37.62 million. That’s literally more than every prior Animal Crossing game has done combined. Nintendo said this includes 10 million units in Japan alone, beating out the 6.81 million units of the classic Super Mario Bros. to take the crown as the country’s top-selling video game to date.

Rounding out the Top 3 is The Legend of Zelda: Breath of the Wild selling 4.37 million this past holiday to pass 28.5 million. Another mover and shaker included Ring Fit Adventure stepping firmly into the Top 10 on Switch at 13.53 million units, flexing its muscle by shipping 1.32 million in the quarter.

Luigi’s Mansion 3 has now surpassed the 11 million threshold, settling at 11.04 million. Both September’s WarioWare: Get it Together! and Big Brain Academy: Brain vs Brain, a remake released in December, passed the million mark at 1.24 million and 1.28 million respectively. Finally, June’s Game Builder Garage snuck onto the million sellers list at 1.01 million to date.

As for copies getting to consumers, Nintendo said October to December 2021 was the single best quarter for first party global sell-thru since 2017’s Switch launch. Putting it plainly, both new titles like Pokémon and evergreen experiences like Mario Kart and Animal Crossing tag-teamed Switch’s best software holiday in its five years on market. Sounds like a happy holiday for the publisher and its employees, indeed.

Before I go, I’ll clean up some additional flavor text and chat about the near-term future in the context of Nintendo’s latest filing.

Within software, Nintendo said digital sales were effectively flat year-over-year at roughly $230 million during the first nine months of this fiscal year. Digital accounted for just over 40% of software sales for its dedicated platforms. For the holiday quarter, digital actually rose 31% to $100 million. This was attributed to an increase in downloadable versions of its titles, naturally!

One area Nintendo doesn’t share a lot is engagement statistics, skewing more towards the traditional unit sales metric. That said, it’s intriguing to see the figure of 98 million “annual playing users” for Switch in the calendar year 2021. That’s up from 80 million in 2020. Executives said the goal is to expand past 100 million users in the upcoming fiscal year.

This represents the number of users who play Switch software at least once during the calendar year, using data from Nintendo accounts. It’s certainly trending alongside the hardware trajectory, though it does show that the people buying them are at least turning them on. I’d like to know how many hours they are playing, and even further what the average revenue is per user. (Wishful thinking.)

There was minimal mention of its Nintendo Switch Online service, which at last count had 32 million paying subscribers. While it didn’t reveal a new user base figure, executives did say the following alluding to some sort of digital record:

“Sales grew steadily for Nintendo Switch Online, which launched a new paid membership service last October, add-on content like Animal Crossing: New Horizons Happy Home Paradise and download-only titles, with digital sales for the same period reaching a record quarterly high.”

Peeking ahead into this January to March 2022 quarter, the final period of Nintendo’s fiscal year, the company is upbeat on its dollar sales, profitability and software momentum as it increased guidance for all of these.

The most aggressive forecast raise was a 10% upward revision for Switch software unit sales. In stark contrast to its lower hardware forecast, Nintendo thinks Switch unit sales will end at 220 million for the year, up from 200 million.

Part of that is Pokémon Legends Arceus, which launched in late January to solid critical acclaim. And, even more importantly for the bottom line, early commercial success. Even if that’s based on somewhat vague language from executives on the conference call. I mean, it’s a brand new Pokémon game with a fresh take on the formula. It’s going to do extremely well. The only wildcard is how it’s a single title as opposed to the dual release model used often by the franchise.

Rounding out the fiscal year for first party will be Kirby and the Forgotten Land in late March. While it won’t be the commercial juggernaut of Nintendo’s more popular brands, I could see it following Animal Crossing: New Horizons as a breakout seller in its respective series. Just not nearly to the magnitude of New Horizons, of course.

Nintendo’s only area of bearish guidance was Switch hardware, down that 4% to 23 million units. My prior estimate was 25 million, which I’m formally reducing to 23.5 million after monitoring the impact of both part availability and input cost. I really do see the firm beating on all counts here, especially operating profit above $5 billion which I believe would be its second best annual figure outside of last year’s high.

When asked about industry consolidation and potential acquisitions, Nintendo gave the answer one would expect given that it’s not nearly as aggressive as competitors. “Our brand was built upon products crafted with dedication by our employees,” said Furukawa. “And having a large number of people who don’t possess Nintendo DNA in our group would not be a plus.”

Intriguingly, management’s reply to a query around the Metaverse left open the possibility for Nintendo to be more forward-thinking than usual. According to a report collated by VGC, executives have interest and see potential however wonder what kind of “joy” Nintendo can provide.

Well, I’d say Nintendo’s solid holiday quarter results are indicative of where it’s at within the broader industry in how there’s uncertainty around hardware that’s being offset by growth in software and legacy titles. Generating its best fiscal Q3 in a number of years while facing headwinds from supply proves the resilience of its formula combining memorable experiences and high-quality IP.

What Nintendo lacks in online capability and ongoing service it makes up for with games that never go out of style and appeal to a huge audience of all ages. Throw in content here and there for Animal Crossing. Toss Mario Kart in every bundle. Launch collections of Mario Party and WarioWare mini-games. Remix the same Pokémon that people have always loved. Sprinkle in the fastest-selling Metroid of all time.

This, along with innovative hardware that supports multiple ways to play especially on the go and prompts people to purchase more than one version, is a recipe for Nintendo’s incredible success during the Switch generation. Which, apparently, is far from over.

What stood out for you in Nintendo’s latest report? Anything I might have missed? Any questions on the numbers? Give me a shout here or social media.

Until next time, thanks very much for reading and be safe all!

Note: Comparisons are year-over-year unless otherwise mentioned. Exchange rate is based on reported conversion: US $1 to ¥111.06.

Sources: Company Investor Relations Website, Famitsu, GSD, The NPD Group, Video Game Chronicle.

-Dom

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

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