Tag: PlayStation

PlayStation 5 Q4 Unit Sales Record Drives All-Time High for Sony’s Gaming Division in 2022 With a Couple Caveats

DomsPlaying

Gamers should be happy, for once, because the PlayStation 5 has finally arrived!

At least that’s according to Sony’s 2022 annual financial results, which proved that any lingering supply issues for the newest console generation are now over.

The Japanese consumer tech giant reported earnings in Japan last week for the fiscal year ending March 2023. Within, its PlayStation division had an exceptional time as hardware inventories returned and people everywhere could buy PlayStations once again. Its Game & Network Services (G&NS) segment produced almost $27 billion in annual sales, an all-time best.

What’s the catch?

Well, a historically weak yen had an outsized impact and was responsible for a substantial portion of revenue growth. Gaming also proved less profitable because of higher development and acquisition expenses. I’ll cover that more later.

Still, that’s not to dampen what Sony is doing with its gaming hardware business emerging out of the height of pandemic times. During January to March, the PlayStation 5 had the best non-holiday quarter for a gaming console ever with 6.3 million units sold. For perspective, it had shipped 3.3 million and 3.9 million in the same quarter during 2020 and 2021, respectively.

This means Sony beat its ambitious fiscal year target of 19 million shipped, reaching 19.1 million. It also drove lifetime shipments to 38.4 million, moving past the 30.75 million for Sega Genesis and Nintendo 64’s 32.93 million.

On the content side for PlayStation, while yearly software unit sales declined, its services and engagement statistics showed progress as PlayStation Plus and Monthly Active Users (MAUs) either remained flat or gained ground.

“Distribution inventories have normalized, and we are now able to deliver PS5 to customers without waiting almost all over the world,” executives said in prepared remarks. “In addition, the positive impact of increased PS5 sell-in has begun to appear in engagement metrics, with dollar-based third-party software sales exceeding the same month of the previous fiscal year in February and March.”

Here’s a closer look at the numbers for 2022, plus a preview of the year ahead with my new predictions.

Starting with Sony overall, its Q4 revenue jumped 35% to $22.6 billion. During fiscal 2022, sales rose 16% to over $85 billion, slightly above its target. This benefited from contributions across a number of business lines, including G&NS in addition to Entertainment, Technology & Services (ET&S) and its Music segment.

On the other hand, quarterly operating profit suffered a 51% decline to $950 million. It was virtually flat for the year, at $8.92 billion, above estimate. Headwinds included currency impact alongside lower contributions from PlayStation and Sony Pictures.

Gaming is a major factor for Sony’s overall performance. Both Q4 and 2022 overall proved to be mixed, with excellent top-line growth yet a weaker profitability outcome. PlayStation revenue between January and March launched 61% higher, to an all-time Q4 record of $7.9 billion. That was over a third of Sony’s sales for the quarter. During 2022, PlayStation sales grew 33% to a record $26.9 billion.

Again, on the flip side was profitability. Fourth quarter operating profit dipped 55% to $287 million. This drove the annual figure down 28% to $1.85 billion.

There’s great top-line movement yet worsening profit tells a totally different tale. Part of the reason behind record sales was massive exchange rate impact. Over the course of 2022, currency effect was upwards of $3.1 billion. That’s 12% of the total! If backing out this portion, for illustration purposes, Sony’s annual revenue would have been virtually flat.

Profitability took a hit mainly due to higher costs associated with making blockbuster first-party games like God of War Ragnarok, which had a reported budget of at least $200 million, plus purchasing Destiny creator Bungie among other smaller studios. Sony is also investing in its services suite and cloud offerings, and rebranded its PlayStation Plus membership structure. And frankly, it costs money to supply more hardware.

A primary growth driver was, naturally, PlayStation 5 hardware shipments. As regional data came in from key markets, indicators pointed to a big quarter. I still didn’t know if it could be this massive. Sony just shipped the most PlayStations in any fiscal Q4. To put this 6.3 million in context, the biggest January to March shipment total was 3.1 million right after its launch in fiscal 2013. Last year, Sony moved a paltry 2 million.

Even more, I bet most if not all stock is selling-thru to customers. The supply and demand equation has equalized, and Sony is clearly making up for lost time.

While this is impressive stuff, the PlayStation 5 continues to lagging its predecessor, which was at 40 million shipped by the end of its third fiscal cycle. That’s currently the fastest-selling console in Sony’s history. We’ll see if PlayStation 5 catches up. (Tease: It should by next year).

This performance was reflected in its product mix, where Hardware made up 35% of the quarter’s sales after more than doubling year-over-year. Next up was 21% via Add-On Content as it benefited from spend on third-party software and downloadable expansions. Digital games comprised 16%, no doubt bolstered by a monumental launch for Warner Bros’ Hogwarts Legacy. And the Others category contributed 13%, moving up 176% since last year. This includes Sony’s games on PC, such as The Last of Us Part 1 which launched in March.

As I did during my Microsoft earnings reaction, here’s a quick rundown of where Sony’s latest annual output fits compared to peers. Tencent’s latest was nearly $26 billion, meaning that if we account for extreme exchange rate fluctuations, Sony’s $26.9 billion would be tops. Backing out that effect, Sony occupies the second spot again at $23.82 billion. This is where Microsoft’s Xbox sales sit at $15.43 billion. Activision Blizzard’s 12-month revenue was $8.14 billion, so the combined firm could be $22 billion to $23 billion, accounting for redundancies and sales overlaps. Nintendo previously produced $12.25 billion, yet the company is reporting more recent results next week.

Sony’s management also shared supplemental statistics, which give insight into the number of folks playing regularly on PlayStation, if those users actively sticking around plus how well are services being received.

To keep it simple, I’ll focus on annual figures. Intriguingly, full game software sales across the PlayStation family took a substantial hit during 2022, moving down 13% to 264.2 million. Out of that, 43.5 million were from first-party titles published by Sony itself. That number is down only marginally from last year’s 43.9 million. In fact, Sony claims that dollar sales of first-party software rose 41%, including the impact from Bungie. The bulk of the unit drop was external games.

Digital represented 67% last year, up slightly from the 66% of fiscal 2021. That means more than two-thirds of games purchased for a PlayStation platform are via download. Digital’s slice didn’t dip below 62% during any quarter over the past two years.

It appears that, for now, the refurbished PlayStation Plus service is attracting and retaining users. There were 47.4 million memberships at the end of March, the same exact figure as the prior year and up 1 million sequentially since the holiday season.

Reflecting a similar engagement theme was active users on PlayStation. MAUs, defined as the “estimated total number of unique accounts that played games or used services on the PlayStation Network during the last month of the quarter” rose from 106 million in March 2022 to 108 million now.

Thus, while software sales declined for Sony this fiscal year, just as many people are subscribing to its catalog of older titles on PlayStation Plus and even more people are active on the ecosystem, which contributed to its elevated financial results.

“The number of monthly active users for PlayStation as a whole increased 2.3 million accounts compared to the same month of the previous fiscal year in March,” management said on its conference call.

There’s two sides to Sony’s story last year, and I’ve fully delved into both. To summarize, it was one of the best years gaming has ever seen. Albeit with the caveat of revenue benefiting greatly from a weak local currency and profit facing hits from big costs. There’s macro elements like supply lines being shored up that greatly benefit, and even though people are buying less games, perhaps partially due to inflation pressure, they are playing the games they bought.

One disappointing element of Sony’s announcement was nothing much on PlayStation VR2, which launched in February. For such a major product launch to receive zero airtime is concerning, and reinforces my viewpoint that its launch isn’t moving the needle for PlayStation or virtual reality as a niche.

Looking ahead, Sony has set a rather ambitious target for its gaming division in fiscal 2023. Namely, it expects the best year ever for PlayStation hardware, even with a single system-selling title on the docket for the upcoming 12 months.

“We are planning to release a major title, Marvel’s Spider-Man 2, this fiscal year, and we aim to continue creating new IP, rolling out catalog titles for PC and strengthening live game service development.”

Starting with hardware guidance, executives anticipate shipping a staggering 25 million PlayStation 5’s between April 2023 and March 2024. That would be the single best year of PlayStation console sales in its three decade history. If this happens, lifetime PlayStation 5 sales would reach 63.4 million, thus blowing past PlayStation 4’s 60 million on a launch-aligned basis.

I believe Sony will in fact meet this mark. I’m forecasting 25 to 25.5 million in annual PlayStation 5 shipments. I don’t expect any sort of new enhanced version, despite what “insiders” claim. Sony doesn’t need one right now. Supply has caught up to demand and it will milk the current devices until there are more games available solely on this generation.

Effectively, I’m targeting calendar 2025 for a PlayStation 5 model refresh.

Unlike Sony’s overall guidance expecting lower results in fiscal 2023, the firm is upbeat on the gaming segment. It anticipates 7% higher revenue and 8% better operating profit for PlayStation, to $28.8 billion and $1.99 billion respectively. The former would be another all-time best.

Will it hit these? I’m hesitant, not because of games or hardware, mainly because of exchange rate uncertainty plus cost upside. I’m expecting a more modest rise in the low single-digits, and operating profit to be flat or down slightly.

I’m expecting a great upcoming 12 months for software on PlayStation. Marvel’s Spider-Man 2 is undoubtedly a system seller. Square Enix’s Final Fantasy XVI and Capcom’s Street Fighter 6 will attract audiences. Activision Blizzard will launch Diablo IV to critical and commercial acclaim, and will have some sort of premium Call of Duty to sell. MLB The Show is a quiet success every year. Even Ubisoft will, allegedly, launch some games.

There’s also the transmedia portion and PC sales, incorporating brands like The Last of Us and Twisted Metal, which can provide upside if costs are kept in check. The great unknown is Sony’s live services push because it’s still in the ramp-up phase, where it generates expenses long before revenues and I remain a skeptic on just how many players will obsess over ongoing games exclusive to a single platform. At least Naughty Dog should share more on The Last of Us multiplayer this year.

I’ve come to the end of another fun rundown, within what’s already been a busy season. Next up will be Nintendo next week. Thanks for hanging out. Until then, take care, and be well everyone!

Note: Comparisons are year-over-year unless otherwise noted. Exchange rate is based on reported average conversion: US $1 to ¥135.4.

Sources: Ariana Ruiz/Picture Alliance (Image Credit), Circana, Company Investor Relations Websites, The Guardian.

-Dom

PlayStation 5 Outpaces PlayStation 4 in Circana’s March 2023 U.S. Games Industry Sales Report

DomsPlaying

Can you believe the year is a quarter over? At least it’s beautiful springtime here in the States.

Which means, most importantly of course, it’s time to spring into another monthly sales report!

Industry tracking firm Circana, formerly The NPD Group, recently published its March 2023 games industry report which tracks trends and tidbits on spending habits of domestic gamers.

Both March and the first three months showed common themes, while the PlayStation 5 hit a major milestone compared to its predecessor plus Capcom has another REmarkable hit on its hands.

Overall consumer buying on games and related categories declined 5% in March, leading to a modest 1% drop for the first quarter. Underlying this movement was weakness in mobile and certain software areas, which offset sizeable gains in the hardware segment.

Generally this indicates industry sales normalizing towards pre-pandemic levels, as consumers get back to other forms of entertainment and face certain external pressures like continued inflation. Better hardware supply is providing a much-needed boost, because those looking to buy a current generation box at retail can find one.

Circana’s monthly announcement tells a mixed story on the Content side as mobile and premium software continued downward pressure, even as new launches hit market. Within premium, Capcom’s Resident Evil 4 Remake was the month’s best seller.

On the console front, Sony’s PlayStation 5 has been on market now for 29 months. This is worth mentioning because it’s (finally) outpaced 2013’s PlayStation 4 on a launch-aligned basis. Until now, the recent cycle was lagging its predecessor. In fact, PlayStation 5 also set a new March unit sales record for the brand, a month after it did the same for a February month, implying that Sony might be able to meet its lofty goals towards this the end of its fiscal year.

“PlayStation 5 lifted hardware spending in March,” said Circana’s Mat Piscatella on Twitter. “However this growth was offset by a decline in content spending, where increases in non-mobile subscription as well as digital add-on console content were offset by lower spend across premium games, PC add-on content and mobile.”

Scroll down for more reactions to the commercial standing of the U.S. games industry in Q1.

United States Games Industry Sales (February 26th – April 1st, 2023)

During the last month, total games industry spending moved down 5% to $4.63 billion. This means the first quarter equaled $13.58 billion, down 1% to date.

The largest contributor of Video Game Content made $3.83 billion in March, a decline of 7% as it comprised 83% of the overall figure. In the same month last year, it made up 85% mainly because of softness in hardware at the time. Q1 purchasing on Content this year lowered 4% to $11.51 billion, whereas in 2022 it reached $12 billion by now.

Mobile was a driving force, moving down yet again in March albeit it’s unclear to what extent as Circana doesn’t share specifics. The report still claims mobile spend was “strong” during March, led by the casual sub-category having its best month since a year ago, outpacing even the holiday period. Top mobile earners last month were Candy Crush Saga, Roblox, Royal Match, Coin Master and Pokémon Go.

Circana said premium software also exhibited a year-on-year decline in March, despite a handful of higher profile releases. Keep in mind last year was the first full month of Elden Ring sales, a title which proved to be a bellwether throughout the first quarter and beyond, plus featured launches in the Gran Turismo and Kirby franchises.

The reanimated Resident Evil 4 Remake won March by revenue, making it the 3rd best-selling game of the entire quarter with only a week of sales in consideration. As compared to earlier titles, Resident Evil Village also topped its debut month of May 2021 while Resident Evil 3 Remake started in 6th during April 2020.

This is an impressive beginning for the beloved Resident Evil 4 Remake that parallels its global success, whereby it’s the second fastest-selling franchise game behind only Resident Evil 6 in 2012. Resident Evil 4 Remake moved 3 million copies in its first two days, and has since sold over a million more.

Beneath Hogwarts Legacy at #2 was the next new release in MLB The Show 23, which scored a third place start. The past couple incarnations of Sony San Diego’s multi-platform baseball sim have performed in this range during their debut months, hitting 4th and 1st in 2022 and 2021, respectively. This year’s title is already the 4th best-seller of 2023, made even more impressive by the fact that it only counts digital on select platforms.

The final new title on March’s list was WWE 2K23 at #7. This was a great result for Take-Two’s latest wrestling game, notably because the publisher doesn’t share its download portion. All of this is from physical sales. Its predecessor entered the arena in the same spot in March 2022 after the storied series took a much-needed year off.

Otherwise, last month’s premium ranks were occupied by titles launched in earlier periods. Major movers included Metroid Prime Remastered jumping from #21 to #13 and Lego Star Wars: The Skywalker Saga launching up to 20th from down in 41st.

Across the first three months of 2023, Hogwarts Legacy was the top-selling title followed by Call of Duty: Modern Warfare 2. The two new entries in March bumped Dead Space Remake a bit to 5th. Further down, Octopath Traveler II was probably the most notable, moving from outside the Top 20 into the 17th slot.

Here’s the full rundown of premium software sellers for March and the first quarter.

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

  1. Resident Evil 4 Remake
  2. Hogwarts Legacy
  3. MLB: The Show 23^
  4. Call of Duty: Modern Warfare 2
  5. The Last of Us Part 1
  6. FIFA 23
  7. WWE 2K23*
  8. Elden Ring
  9. Madden NFL 23
  10. Mario Kart 8*
  11. Minecraft
  12. Octopath Traveler II
  13. Metroid Prime Remastered*
  14. Pokémon Scarlet & Violet*
  15. God of War: Ragnarök
  16. Kirby’s Return to Dreamland*
  17. Dead Space Remake
  18. NBA 2K23*
  19. Sonic Frontiers
  20. LEGO Star Wars: The Skywalker Saga

Top-Selling Games of Q1 2023, U.S., All Platforms (Physical & Digital Dollar Sales):

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

Sales within the Video Game Hardware category moved up 10% in the U.S. last month, settling at $566 million, which proved to be a substantial figure in a historical context.

“This is the second highest video game hardware spend for a March month in U.S. history, trailing only the $680 million reached in March 2021,” noted Piscatella.

That sort of near historic momentum drove Q1 sales upwards 21% to $1.5 billion. For comparison, its contribution was $1.2 billion between January and March 2022.

This signals not just a healthy supply of consoles in market, but a better-than-expected amount coming off a challenging 2022. I’ve written about how I was skeptical of Sony’s bullishness on its console business even now that supply lines are shored up. I’m beginning to think executives were onto something.

Why? In addition to PlayStation 5 now selling faster than PlayStation 4 domestically, it also set a new unit sales record last month for the PlayStation brand during a March month. Looking back historically, PlayStation Plus moved 620K units around its first month in 2005. The latest box from Sony outsold this number.

Naturally, PlayStation 5 was the best-selling console of March by both units and revenue as it gained ground compared to last year. It’s unclear if we’re looking at a record first quarter of unit sales after both February and March were both all-time PlayStation records. All Circana did was call year-on-year growth in Q1 “significant.”

Something else that’s significant, even if less so, was how Xbox Series X|S again secured second place during March as measured by dollar sales. This is the second month in a row where Microsoft’s latest console family has outpaced Nintendo on revenue. Still, Nintendo Switch continues to move off shelves in its seventh year as the runner-up during March by unit sales.

Similar to March itself, when considering the first quarter, Switch secured second place on units. Xbox Series X|S is runner-up right now on dollars. Circana tells me that the difference between the two platforms vying for second place is “very close.” Basically, it’s anyone’s game!

Rounding out the spending categories was Video Game Accessories, which didn’t move much in March or Q1 in either direction. Purchasing rose 1% last month to $239 million, making the year-to-date essentially flat at $617 million.

Game pads boosted March’s result, earning more than any other sub-segment in Accessories. Sony’s PlayStation 5 DualSense Edge Wireless controller in black was the month’s top-seller, benefiting from that premium price point.

As for the year-to-date best-seller, I have a question out to Circana to see if they might be able to share it. I’d imagine it’s one of the PlayStation 5 DualSense models, based on how well the corresponding console is doing lately.

Separately, fitting with the broader narrative of a slower start for PlayStation VR2, I asked Circana specifically if they could share anything about the headset’s performance or how it compares to the first iteration back in 2016. They weren’t able to comment. Seeing this segment where it is means that I don’t think virtual reality is moving the needle, even during the first full month of sales for a premier product launch from one of the industry’s biggest players.

While somewhat disappointing, it matches my expectation that virtual reality has niche appeal, both in the past and future, until the technology catches up with where it needs to be and headsets can be standalone. There’s also the high barrier to entry on cost for something that requires a console connection.

While domestic industry sales trended downward during both March and the first quarter, there are plenty of bright spots including hardware, big budget title sales and even accessories moving in a good direction. PlayStation 5 hitting a couple major milestones is reassuring, given where supply has been for most of this generation.

“Engagement is returning to pre-pandemic levels, but spending is holding significantly above,” noted Piscatella.

Mobile is still the unknown, showing weakness for a while now, and Xbox Series X|S continues to lag where it should be against its biggest peer. Perhaps Microsoft isn’t as concerned. Circana did specifically say that subscription spending, like that on Xbox Game Pass, is still growing at this phase, although slower than it has in recent years because of cycle maturation.

I’ll now cover the first month of the new quarter before I go. April is a curious month, continuing with blockbuster releases on the premium side. Plenty of which will help with console demand.

I’m anticipating overall spending to be flat year-on-year, with upside depending on if console inventory holds up and where mobile goes.

Within Content, I’m expecting a massive debut from Star Wars Jedi: Survivor. However, there’s a caveat. The latest from Respawn Entertainment and Electronic Arts launches on April 28th, the day before the April tracking period ends. Even so, I’m betting it’s the month’s best-seller.

Dead Island 2 releases later this week, and it’s a curious one in this context. I can see a Top 10 start, though not a Top 5. EA Sports PGA Tour can be a quiet seller, with Top 15 potential. Minecraft Legends will absolutely have its audience on brand alone, yet I’m not expecting a high chart position because a number of fans will access it via Xbox Game Pass and strategy is more of a focused genre. Lastly, Horizon Forbidden West has its Burning Shores expansion out, so that should reappear in a solid position.

For the console space, it’s impossible to bet against Sony right now. At least until Nintendo’s next Zelda game in May. Expect another win for the PlayStation 5 in April.

Thus officially ends the first quarter, a fun one at that. I greatly appreciate everyone visiting the site. Check out Piscatella’s social media post for further details directly from Circana. Be well, all!

*Digital Sales Not Included

^Xbox & Nintendo Switch Digital Sales Not Included

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

Sources: Bloomberg, Capcom, Circana.

-Dom

Hogwarts Legacy & PlayStation 5 Unit Sales Record Boost U.S. Games Sales Growth in February 2023 Circana Report

DomsPlaying

It’s the season to Spring into a new video game sales report.

Yup, the jokes really bloom around these parts and can blossom into something special.

Anyways, I’m here to cover the latest U.S. games industry spending report. For a bit of background, industry tracking firm The NPD Group merged with Information Resources, Inc (IRI) last year. Now, the two firms have rebranded into: Circana.

Fun new name, same sales data!

Within this announcement, Circana shared that consumer spending here in the States is back to growth after a lackluster January. In fact, February’s 6% growth rate was the best result since October 2021’s 13% increase amidst certain macro elements easing and console inventories returning to retail.

Total monthly spend reached $4.6 billion, boosted mainly by the massive launch of Hogwarts Legacy and ongoing PlayStation 5 stock meeting its consistent demand. All three primary categories of Content, Hardware and Accessories showed gains last month, the latter two in double-digit territory.

For Content, while mobile spending continued to lag, the premium side proved healthy especially as it relates to new releases. There were seven new launches among the Top 20 best-sellers, including four within the Top 10. Earning the top spot was Hogwarts Legacy, published by Warner Bros.

Note: Harry Potter author J.K. Rowling wasn’t directly involved in making Hogwarts Legacy, though she undoubtedly benefits from it financially. I want to make it utterly clear that trans rights are human rights, and I think her transphobic comments are despicable.

PlayStation 5 continued to drive an upward trajectory within the Hardware segment, which saw spending jump nearly 70% in February. Sony’s latest was the best-selling console by both units and revenue. Even further, it sold more units last month than any prior individual PlayStation platform. Previously, the PlayStation 2 held this record back in 2005.

“The February results, and really those going back to October of last year, show a stabilization of trends, both in purchasing and engagement,” said Circana’s Mat Piscatella on Twitter. “We’re well into the ‘new normal’ and are no longer subject, for now, to the wild swings we’d seen in the market starting in March 2020.”

Here’s a deeper dive into the data incoming!

United States Games Industry Sales (January 29th – February 25th, 2023)

Consumers in the U.S. spent upwards of $4.6 billion on gaming last month, 6% higher than this time last year. That means year-to-date is trending up almost 1% to $8.95 billion.

Slowness in mobile was offset by digital strength on both console and PC, plus subscription spending on non-mobile platforms went up. Alongside this, the launch of Sony’s PlayStation VR2 led to higher sales within peripherals, even if there’s limited detail on its actual impact.

Digging into the report, Content category spending in February rose 1% to $3.89 billion, making up 85% of the broader total. Last year, it contributed 88%. This means for 2023 right now, spending is down a modest 2% to $7.68 billion.

Circana didn’t share much in the way of specifics on mobile, other than to highlight that it declined during the month. According to data partner Sensor Tower, the best performing mobile titles were Candy Crush Saga, Roblox, Royal Match, Pokémon Go and Coin Master. In particular, Pokémon Go had a resurgence, seeing in-game spend up 23% compared to January, indicating a 10% increase year-on-year, as it reentered the Top 5 biggest monthly earners.

Within premium software, the aforementioned Hogwarts Legacy concocted a recipe for success, outselling all other titles during its debut month thus securing the top spot of 2023 so far. The ever-present Call of Duty: Modern Warfare 2 and Dead Space, January’s winner, rounded out the Top 3 respectively. After a couple sports titles in Madden NFL 23 and FIFA 23, The Last of Us Part 1 moved back into Top 10 at #6 on the back of the hugely popular HBO show.

Rounding out the Top 10 were three more new releases. Wild Hearts started in 8th, which means Electronic Arts published four of the eight best-selling titles in February. Next up were two Japanese titles in Sega’s Like a Dragon: Ishin! and Square Enix’s Octopath Traveler II finishing up the Top 10. As a comparison for the latter, Octopath Traveler was the best-selling title of July 2018. In fairness, the sequel had only a couple days of tracking last month, however it also launched on more platforms than strictly Nintendo Switch.

Moving down the list to look at other new games, Kirby’s Return to Dream Land started at #15. The Kirby brand has seen a nice boost from the Switch effect this generation, as last year’s Kirby and the Forgotten Land was the fastest-selling game in franchise history. We’ll know more about its performance during Nintendo’s upcoming results.

Company of Heroes 3 debuted at #16. That’s a solid showing from the latest mainline entry in the real time strategy series, as Company of Heroes 2 didn’t chart back in 2013. This also means that Sega had three games among the best-sellers ranks in February. Finally, Theatrhythm Final Bar Line landed right at #20, the second game from Square Enix on the list.

It’s way early in the year, so the annual ranks look a lot like February’s. Hogwarts Legacy entering the list at #1 is the headliner, of course. Sony’s The Last of Us Part 1 bumps up into the Top 10, at #9. Electronic Arts still has three titles within the Top 5, and also boasts Need for Speed: Unbound at #18 and Wild Hearts sneaking in at #20.

Check below for a complete rundown of recent best-sellers.

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

  1. Hogwarts Legacy
  2. Call of Duty: Modern Warfare 2
  3. Dead Space Remake
  4. Madden NFL 23
  5. FIFA 23
  6. The Last of Us Part 1
  7. Elden Ring
  8. Wild Hearts
  9. Like a Dragon: Ishin!
  10. Octopath Traveler II
  11. God of War: Ragnarök
  12. Minecraft
  13. Mario Kart 8*
  14. Pokémon Scarlet & Violet*
  15. Kirby’s Return to Dream Land*
  16. Company of Heroes 3
  17. Sonic Frontiers
  18. The Last of Us Part 2
  19. NBA 2K23*
  20. Theatrhythm Final Bar Line

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. Dead Space Remake
  4. Madden NFL 23
  5. FIFA 23
  6. Elden Ring
  7. Fire Emblem Engage*
  8. God of War: Ragnarök
  9. The Last of Us Part 1
  10. Forspoken
  11. Pokémon Scarlet & Violet*
  12. Minecraft
  13. Mario Kart 8*
  14. One Piece Odyssey
  15. Sonic Frontiers
  16. Monster Hunter: Rise
  17. NBA 2K23*
  18. Need for Speed: Unbound
  19. Marvel’s Spider-Man: Miles Morales
  20. Wild Hearts

Last month, domestic Hardware segment sales jumped a staggering 68% to nearly $500 million. After January’s resilience, it’s returned to growth amidst continued supply improvements and people’s general interest in buying consoles. A major third-party software launch in Hogwarts Legacy didn’t hurt, either.

In fact, Circana pointed out the latest monthly result was the highest hardware spend during a February month in well over a decade. Last month’s $495 million figure was the best since 2009, back when it reached $534 million.

Expanding to the current yearly number, console spend is trending 29% higher to $888 million.

Leading the charge here is Sony’s latest generation of PlayStation 5 devices. This family repeated its win from January, indicating the company’s supply lines are shored up and retail boxes are available for folks to purchase as desired. In fact, PlayStation 5 unit sales last month set a record February level compared to all other individual PlayStation platforms in history. Better availability alongside pent-up demand and tent-pole AAA title was the perfect storm for a record month.

While Circana doesn’t share exact unit sales, we can estimate based on historical data. Using older data from The NPD Group results back during February 2005, PlayStation 2 unit sales domestically were roughly 533K at the time. PlayStation 5’s output last month must have been even higher for it to set a record. Over half a million sold in a single, non-holiday month!

What about something non-PlayStation? Such as Nintendo Switch? Or Xbox Series X|S?

Well then, Switch was second in February on unit sales while Xbox Series X|S generated the second most dollars. As for 2023, Nintendo Switch was second on dollars generated while Xbox Series X|S slots in third by that metric.

Accessories was the other segment that rose double-digits in February, moving up 13% to $212 million. It’s now essentially flat for the year, down 1% to $377 million in aggregate across the first two months.

Circana attributed the monthly gain to a greater contribution from virtual reality headsets, which offset lower controller buying. The main reason for that was, clearly, the launch of PlayStation VR2. To what extent is unclear, because Sony hasn’t shared results on its new product and this report isn’t specific on how it compares to its predecessor or peers. It’s hard to say where indicators point when there aren’t any.

Update: I’ve chatted with Piscatella from Circana. He confirmed the best-selling accessory of February was Sony’s DualSense Midnight Black wireless controller. Additionally, Sony also secured second place with its DualSense Gray Camo game pad iteration. I have my eye on future releases to get a sense of how PlayStation’s premium DualSense Edge version fares.

February’s showing for U.S. spending was a solid recovery from January, and the best year-on-year growth in around 18 months. It helped to have an uber-popular franchise like Harry Potter launch, not to mention how people can actually find consoles to buy which led to PlayStation 5 setting a new February unit sales high within the brand’s history.

There’s also the general impact from easing inflation, allowing consumers to spend a bit more on entertainment. Having console supply or major games on market is great; there’s also the buying power and ongoing demand side of the equation.

“Improved PS5 supply has certainly helped, as have strong sales performances across both new releases and catalog titles,” noted Piscatella. “Some areas are still in the process of normalizing such as mobile, and we’re still seeing delays that might not have happened in other times.”

Looking ahead to March, it’s already almost the end of another quarter! Note the Circana sales report tracks from February 26th to April 1st.

I’m upbeat, especially for the likes of new releases, software holdovers from February and PlayStation hardware. Mobile remains iffy. Even considering last year when March had the bulk of Elden Ring sales, this year there’s the equally impressive Hogwarts Legacy, which I expect might repeat as the month’s top-seller.

The other AAA title that will compete for March’s prime position is Resident Evil 4 Remake, which shipped 3 million units during its first two days according to Capcom. It will be among the Top 3, and I’m Leoning towards predicting it will win.

Then there’s additional bigger budget releases that will chart, including MLB The Show 23, Wo Long: Fallen Dynasty and WWE 2K23. I’m expecting a great opening day (and month) from MLB The Show in particular, and there’s upside to WWE 2K after last year’s return to form.

On the hardware front, it’s difficult to bet against the PlayStation 5 right now. So I won’t, at least not until May when The Legend of Zelda: Tears of the Kingdom hits Switch. Speaking of, have you seen that footage? Wow!

In general for the upcoming March monthly announcement, I see spending up slightly since last year, with hardware showcasing a double-digit bump. Content will be closer to flat, depending on how mobile goes.

In the meantime, I recommend checking out Piscatella’s thread on Twitter (even though he doesn’t like us dark mode users!) for more details on February’s results. Feel free to drop a line here or on social media with any questions or comments. Thanks for visiting! Be safe, all.

*Digital Sales Not Included

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

Sources: Capcom, Circana, Nintendo, Warner Bros.

-Dom

PS5 & Dead Space Headline January 2023 NPD Group U.S. Sales Report During 1st Decline Since September

DomsPlaying

I’m back to the domestic sales beat!

Yesterday, The NPD Group posted its first monthly report of 2023 showcasing January’s consumer spending across the games industry. Since this currently matches year-to-date, this recap will be shorter than usual. There’s still a lot of juicy data to uncover.

January’s results were mixed, moving down 5% since last year’s near all-time overall spending high which occurred in 2021. Ever since that peak, it’s been slowly reverting towards pre-pandemic levels.

In the context of recent figures, January was the first spending decline since September 2022 when it dipped 4%. This modest downward move was mainly due to the strong comparable last year, during which the massive launch of Pokémon Legends Arceus on Nintendo Switch.

Within the segments of Video Game Content, Video Game Hardware and Video Game Accessories, Hardware was the only category that didn’t show a reduction since this time last year. Still, console sales were flat, which limited the category’s upside push on the total even amidst inventory improvement.

The Content side often goes as mobile does, since it contributes upwards of the category’s sales. While the group’s report didn’t quantify mobile spending, it did cite a decline in this major area.

“Drops in mobile content, physical console content, and gamepad spending drove the January shortfall,” noted The NPD Group’s Mat Piscatella.

Call of Duty: Modern Warfare 2, as expected, continued to lead the overall premium software sales chart. As for new titles, the Dead Space Remake from Electronic Arts was the headliner in the second spot.

Within Hardware, just as Sony’s PlayStation 5 did during 2022 measured by dollar sales, it was the top-selling console in January. This time by both revenue and units, meaning Sony’s production ramp-up is in full swing in an attempt to offset shortages earlier in this latest generation.

I always say it’s crucial to keep historical context in mind when looking at monthly shifts. Consumer spending last January was down 1% from a best-ever result the prior year in the States. Which means that even though last month was the first decline in some time, this movement isn’t as poor a result as headlines might indicate.

That said, here’s a full recap of the numbers underlying this latest report.

United States Games Industry Sales (January 1st – January 28th, 2023)

Unfortunately, The NPD Group’s public report for January was more sparse than usual in terms of charts and graphs. The above graphic shows last month’s numbers.

Overall U.S. spending on games lowered 5% to $4.35 billion. Compare that to last year’s $4.59 billion, and 2021’s record of $4.8 billion. People are spending a bit less now, whether due to macro pressure like inflation or choosing other entertainment forms as they venture outside the house.

Content sales dipped to $3.79 billion, or a similar decline of 5%. Currently, this segment that includes software sales, mobile and subscriptions alike, makes up 87% of the country’s total. During the holiday season in December, this portion was 73% due to higher relative hardware output. It was recently much closer to 2022’s January contribution of 88%.

Mobile weakness continued, and this year’s new premium titles weren’t quite enough to match the performance of a major Pokémon franchise release back in January 2022.

Activision Blizzard’s Call of Duty: Modern Warfare 2 led the premium ranks for the fourth consecutive month since its start in November, now moving into a new season for the ongoing multiplayer shooter.

Next was the re-imagined Dead Space from Motive Studios as the first new entry in January, landing in second place. While The NPD Group didn’t share much in the way of comparisons, we can look at earlier rankings. During October 2008, the original Dead Space didn’t chart since it was a new offering. When the much-anticipated sequel Dead Space 2 debuted in January 2011, it was the third best-seller after Call of Duty: Black Ops and Just Dance 2. Lastly, in February 2013, Dead Space 3 secured top billing for the series’ best performance to date.

Back to last month, rounding out the Top 3 was Madden NFL 23, the same exact position it held for 2022 overall. This consistency was in part driven by the lead-up to Super Bowl LVII, during which Kansas City thankfully won over the Philadelphia Eagles. (Giants fan here, as if you couldn’t tell!)

The next new release to chart last month was Fire Emblem Engage on Nintendo Switch at #5. One caveat for this latest mainline entry in the long-running franchise is that Nintendo’s games don’t include digital share for the purposes of these domestic charts. Compare its spot to Fire Emblem: Three Houses in July 2019 when it took home #2 behind only Madden NFL 20.

There were two additional new releases within the Top 10 during January: Forspoken from Square Enix debuted in seventh, while Bandai Namco’s One Piece Odyssey kicked off in ninth. I’d say the former was in-line with modest expectations while the latter undoubtedly out-performed in that position.

Lower down the list, big movers for existing titles included The Last of Us Part 1 which jumped up from 36th to 11th on the heels of its HBO show’s popularity. Monster Hunter: Rise skyrocketed from 68th to 13th as its PC version hit market.

Check below for the full software chart for January.

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

  1. Call of Duty: Modern Warfare 2
  2. Dead Space Remake
  3. Madden NFL 23
  4. FIFA 23
  5. Fire Emblem Engage*
  6. Elden Ring
  7. Forspoken
  8. God of War: Ragnarök
  9. One Piece Odyssey
  10. Pokémon Scarlet & Violet*
  11. The Last of Us Part 1
  12. Sonic Frontiers
  13. Monster Hunter: Rise
  14. Mario Kart 8*
  15. Minecraft
  16. Need for Speed Unbound
  17. Just Dance 2023
  18. NBA 2K23*
  19. Marvel’s Spider-Man: Miles Morales
  20. NHL 23

Spending on Hardware ended up virtually flat year-on-year during January, at $393 million. The implication being supply is generally getting better, however the lower-priced Switch is still a significant portion of the pie while Sony and Microsoft still aren’t where they would like to be on manufacturing.

“Growth in PlayStation 5 and Switch hardware spending was offset by declines across other platforms,” said Piscatella.

At the top end, PlayStation 5 won the month using both revenue generated and unit sales as barometers. On the dollar sales side, this is the same theme from 2022 when Sony’s platform dominated most months due to its higher average price point. The more impressive part is Sony outpacing all others by units, meaning that its suppliers are increasing inventories at market and consumer demand is steady even after the holiday months.

This sort of result also confirms Sony executives stating recently that it’s easier than even to find a PlayStation 5. Just a couple weeks back, during a record third fiscal quarter report, the Japanese consumer tech company raised its annual unit sales guidance for the family of devices. It now expects to ship 19 million globally for the fiscal year ending next month, up a million from the previous forecast. At present, it’s at 12.8 million through the first three quarters.

Refocusing on the U.S., Nintendo Switch slotted in second place on both metrics. Based on Piscatella’s comments, its console sales actually grew last month as it approaches its sixth birthday in March. While it’s a small tidbit in the general report, and it’s not specific on the amount of growth, this is a notable accomplishment for the aging platform.

Microsoft’s Xbox Series X|S family continues to lag its peers, seeing as it’s the remaining of the big three and falls into the group of consoles that did not grow in January. This echoes Microsoft’s latest financial results during which hardware sales reduced 13%. Even in the holiday quarter, when demand is at its highest. This signals a couple of points to me: it’s having difficulties getting quantities to market, and that demand might not be as strong as Sony’s offering. It also reflects Microsoft’s broad gaming strategy of reaching players with the appeal of ecosystem and subscription, being where they are with existing devices like mobile as opposed to requiring an Xbox for access. This model diverges compared to competitors, thus local hardware sales seem to be suffering for it.

The NPD Group’s final tracked segment of Accessories saw the most precipitous decline in January, the only one to fall in the double-digits, dipping 14% to $165 million. This comes after a 15% decline last year. In fairness, January 2021 was an all-time high. Still, peripheral spending is showing more severe declines than the other two categories.

Pushing this down was a stark decline in spending on game pads, which is a somewhat unfortunate result considering hardware’s more modest reduction. Game pad spending was the reason behind most of the segment’s softness last month.

Sony’s PlayStation DualSense Wireless Controller in midnight black started 2023 as the year’s best-selling accessory by dollar sales, outpacing all other peripherals in January.

Taking January’s report as a whole, it was a mixed bag coming off better spending during the beginning of 2022. There were positive signs, of course, in terms of PlayStation 5 availability and a more robust release calendar for premium gaming that will continue in future months. Mobile continued to be a main area of caution, as it was in the back half of 2022, along with retail software sales and peripheral spending putting downward pressure on the domestic industry.

Looking ahead to February, the Content side is tricky. Last year saw the record-breaking start for Elden Ring and the great debut of Horizon Forbidden West. Still, all signs point to a spectacular launch for Hogwarts Legacy from Warner Bros last week, which will stand up even against a high comparable and easily be the month’s best-selling premium title. There’s also a pair of “hearts” games in Wild Hearts and Atomic Heart that will bolster ranks here, plus Destiny 2’s Lightfall expansion. Thus, I’m thinking Content will be effectively flat year-on-year. Within 1 to 2% on either side. (Yes, it’s a wishy-washy prediction. Hogwarts Legacy is that huge.)

I’m more upbeat on Hardware for a few reasons, namely better supply and a weaker result last year when the category declined almost 30%. Potential PlayStation 5 buyers weren’t able to find one around then, and now they are seeing more at retail. Nintendo Switch is proving to be resilient. Even with Xbox’s tepid inventory, I’m seeing Hardware rising between 5% to 10% this month as PlayStation 5 will lead the charge as top-seller. As it will often throughout 2023.

I’ll even mention Accessories, mainly because of Sony’s PlayStation VR2 hitting market next week. While I’m mostly bearish on its commercial prospects over the short to medium term, I do expect an early boost in this context. I believe the category will see higher spending than February 2022.

That about wraps up the January wrap-up. What do you think of the latest results? Do you agree with my predictions for February? Are you picking up any new games or PlayStation VR2? I’d love to hear about it at the site or on social media.

As for suggested reading, I recommend Piscatella’s thread on Twitter. Thanks for reading through the first sales recap of 2023! Be well, everyone.

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

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

Sources: Activision Blizzard, Electronic Arts, The NPD Group, Sony Corp.

-Dom

PlayStation Achieves Record Holiday Sales & Profit in 2022 Q3 & Raises PS5 Annual Hardware Target

DomsPlaying2 Comments

What a quarter for PlayStation. Talk about bucking the trend!

I’ve been writing recently how this past holiday will be a mixed bag for many consumer technology firms, including gaming hardware manufacturers and software publishers. Sony is both of these things, and management is masterfully navigating the murky waters of our economic environment.

This fact is clearly illustrated when it reported third quarter fiscal 2022 results earlier today in Japan, in which the overall business grew double-digits and the PlayStation business unit achieved record Q3 sales and operating profit. The prior record-holder was this same quarter last year.

Within the report, it showcased growth across all PlayStation product categories. Hardware output more than doubled since last year, as did retail software, and digital content rose substantially. As I’ll show in a later chart.

PlayStation 5 (PS5) hardware had its best quarter to date measured by shipments, by a wide margin. Sony shipped 7.1 million PS5 units between October and December, up a whopping 82% compared to last holiday’s 3.9 million. That brings lifetime PS5 unit sales to 32.1 million. It’s now outsold the Sega Genesis, which peaked at 30.75 million overall.

Not only that, Sony actually increased its annual hardware guidance! While PS5’s better availability is impressive given higher input costs and supply chain disruptions of calendar 2022, it’s worth noting the console is still tracking below PlayStation 4 (PS4) at this same point in the early life cycle.

Partially driving demand for the new console was a suite of AAA games around this time. Third-party hits Call of Duty: Modern Warfare 2 and annualized sports games plus a system-seller like God of War Ragnarök alongside a supplementary title like Gran Turismo 7 significantly bolstered software, as both physical units and digital downloads soared.

“We are seeing steady results from the various measures we have taken in terms of both hardware and software,” management said in prepared remarks. “And we believe that we have created positive momentum to re-accelerate the growth of the game business centered on the expansion of the penetration of PlayStation 5.”

Here’s a deeper dive into the numbers behind this all-time holiday season, then a look at the company’s guidance and my predictions. Including a new chart format for the category mix!

Across the broader corporation, as shown in the above slides, Sony generated 13% more revenue this quarter up to $24 billion. Operating profit however declined 8%, to $3 billion. That second figure was the second best result in company history in local currency, behind only Q3 last year.

Shifting focus to the PlayStation segment alone, which is called Game & Network Services (G&NS) in Sony’s reporting. Sales increased a staggering 53% to $8.8 billion. Operating profit rose a more modest, yet still impressive, 25% to $820 million.

PlayStation exhibited exceptional top-line and profit growth that led to both of these figures being all-time records. Now it’s partially due to foreign exchange movement in a volatile rate environment, yet it’s mainly due to improving underlying fundamentals in its gaming business. Better hardware sales due to supply being there and demand staying strong, plus a big boost from first-party software. Even rising costs related to network business and acquisitions couldn’t hold profit back.

This was an astounding quarter. Looking at product category sales, nearly all of them moved up double-digits in Q3. Quite literally off the chart, as shown in the last one in the above gallery. Hardware was the biggest contributor at 35% of the total, since it more than doubled since last holiday. Add-On Content was the next biggest segment at 21%, even if it “only” increased 5%. Digital software comprised 20% of the PlayStation business, improving its sales 35% year-on-year. Physical Software proved to be the biggest mover from a growth standpoint, more than tripling.

Factoring in this latest record quarter, annualized revenue for G&NS is upwards of $22.84 billion right now. That’s the highest in history, tracking towards a best-ever year of sales. In fact, it’s $3 billion more than it’s ever been. I can’t overplay how well gaming is doing from a revenue standpoint, approaching a ridiculous $23 billion.

Profitability over the last 12-month period is a bit more tempered, as annual operating income totals $2.11 billion at present. It’s certainly recovering from where it was last quarter, trending towards pandemic highs.

Running down a quick comparison to industry peers, Sony is still in second place from a revenue standpoint. Tencent reports in March; for now, its annual sales are around $25.8 billion. PlayStation slots in here at the $22.84 billion. In Microsoft’s report last week, which I covered here, revenue over the last 12 months equaled $15.56 billion. Lastly, Nintendo is at $13 billion, though it has also yet to report and will do so next week. Keep in mind that a combined Microsoft and Activision Blizzard entity could eventually compete with Sony for second place, though I’d estimate it’s not above $20 billion to $21 billion just yet.

Now I’ll dig more into additional info from Sony on unit sales, network results and engagement stats for its gaming vertical.

Full game software sales declined in Q3, from 92.7 million to 86.5 million. That accounts for both internal teams and external publishers, including bellwethers like Call of Duty, Madden NFL and FIFA.

For first-party titles, this is where the real boost occurred. It nearly doubled from 11.3 million last year to 20.8 million. The bulk was, of course, driven by God of War Ragnarök which started at 5.1 million units during its launch week in November and has since reached the 11 million milestone. It’s the fastest-selling platform exclusive in PlayStation history across both of these time periods, a ridiculous result for the sequel to God of War (2018).

Within software, digital downloads compromised 62% of total game sales on PlayStation. That’s the exact same figure as last year, and only down slightly from 63% last quarter. The aforementioned growth of retail sales certainly affected this split.

Sony’s rebranded PlayStation Plus service now has 46.4 million subscribers, down compared to last year’s 48 million. Still, it’s higher than the 45.4 million last quarter thus showing sequential growth.

The other major user stat of Monthly Active Users (MAUs) edged up a million in Q3 to 112 million. It’s also 10 million higher than Q2, since the holiday season tends to attract new users and returning players alike. Sony also cited the transition to current generation hardware as a reason for user acquisition. The percentage of that 112 million that were solely on PS5 moved up to 30%, or roughly 33.6 million individual accounts.

“Engagement metrics of users who transitioned from PS4 to PS5, such as their PS Plus subscription rate, gameplay time, and average spending amount are significantly higher than those when they played on PS4,” executives said. “So we will continue to focus on accelerating the transition of PS4 users to PS5.”

Sony points out that almost 30% of MAUs on PS5 are users that never had a PS4, thus it’s attracting various new players, and payers, to the ecosystem. An essential part of any console business.

Intriguingly, for PlayStation players, total gameplay time declined 3% versus last Q3. Compared to the quarter ending September, it was up 6%. Focusing strictly on the month of December, hours jumped 14% compared to November.

“We believe that user engagement is on a recovery trend due to the penetration of PS5 and the contribution of hit titles,” management said. Based on the way hardware is trending, how high revenue has grown and its excellent title lineup last year, I certainly see that same trend.

It’s hard to overstate how exceptionally PlayStation performed in the months between October and December 2022.

To secure record revenue and profit during this macro environment, when people are facing inflation and returning to other activities, it’s truly the exception within consumer tech and gaming. Quite literally moving the opposite direction of a major peer like Microsoft. Even Apple is facing revenue challenges as it reports 5% decline in sales just this afternoon. Related publishers around the globe are struggling to outpace last year’s results. I’m supremely impressed with the leadership executing on its strategies, namely how it secured enough consoles to satiate pent-up demand.

Moving into the last quarter of its current fiscal year, management provided updated guidance for a variety of numbers. It slightly reduced total sales guidance down 1%, then bumped up operating income by 2 percentage points. These now imply around $81.2 billion in revenue and $8.33 billion in profit for fiscal 2022.

As for PlayStation, management reiterated its annual sales forecast which would be a record of $25.6 billion. It also raised guidance for gaming operating profit by around 7%, now expecting $1.7 billion for the year mainly because of currency movement. I think the top-line figure is fine for PlayStation as a segment, though firmly believe that operating profit forecast will be easily achieved. It feels too conservative given the latest holiday performance.

On the flip side, management is being even more aggressive on its PS5 unit sales outlook for the year. It’s raising the already high forecast by a million units, up to 19 million. Which would bring lifetime shipments to 38.3 million. All I can say is: Wow. Talk about upbeat! Right now, PS5 sales for fiscal 2022 are at 12.8 million thru 3 quarters. Sony needs to ship a massive 6.2 million in the 3 months ending this March in order to accomplish this target.

Now, I thought they were out of their collective mind last quarter. And I remain my usual skeptical self, considering 6.2 million is more than literally any other quarter in the PS5 life cycle other than this past holiday season. Management’s confidence must be rubbing off on me, as I think Sony will get close: I’m bumping my annual forecast to 17.5 million to 18 million.

What else could drive results into March? Well, PlayStation VR2 launches in a few weeks though I’m tepid on its commercial upside. Virtual reality remains a niche market, and the cost to entry is high for a peripheral that requires a pricey base console. I expect 1 million units to ship in the quarter ending March, yet a marginal impact on the bottom line considering it’s also costly to make headsets.

There’s also Sony’s transmedia push, which is paying dividends for both gaming and its Pictures division. In particular, the collaboration with HBO on The Last of Us is a smash hit and having broader audience appeal beyond any expectation. It’s attracting massive viewership and driving sales of September’s console release of The Last of Us Part 1, which is also launching on PC before fiscal year-end, and June 2020’s The Last of Us Part 2.

Well, talk about a lot to cover! It’s been a busy season already. Thanks for checking out another recap. Head on over to the latest earnings calendar for more dates to come, and I’ll have a full rundown of Nintendo’s results after the company publishes them next week.

Until then, be safe everyone!

Note: Comparisons are year-over-year unless otherwise noted. Exchange rate is based on reported average conversion: US $1 to ¥141.7.

Sources: Company Investor Relations Websites, HBO Max (Image Credit), USA Today (Image Credit).

-Dom

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

DomsPlaying

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

DomsPlaying

‘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

Call of Duty: Modern Warfare 2 Leads Software in Stable October 2022 NPD Group U.S. Games Sales Report

DomsPlaying

Time is marching on through the latter parts of 2022, and with it comes the first monthly sales report of the fourth quarter from games industry tracking firm The NPD Group.

Ironically, considering it was the spooky season, October proved to be much less scary than most of the year as it broke a long-running downward streak. It’s the first month in exactly one year during which spending on games didn’t show a year-on-year decline, boosted by a new Call of Duty, improving hardware inventories and easing of inflationary concerns.

Overall consumer spending across the three categories of Video Game Content, Hardware and Accessories was flat year-on-year, as the largest category of Content moved up slightly. The Hardware segment dipped double-digits, primarily due to a decline in non-PlayStation or Xbox platforms, i.e. Nintendo Switch.

Not bad in general, considering this time last year was the best October on record!

It helps to feature what will likely be the year’s biggest-selling game in Call of Duty: Modern Warfare 2, which (expectedly) topped the overall software chart. That makes 15 consecutive years where a Call of Duty title won its debut month. Which is a staggering result for the annualized military shooter especially since many so-called experts have consistently, and incorrectly, called for its demise.

Not only that, as happens this later in the year, the premium software chart was sprinkled with a variety of additional new releases. October saw five new games rank within the Top 10, and three more between #11 and #20. In addition to the aforementioned Call of Duty, the likes of Gotham Knights, NHL 23, Mario + Rabbids: Sparks of Hope and Bayonetta 3 all generated enough revenue to start in the Top 10, driving Content spend upward despite softness in mobile.

Within Hardware, the PlayStation 5 continued its dominance in October, winning out by both dollar sales and units sold. As it has for three months now. What’s reassuring is how Sony’s family of PlayStation 5 devices along with Microsoft’s Xbox Series X|S family both generated double-digit gains. For four months running. Sensing a burgeoning trend now that supply is getting better? It just took a bit for this generation to get going, seeing as it began during a global pandemic and all.

“October growth in digital sales and subscriptions for console and PC video game content, driven in large part by the release of Call of Duty: Modern Warfare 2, was offset by declines in mobile content and hardware,” wrote The NPD Group’s Mat Piscatella on Twitter.

Signals in October and recent months point to a trend towards increased buying on premium software as the calendar became busier, demand meeting or exceeding console supply and spending bumping up because of it. Prices indicators overall are plateauing right now in the States, so spending power is better than it was earlier in the year. Even as folks are spending less on mobile, other areas are boosting the results.

Read more below as I dig into the domestic sales trends and list out the latest software rankings.

United States Games Industry Sales (October 2nd, 2022 – October 29, 2022)

Looking at the above slides provided by The NPD Group, total monthly sales across the U.S. games industry stayed constant since last year at $4.27 billion. The green trend-line, which shows percentage change against prior year, has been moving mostly upwards since mid-year. I’d say this is the single most important takeaway from recent reports. Essentially, the rate at which spending declined in the back half of the year is improving.

Expanding to the first ten months of 2022 now, spending is still down 7% at $42.7 billion. This is mainly due to headwinds within Content as Hardware is showing a modest decline. There’s worse-than-expected output from mobile and a lighter premium software release slate until just recently in the fourth quarter.

Content as a segment, which includes software sales in addition to subscriptions and mobile, has returned to year-on-year growth, edging up 2% in October to $3.7 billion. Its contribution to overall sales was nearly 87%, compared to 85.5% this time last year. As for annual figures so far, Content has contracted 8% to $37.19 billion. That’s an improvement since last month, when it was trending down 9%, due to the October growth boosted by big budget new launches.

Mobile is traditionally the largest contributor within the Content segment. Unfortunately, last month’s report doesn’t shed much light into this other than to state spending was lower year-over-year. One tidbit from a GamesBeat article highlights how mobile spending could decline in 2022 for the first time in tracked history, an intriguing dynamic given how people are on the go more lately.

Within premium, October’s winner of Call of Duty: Modern Warfare 2 is also already the second best-selling game of the year, behind only Elden Ring. One element here is how Activision Blizzard employed a more staggered launch schedule for this year’s title, which seemingly attracted people earlier. Its story campaign dropped on October 21st while the full game hit market on October 28th.

This domestic debut fits the broader narrative of Modern Warfare as the premier sub-brand within the series. This year’s game, which shares a title with the 2009 classic, generated $800 million during its opening weekend and reached $1 billion in sales within ten days on market, becoming the fastest-selling Call of Duty in history and second fastest-selling game ever behind Grand Theft Auto V. (No wonder Microsoft is willing to pay so much for the publisher.)

Moving down the list, Gotham Knights snagged second place in what I’d call the biggest surprise of the month. Despite middling critical reception, the Warner Bros-published game clearly benefited from brand awareness as part of the DC Comics universe. Even without the Bat himself being playable. As a quick comparison point, Batman: Arkham Knight started atop the June 2015 software chart.

Then it’s the sports games, All from American publisher Electronic Arts. Both FIFA 23 and Madden NFL 23 dropped a couple spots respectively to 3rd and 4th. The next highest-ranked new title on October’s list was NHL 23, which scored 5th. This is a notable improvement compared to its predecessor, which dropped at 9th in October 2021.

Coming up next at #6 was Nintendo Switch exclusive Mario + Rabbids: Sparks of Hope. The collaboration between Ubisoft and Nintendo is a sequel to Mario + Rabbids: Kingdom Battle, a title that launched one spot higher in September 2017. (When, I might add, my beloved Destiny 2 was the month’s top earner.)

The final new game among the Top 10 last month was another Nintendo Switch exclusive in Bayonetta 3. Platinum Games’ latest in the long-running franchise is the first to launch on Switch, landing in 9th. It’s tricky to compare to prior games because they started on the failed Nintendo Wii U, which had quite the limited install base. One caveat is digital is not included for Nintendo-published games such as this one.

In terms of other new releases securing spots among the Top 20, there’s Star Ocean: The Divine Force at #14 and Dragon Ball: The Breakers at #16, while PGA Tour 2K23 teed off one spot lower at #17. And while it’s not a brand new title, Persona 5 experienced a massive jump up to seventh place due to its release on a variety of new platforms, including Xbox and Nintendo Switch.

Expanding to the current annual ranks, Elden Rings has held off Call of Duty: Modern Warfare 2 for the time being. Bandai Namco announced recently that FromSoftware’s latest reached an impressive 17.5 million copies sold globally. I expect this dynamic in the U.S. will swap come next month, when Call of Duty: Modern Warfare 2 will become the year’s best earner. Otherwise, FIFA 23 bounces into the Top 10, settling at #8, while Gotham Knights continues its impressive start being already the 14th top-selling game of 2022.

Here’s the full list of best-sellers for last month and the year through October.

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

  1. Call of Duty: Modern Warfare 2
  2. Gotham Knights
  3. FIFA 23
  4. Madden NFL 23
  5. NHL 23
  6. Mario + Rabbids: Sparks of Hope
  7. Persona 5
  8. NBA 2K23*
  9. Bayonetta 3*
  10. Elden Ring
  11. Mario Kart 8*
  12. Splatoon 3*
  13. Minecraft
  14. Star Ocean: The Divine Force
  15. Grounded
  16. Dragon Ball: The Breakers
  17. PGA Tour 2K23*
  18. Nintendo Switch Sports*
  19. NieR: Automata
  20. Super Smash Bros. Ultimate*

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

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

Console sales, which rose almost 20% in September, returned to a decline last month. Consumer spending on Hardware as a category declined 10% in October to $424 million. This happened despite solid double-digit growth for PlayStation 5 and Xbox Series X|S, implying that Nintendo Switch made up the difference on the downside.

Intriguingly this didn’t have a substantial impact on the trend for 2022 to date, as Hardware spend is currently $3.78 billion or 2% lower than last year’s $3.87 billion thru the same time frame. That’s only down modestly from a 1% decline as of September. This tells me that availability is still better than it’s been in a long while, even if Nintendo Switch is aging into the back part of its life cycle.

As I predicted would happen last month, I mentioned earlier that PlayStation 5 won October on both dollar sales and units. Sony has been able to shore up its pipeline and suppliers are outputting more boxes to meet demand, and those folks that want a PlayStation 5 are certainly buying when they find one. In my article on Sony’s recent rules, I noted that PlayStation 5 lifetime unit sales reached 25 million. While it’s currently selling at a slower pace than PlayStation 4, the company is way upbeat on the remainder of this fiscal year through March 2023.

One additional note from The NPD Group is Xbox Series X|S landed in second place during October, reaffirming my inference that Nintendo Switch is starting to saturate its potential audience.

On the year so far, PlayStation 5 continues its lead on dollar sales followed by Xbox Series X|S and Nintendo Switch, in that order. When measured by units, Nintendo Switch is still in the lead driven by its lower price point. PlayStation 5 is next, while Xbox Series X|S is in third by that metric.

This checks out, as the higher-priced current generation is making more money per unit sold than Nintendo’s older hardware. Not to mention, there’s more demand for the shiny new boxes. Though Nintendo does benefit from families and households buying multiple devices, a situation that will benefit it during this upcoming holiday period. The Switch recently passed 114 million units globally, still the third best-selling home and handheld console of all time.

In what I’d call the most disappointing result, mainly because it missed my more upbeat expectation after a solid September, Accessories experience 8% lower sales in October to $148 million. Apparently, a new game pad from Microsoft in the Xbox Elite Controller Series 2 Core wasn’t as attractive, maybe due to its pricing that’s above the likes of entry level controllers. Perhaps there were declines elsewhere that dragged the segment down.

Annual spending on Accessories for 2022 is currently down 12% from last year’s $1.95 billion, totaling $1.72 billion through the first ten months of this year.

During October, Sony’s PlayStation 5 Dual Sense Midnight Black was the month’s top-selling peripheral, a flip from September when it was the base level black Xbox Wireless Controller. Microsoft’s Xbox Elite Series 2 Wireless Controller is still tops for the year, as I confirmed directly with The NPD Group.

As far as monthly results go for commercial output of the domestic games industry, October was the steadiest in recent history. Prior to last month, we had seen 11 consecutive months of spending declines.

This sort of rebound is especially noteworthy since it’s compared against a record-breaking October last year. The Call of Duty effect is of course a big plus, alongside a great showing from Gotham Knights plus those annualized sports titles signaling a ramp up to the holiday shopping season.

Checking ahead to November, which includes the bellwether Black Friday period, I’m anticipating growth in overall domestic spending. Likely in the mid-to-high single digits. Mainly because of the better console inventories, massive PlayStation and Nintendo software launches and a chance for accessories to benefit from deals.

Even considering Call of Duty: Vanguard launching last November, I’m guessing the Content category will be flat or maybe a slight decline. I expect Call of Duty: Modern Warfare 2 will repeat as the top-seller, with both Sony’s God of War: Ragnarök and The Pokémon Company’s Pokémon Scarlet & Pokémon Violet close on its heels. Because the former includes digital, and it’s going to have a potential record-setting debut for a PlayStation exclusive, I firmly believe it can secure second place.

For Hardware, PlayStation 5 should take November on revenue as it will still retain its pricing. I’m much less certain on units sold. I think Nintendo Switch can win by this metric, given the incredible popularity of Pokémon as a franchise.

There we have the latest U.S. sales recap, and predictions as the year begins its end. I highly recommend checking out Piscatella’s thread here, a bittersweet one since apparently it will be the second-to-last NPD report on Twitter. The company is changing formats to a more formal press release style. You know I’ll still cover it here and on social media, regardless of how it’s announced!

Thanks everyone for taking the time to visit the site. Here’s wishing everyone a great November, and a Happy Thanksgiving to everyone that celebrates. Take care and be well!

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

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

Sources: Activision Blizzard, Bandai Namco, GamesBeat, Newsweek (Image Credit), The NPD Group, Sony Corp.

-Dom

PlayStation 5 Sales Reach 25 Million as Sony’s Gaming Unit Posts Record Revenue & Declining Profit in Mixed Q2 2022 Report

DomsPlaying2 Comments

As the calendar turns to November, the ongoing earnings season across gaming, tech and media keeps on rolling. Those who follow my latest calendar post will know it’s only picking up steam!

Yesterday, Sony announced fiscal 2022 second quarter results. It’s the definition of a mixed bag, akin to receiving both an apple and candy bar while trick-or-treating! (I miss the spooky season already.)

Overall the Japanese consumer tech company saw improved sales and profitability. Within the PlayStation business, revenue rose in the double-digits to its best fiscal Q2 on record. However, operating profit saw a precipitous drop of nearly 50% in what was one of its toughest outcomes in recent memory.

Underlying this dynamic of good top-line growth yet decreasing profitability was favorable impact from exchange rate movement, as the Japanese yen is near its weakest point in decades. It’s also attributed to lower software output from external publishers. Then, for profit, better margins for PlayStation 5 hardware couldn’t offset high expenses from ongoing development and acquisition activity, namely the purchase of Bungie.

Speaking of hardware, PlayStation 5 lifetime unit sales reached 25 million after Sony shipped 3.3 million units in the quarter ending September. That’s the same exact quarterly shipment amount as last year. While it now outpaces Nintendo GameCube’s 21.74 million and the original Xbox at 24 million, it’s still hitting market at a much slower pace than its predecessor. Sony is upbeat on the remainder of this fiscal year at least, reiterating its 18 million shipped target. Which means it must reach 12.3 million in the back half. Read my predictions later in the piece to see if I agree.

As for engagement stats given the rebranding of PlayStation Plus during this quarter, it’s better than it first appears. From a subscriber and active user standpoint, things are looking down as both PlayStation Plus and Monthly Active Users (MAUs) across the network declined. However, Network Services dollar revenue is up double-digits. Which means the rebranding is attracting buyers that are spending more, and shedding those that aren’t interested in paying within the ecosystem. It’s actually been a win for PlayStation, despite a lower subscriber count.

“Production itself has been quite well,” said Sony Chief Financial Officer Hiroki Totoki. “We have the decline of MAUs and the other indices. The second quarter, more people are now going outdoors. And we have yet to get out of the negative cycles. PlayStation 4’s and third-party software sales have been rather sluggish. Catalog and historical titles have been declining. Against that, PlayStation 5 engagement is quite high.”

That said, here’s a deep dive into Sony’s latest numbers.

Sony’s consolidated results for the latest quarter are shown on the first slide above, and the remainder reveal insight into its Game & Network Services (G&NS) business.

Overall sales moved up 16% to $19.91 billion, while operating profit rose 8% to almost $2.5 billion. Both of these figures are best-ever second quarter results, as reported in Japanese yen. Even amidst a global scenario that’s experiencing economic slowdowns and rising inflation, Sony is proving to be resilient so far.

Now onto the PlayStation business. This unit improved quarterly revenue by 12% to a Q2 record $5.2 billion, contributing 26% of the company’s total. Operating income on the other hand was hit hard in the three months ending September, dropping 49% to $305 million.

On the top-line, these gaming results benefited from currency fluctuations even as sales of software not published by PlayStation softened. Profitability was drastically eroded by the aforementioned content sales drop and higher expenses amidst rising costs in general. There was a bit of good news sprinkled, as Sony indicated it’s losing less money on hardware in recent months.

Moving into the product sales split chart will help illustrate these talking points, showcasing what’s driving PlayStation right now. All categories were either flat or up, many of them in the double-digits. Intriguingly, Physical Software saw the biggest gain at 32%. Next up was Network Services, clearly benefiting from PlayStation Plus’ new tiered system (as cumbersome as it might be). Digital Software rose 14% while Hardware moved up 12% on better inventories. Add-On Content was the only source not to grow; though it also didn’t lose any ground, coming in flat for the quarter.

To help provide even more perspective, there are two additional charts showing the last 12 months of sales and profit for PlayStation. Summing up the last four quarters, Sony’s annual gaming revenue is currently nearly $20.3 billion. That’s the second best trailing 12-month revenue in PlayStation history, nearly identical to last year’s figure. On the flip side, the last year of operating income being under $2 billion is the worst in over two-and-a-half years. This clearly shows the challenge for Sony when it comes to gaming, maintaining profitability in a cooling economic situation as it pushes forward with big budget projects.

As I did in my recent article on Microsoft’s latest results, here’s a quick rundown of where PlayStation’s annual sales fit in the industry right now. I’ll mention the same caveat: when converted to United States dollars, the Japanese companies look a bit lighter than usual because of yen weakness. That said, Tencent’s $24 billion from gaming is tops. Sony maintains the second slot with its nearly $20 billion, while Xbox continues in third with $16 billion. Nintendo, which reports next week, was at $13 billion though that will likely move up.

Moving on from the financial side, here’s a closer look at Sony’s supplemental information highlighting even more recent stats for the G&NS division.

Full game software sales across PlayStation platforms totaled 62.5 million in Q2, which is down 18% or almost 14 million units since the same three months in fiscal 2021. This is partly driven by release slate, where last year saw titles like Ratchet & Clank: Rift Apart just before the quarter started then launches for both Ghost of Tsushima Director’s Cut and Deathloop. This year’s flagship was solely The Last of Us Part 1.

First party titles sold nearly a million less units in Q2 this year, at 6.7 million compared to 7.6 million. Even considering third party titles, mainly in the sports genre, content sales proved to be lighter. Digital split within full game software remained relatively constant, at 63% in Q2 versus 62% last year.

“When we compare software sales for this quarter with the same period of the previous fiscal year, we see sales of past library titles declined sharply, while sales of major new titles remained strong,” management said. “Users appear to be playing a smaller number of titles out of a desire to spend less money.”

Then there’s the element of subscription services and player engagement. PlayStation Plus ended September with 45.4 million subscribers, down 1.8 million since last year and 1.9 million compared with last quarter. This was mainly due to user engagement on PlayStation 4 performing worse than the company anticipated.

MAUs across the PlayStation network moved down to 102 million, seeing similar contractions against last year’s 104 million and Q1’s 103 million. Sony pointed out that total gameplay time rose “slightly” compared to the prior quarter, it declined 10%. Why? People have more opportunities to “go outside” now that COVID 19 infections are trending down. Basically, gamers are apparently touching more grass.

The last tidbit provided by executives during their prepared remarks is that PlayStation Plus subscriber ratio among PlayStation 5 general is “significantly above” that of PlayStation 4. Which makes sense, it’s a much more digital world now that’s open to paying for subscriptions like this and Xbox Game Pass. Sony’s latest rebranding and alignment of services shows its focus on attracting people to its ecosystem, so they can spend within it.

Thus concludes what I’d classify as one of PlayStation’s most divergent quarters in recent memory, presenting a clear divide between record sales and diminishing profits.

Sales growth is great to see, especially for Hardware and Network Services. I’d still argue that reigning in costs is much more important given today’s recessionary environment. PlayStation 5 availability is better than it’s been since launch and demand is certainly there on the consumer side. Its Sony’s expenditures on big budget projects, including PlayStation VR2 as a new peripheral, and buying of studios like Bungie that impacts the bottom line.

Management’s forward-looking guidance for the second half of fiscal 2022 reflects this same situation. First, it raised total company guidance for both sales and operating profit by 1% and 5% respectively. Then, it expects slightly higher sales from PlayStation however is forecasting 12% lower operating profit. This is much more in-line with my expectations.

As I mentioned above, PlayStation 5’s full year target is still 18 million units. Management claims that both material supply and logistical challenges have eased, thus it actually produced 6.5 million in Q2 and shipped around half of those to retail. I remain skeptical, keeping my previous annual estimate of between 15 and 16 million.

If it happens to meet the 12.3 million PlayStation 5 units required in the back half of fiscal 2022 to get there, lifetime sales would be 37.3 million by March 2023. Still below the 40 million of PlayStation 4 during the same time frame. It sounds like Sony’s target for fiscal year 2023 is 23 million, trying to make up ground on its predecessor. I think it will need more than that.

While Sony doesn’t provide formal guidance on software, I’m quite bullish on the next quarter and into the first calendar portion of 2023. Mainly because of two major new releases, one first-party and the other multi-platform. God of War Ragnarok hits market next week, and will rival or outpace the year’s biggest PlayStation 5 exclusives. As part of this report, Sony shared updated unit sales for God of War (2018): It’s now reached 23 million units, up from just under 20 million a year ago.

Then of course we have Call of Duty: Modern Warfare 2, what I expect to be 2022’s best-selling premium title. Yes, even considering the beast that is Elden Ring. Activision Blizzard’s Call of Duty franchise is on another level, especially its Modern Warfare sub-brand, seeing as this year’s title earned a record opening weekend of $800 million in sales to consumers. Considering PlayStation has a marketing deal in place, it benefits more than any other platform when the military shooter does well. Between that and PlayStation Plus continuing to fill out its offering, I’m upbeat on both software and add-on content sales in the coming quarters.

“We are actively pursuing various measures to further increase user engagement and re-accelerate the growth of our game business from both the hardware and software perspectives,” said Sony’s executives in prepared remarks. “We expect to see the results of these efforts contribute to sales and
profit in earnest from the second half of this fiscal year and next fiscal year.”

Finally, there’s Sony’s announcement today on the timing and cost of PlayStation VR2. The follow-up to its original virtual reality headset back in 2016 will launch on February 22nd at the lofty price of US $549.99 for its base model. This reflects the same sort of revenue and profit considerations as before: It’s a major barrier to entry considering users also need to own a PlayStation 5, which will push up sales, however margins will likely be small considering how much it costs to make each unit. I’m cautious on its commercial prospects initially, and think it will appeal more over time once more people own its corresponding console.

That’s a wrap on Sony’s latest results. What were your reactions? Any surprises? Do you think Sony can hit its financial and hardware targets by March? Drop a note here or social media and check back soon for even more coverage of gaming, tech and media. Be well, and thanks for stopping by!

Note: Comparisons are year-over-year unless otherwise mentioned. Exchange rate is based on reported average conversion: US $1 to ¥138.2.

Sources: Activision Blizzard, Company Investor Relations Websites, Forbes (Image Credit), Michael Ng (Image Credit), PlayStation Blog.

-Dom

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

DomsPlaying

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thanks for visiting! Be well, all.

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

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

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

-Dom