Madden & Mobile Score Big in Record August Report for U.S. Games Industry Sales

Yes, it’s football season again in America which means autumn is on the way. And a new Madden NFL game is atop the charts.

The world is returning to its natural order.

Jokes aside, I first want to say I hope everyone is well in this challenging portion of the pandemic. Which is still going on, despite what some might have you believe. I wish you and your families all the best during this still difficult time. Hang in there.

Hopefully for a quick distraction, industry tracking firm NPD Group reported its monthly U.S. games spending report for August 2021. It’s a huge one. As in almost $4.4 billion in spending, which marks an August record for overall sales across the industry’s history.

Within the Video Game Content category, which saw monthly sales growth of 5%, the aforementioned Madden NFL 2022 led the total software chart. This is a feat the Electronic Arts-published franchise has accomplished now for a staggering 22 straight years during its launch month! The last time a Madden NFL title wasn’t the best-seller in its first month was August 1999 when wrestling game WWF Attitude outpaced the start of Madden NFL 2000. Granted, this was a time when the latter of which had a limited amount of days during that measured period.

Mobile continues its climb notably as more people open up their commutes and traveling, accounting for over $2 billion or roughly 45% of the domestic spending total. Led by Candy Crush Saga, Garena Free Fire and Roblox among others, this segment is a driving force behind the record August performance.

Swapping to the console side, Nintendo Switch, Sony’s PlayStation 5 and even Xbox Series X|S continue solid trends leading Video Game Hardware category spending to a 45% increase and an August dollar total that hadn’t been reached since 2008. Nintendo Switch was the best-selling in August by unit sales, thus retaining its spot as the top-seller for 2021 so far. This unit sales lead is the 33rd consecutive month for the hybrid console, which I expect to continue thru next month and beyond with the launch of its new OLED model.

PlayStation 5’s first year momentum marches on despite widespread supply shortages. It was August’s highest-selling platform by dollar sales, a metric by which it also leads for the year to date.

The literally massive PlayStation 5 has been on sale for 10 months now. During that time, it’s the fastest-selling PlayStation brand platform in tracked history. As I noted last month in July, NPD Group reported it was the fastest-selling hardware ever thru nine months at the time. Now that its comparison has reached the Nintendo Switch’s holiday season, the PlayStation 5 no longer holds the top spot. Still an impressive run given constraints on the inventory side. It could even return to being the quickest seller, depending where production goes.

Now that I’ve hit the highlights, it’s time to move into the full August figures.

United States Games Industry Sales (August 1st, 2021 – August 28th, 2021):

As detailed in the above gallery, overall consumer spending rose 7% to $4.37 billion during August 2021. Spurred mainly by Madden, mobile, subscriptions plus both older and newer hardware growth despite semi-conductor concerns, this is an August month record across NPD Group’s tracking history. Full-on proof the games industry keeps on moving as the most popular entertainment vertical.

Expanding to annual figures, total consumer spend on gaming year-to-date hit nearly $38 billion. This is 13% higher than the first eight months of 2020. All of the three major categories saw double-digit growth during this time, showcasing the stickiness of demand, general fan retention and even audience expansion.

Video Game Content i.e. everything from software, mobile and related sales made up the bulk of these monthly totals, reaching $3.88 billion in August. Or around 89% of overall spend. Which is 5% better than the same time last year. Underlying this is the sixth month in a row where mobile alone generated $2 billion, something that only happened three times all of last year.

As NPD Group reports have shown recently, the strength of 2021 to date sales continues with Content alone moving up 11% to $33.33 billion in aggregate during this time-frame.

Digging into individual title performance during August, I mentioned before how Madden NFL 2022 led the chart during its first month on sale and maintained an historic streak going back more than two decades. As a result of.. kicking off this initial performance, the game is immediately the fourth best-selling title of 2021 so far.

Football wasn’t the only big story of the software list. Open world samurai slasher Ghost of Tsushima, which came out on PlayStation 4 back in July 2020, saw a resurgence in August due to the start of its Director’s Cut version including an upgrade path to PlayStation 5 alongside a new expansion. Sony’s PlayStation exclusive was ranked 110th in July. Talk about making moves!

Rounding out the Top 3 was, of course, Call of Duty: Black Ops Cold War as it entered its latest Season 5 of ongoing content. The military shooter is published by Activision Blizzard, a company that’s still under a lawsuit due to reported workplace toxicity and a culture of abuse towards women and marginalized people. I’m behind the employees fighting back against executives.

Right after this was the 4th best-selling title of the month in turn-based strategy game Humankind. Published by Sega and made by Amplitude Studios, it was the top-selling PC game during August. It’s already 5th on the 2021 to date chart for PC as a platform. An exceptional start, especially for a game without a console release just yet. (I guess it did launch on Google Stadia.. hah.)

Otherwise, the top monthly rankings were about as expected. Business as usual for a couple Nintendo games among the ten best-sellers: the ever-present Mario Kart 8 then The Legend of Zelda: Skyward Sword HD moving to 7th from its top spot in July. The publisher has a number more in the Top 20, as always.

Minecraft in there like usual. Assassin’s Creed Valhalla did show a nice move back into the Top 10 from #20 in July, likely due to ongoing support via Ubisoft’s downloadable content. In terms of new releases, No More Heroes 3 from Grasshopper Manufacture started at #42. Tough to contend in August as a Switch exclusive and with only a few days in the tracking period.

Below are the software ranks across all measured platforms for August plus year-to-date.

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

  1. Madden NFL 2022
  2. Ghost of Tsushima
  3. Call of Duty: Black Ops Cold War
  4. Humankind
  5. Marvel’s Spider-Man: Miles Morales
  6. Mario Kart 8*
  7. The Legend of Zelda: Skyward Sword HD*
  8. Minecraft
  9. Assassin’s Creed Valhalla
  10. MLB The Show 21^
  11. Super Smash Bros. Ultimate*
  12. Call of Duty: Modern Warfare 2019
  13. Ratchet & Clank: Rift Apart
  14. Animal Crossing: New Horizons*
  15. Pokémon Sword & Shield*
  16. Mortal Kombat 11
  17. Super Mario 3D World + Bowser’s Fury*
  18. The Legend of Zelda: Breath of the Wild*
  19. Mario: Golf: Super Rush*
  20. Super Mario Party*

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

  1. Call of Duty: Black Ops Cold War
  2. MLB The Show 21^
  3. Resident Evil: Village
  4. Madden NFL 22
  5. Super Mario 3D World + Bowser’s Fury*
  6. Marvel’s Spider-Man: Miles Morales
  7. Mario Kart 8*
  8. Monster Hunter Rise
  9. Minecraft
  10. Assassin’s Creed: Valhalla

Video Game Hardware remained the biggest monthly grower shared by NPD Group, jumping 45% to $329 million in total spend last month. This is the single best August result for the category since $395 million back in August 2008.

“Were enough units available to actually satiate consumer demand this year, I have little doubt this record would have been absolutely smashed,” said NPD Group’s Mat Piscatella after sharing the report.

And I concur. We’ll never know the ceiling for hardware sales during these recent months with a dire chip situation for everything from automobiles to consumer tech to appliances and beyond. The unfortunate part is how this is expected to continue in the near-term, so this category’s true potential during this latest generation of platforms won’t be revealed until years to come.

Within these constraints, I mentioned before how Nintendo Switch retained the top spot in August and 2021 by unit sales thus increasing its incredible streak of monthly wins. Since November 2019! This begs the question of how long can it go? Based on a potential pricing move for the base model and demand from enthusiasts for Nintendo Switch OLED, launching worldwide October 8th, my guess is unit sales thru the holiday season will be led by Nintendo’s hybrid console.

Dollar sales leader for both August and year-to-date PlayStation 5 is faring well, even if no longer the fastest-selling platform in history. Both Game Boy Advance and Nintendo Switch are now ahead of PlayStation 5 during each platform’s respective first 10 months on market. Within Sony’s storied gaming history, it’s still top dog. Between that and leading recent months by revenue, partially bolstered by a higher price point than Switch, the PlayStation brand is as ubiquitous as ever.

Similar to recent months, there wasn’t much in the way of details on Microsoft’s Xbox platform sales. NPD Group did reiterate how Microsoft is selling-thru to buyers as many Xbox Series X|S boxes as it can produce in the States. It’s just seemingly not as many as its competitors. I’m curious about these production dynamics, in particular the gap between platform performance. I didn’t see a comparison or any granularity past these general comments.

We’ll have to live for now knowing that all three major manufacturers are performing consistently in the domestic market, just a matter of how well!

Last category on the docket before closing up shop is Video Game Accessories. It’s the only one of the three that didn’t experience growth during August, coming in exactly flat at $164 million in contribution.

This was Microsoft’s category to shine last month. The team’s Xbox Elite Series 2 Wireless Controller achieved best-selling status out of all accessories, implying that even though many people can’t buy consoles, the high-end game pad is attractive. Mainly because of its compatibility with various generations and devices, including Bluetooth capability for use with cloud gaming.

When looking at the year as a whole, the result for Accessories stays much more positive. Its annual figure to date is up 12% compared to last year, reaching nearly $1.59 billion. Sony’s PlayStation 5 DualSense Controller white variant kept its position as the year’s highest-selling accessory. No doubt mapping in parallel to its underlying console trajectory, as folks opt to purchase additional game pads for co-op or multiplayer use.

Another month in the books. While it wasn’t the most eventful, there’s still plenty of news, indicators and trends to follow.

Yet another record for overall spending, this time an August month, and hardware growth leading to the best category result in 13 years. A set of impressive streaks for Nintendo and Electronic Arts, while Sony’s latest platform trajectory remaining the best it’s ever been.

Companies selling out of console stock, trying desperately to make enough to keep up with intense demand. Big movers and shakers on the software side, plus mobile’s steady presence for content spending alongside subscription services increasing in popularity.

Top-end game pads propping up an accessories segment that often moves as hardware does early in a cycle.

September marks the last month of the third quarter already! It’s a busy one, even in a year with noticeably less output at the triple-A level. Perennial seller NBA 2K from Take-Two Interactive has a new annual entry. Nintendo’s silly party game WarioWare: Get It Together is out. Then there’s Deathloop, the unusual Xbox Game Studios title exclusive to PlayStation 5 that I predict will outperform. Life is Strange: True Colors, Lost Judgment, Diablo II: Resurrected and I imagine a surprise or two will be featured in stories upcoming.

Not to mention the biggest topic in hardware next month as Switch’s OLED model hit shelves. How will it fare given the environment, and will PlayStation 5 keep pace? Can Microsoft boost Xbox output to compete in the rankings?

We’ll know more then. Thanks everyone for stopping by this month and hope to see you again soon!

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

Comparisons are year-over-year unless otherwise noted.

Sources: Electronic Arts, Neil Gardose (Photo Credit), The NPD Group, Sensor Tower.

-Dom

Hardware & Zelda Propel U.S. Games Industry Spending to Record High July

The domestic games industry is rolling with the excessive wave of warm weather hitting the States lately in that it’s heating up during these Summer months, as consumer spending in July 2021 reaching a record high for any July in history.

Industry tracking firm The NPD Group shared its latest U.S. monthly sales report this morning. In which, all signs point to continued momentum especially within hardware, even considering tight supply conditions limiting inventories in the market for next generation consoles from Sony and Microsoft. This and content spending increases notably for mobile, subscriptions and post-launch are likely bolstered by returning mandates hitting the country as variants of coronavirus spread.

Despite what a bad opinion piece from a major media outlet that I won’t link here might say, people are most certainly still enjoying games. And buying new devices on which to play them, for longer than ever.

Overall consumer spending across Content, Hardware and Accessories totaled nearly $4.6 billion in July. That’s a solid increase of 10% since this same time last year and a record amount for a July month across tracked history, dethroning last year’s $4.2 billion.

In terms of dollar sales, Content continues as the largest contributor though it was the only category of the three not to experience double-digit growth. Hardware gains proved resilient, nearly doubling year-on-year spend driven by another unit sales lead for Nintendo and PlayStation 5 continuing its historically quick start. Accessories wouldn’t be left out of the party as it actually set a July sales record of its own, influenced by a new product offering from Nintendo.

Software charts boasted two new games in the Top 3, both from storied franchises created by Japanese publishers Nintendo and Capcom. Activision Blizzard’s Call of Duty franchise had another month where two of its games ended up in the general Top 10. The real story there is how the American publisher should be called out for reports of its toxic workplace every time its games are mentioned now.

It’s time for the numbers behind an exceptional July for broad U.S. games industry spending.

United States Games Industry Sales (July 4th, 2021 – July 31st, 2021):

As I mentioned above, it was a record July month for overall monthly domestic spending on games at $4.6 billion. When expanding to 2021 as a whole, total video game sales rose 14% to $33.5 billion across the first seven months. Gaming is still the preeminent entertainment experience, especially as platform holders delve more into the subscription side appealing to folks with both traditional and on-the-go devices.

Within the largest sub-category of Content i.e. software etc, it was mobile, subscription and post-launch spending boosting sales during July to just under $4.1 billion. That’s a moderate 6% increase. Year-to-date Content currently totals $29.4 billion, moving up 12%.

The Switch Effect remains in full effect here on the overall monthly software chart. Nintendo’s hybrid platform claimed four of the Top 6 spots as console or outright exclusives, three of which are published by Nintendo and don’t even count the digital portion of their sales!

The Legend of Zelda: Skyward Sword HD took home top honors in July. I didn’t see much in the way of context here within the report, and I’d love to know how this remaster compares to the original game launching on Wii back in November 2011. All I can say is the first game debuted at #9, so I assume there’s a sizeable difference here. Will update if I hear anything.

Next at #2 is chart mainstay Call of Duty: Black Ops Cold War from Activision Blizzard, the American publisher that’s under a lawsuit because it reportedly doesn’t treat its employees well at all and fosters a “frat boy” workplace culture. The game’s latest season launched today, and I give props to every single employee working hard to keep up with its ongoing content roadmap amidst this difficult environment. Worth noting that 2019’s Call of Duty: Modern Warfare is back in the Top 10 this past month, at the ninth spot.

Capcom’s Monster Hunter Stories 2: Wings of Ruin landed third on the total rankings. The Switch title that’s also available on PC already generated triple the *lifetime* sales of the original Monster Hunter Stories 2017 release on Nintendo 3DS. Wow. NPD Group Analyst Mat Piscatella called this biggest surprise of the month, and can’t argue there. Monster Hunter as a whole gained a more global appeal since Monster Hunter: World in 2018, seemingly now to the point where even console exclusive spin-offs are gaining heavy traction.

Moving down the list, I have to point out Mario Kart 8 and MLB The Show 21. First off, who keeps buying Mario Kart? Well it’s probably anyone purchasing a Switch, right. Which is plenty of people right now. I’ve pushed back my expectations for a Mario Kart 9 every time I see it achieve a Top 5 month or reach a new milestone on global sales, which are now at over 37 million units.

Then there’s MLB The Show 21 at #7 in July, allowing it to set a new year-to-date sales record within the franchise. Not only that: Lifetime dollar sales of the game have already beat out last year’s entry to become the best ever for any MLB The Show game, a series which dates back to 2006. This is only its fourth month on sale! The multi-platform move and Xbox Game Pass decision by Major League Baseball made this game a mega hit.

The last of the new releases within the Top 20 was Neo: The World Ends With You debuting at #16. Launch month dollar sales of the Square Enix-published release started at more than double that of The World Ends With You for Nintendo DS in July 2007.

Finally, Capcom also launched The Great Ace Attorney Chronicles in July, a compilation of adventure games within the Ace Attorney series which started at the 22nd spot on the total chart.

Here’s a full look at two of the main software lists, first for the month then the year as a whole as of July.

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

  1. The Legend of Zelda: Skyward Sword HD*
  2. Call of Duty: Black Ops Cold War
  3. Monster Hunter Stories 2: Wings of Ruin
  4. Mario Kart 8*
  5. Minecraft
  6. Mario Golf: Super Rush*
  7. MLB The Show 21^
  8. Marvel’s Spider-Man: Miles Morales
  9. Call of Duty: Modern Warfare 2019
  10. Super Smash Bros. Ultimate*
  11. Ratchet & Clank: Rift Apart
  12. Animal Crossing: New Horizons*
  13. Tony Hawk’s Pro Skater 1+2
  14. Super Mario 3D World + Bowser’s Fury*
  15. Mortal Kombat 11
  16. Neo: The World Ends With You
  17. The Legend of Zelda: Breath of the Wild*
  18. Pokémon Sword & Shield*
  19. Resident Evil: Village
  20. Assassin’s Creed: Valhalla

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

  1. Call of Duty: Black Ops Cold War
  2. MLB The Show 21^
  3. Resident Evil: Village
  4. Super Mario 3D World + Bowser’s Fury*
  5. Marvel’s Spider-Man: Miles Morales
  6. Monster Hunter: Rise
  7. Mario Kart 8*
  8. Minecraft
  9. Assassin’s Creed: Valhalla
  10. Animal Crossing: New Horizons*

Now, talk about explosive growth.

Hardware experienced the biggest increase of the three segments during July 2021 as sales nearly doubled year-on-year to $323 million. Up 98%, to be exact. It’s the best individual July month since upwards of $447 million back in 2008. Sounds like all three major competitors in Nintendo Switch, PlayStation 5 and Xbox Series X|S experienced increases naturally, just depends on how many boxes they can ship honestly.

Switch maintained its staggering streak of now 32 consecutive months atop the console ranks in July as measured by units sold. It’s also the year’s top-seller, by both units and dollars. Those new software title launches plus evergreens like the aforementioned Mario Kart continue to attract, and I’m very curious to see demand impact for the OLED model that hits market in October.

However, PlayStation 5 led console spending by dollar sales in July implying a higher average selling price and consistent retail demand for its supply-constrained platform. Sony’s latest generation box is still the fastest-selling home console as measured by dollar sales during its first 9 months on market. For now. It’s worth noting that next month will be the 10th for PlayStation 5, which corresponds to Switch’s first December. Even with demand as strong as it is, I don’t know if Sony can keep this streak alive given this timing and external sources limiting output.

On the Xbox side, the report didn’t shed too much light. Piscatella noted that Xbox console sales are “significantly higher” than one year back, albeit that was very late in the Xbox One life cycle.

For 2021 in aggregate, spending on Hardware jumped 50% to $2.7 billion. That’s again the best growth in the tracked sub-categories of Content, Hardware and Accessories. As we’ve seen all year, Nintendo’s Switch console is 2021’s best-selling so far. This time measured by both units and dollars. While not a shocking result, it’s certainly noteworthy for a platform starting off its fourth year on sale versus others in their early stages.

It’s time to accessorize, as July 2021 proved to be a historic month for Accessories as well.

Not to be outdone by its counterparts, spending on Accessories just set a new July record. Last year, July 2020 dollar spend was around $170 million. This year, July sales reached its brand new all-time high of $189 million.

And yes, there’s a theme. The Legend of Zelda: Skyward Sword HD Edition Joy Con debuted as the month’s top-selling accessory, no surprise really. So Nintendo’s latest launch in the Zelda franchise, even as a remaster, was responsible for the month’s best-selling game plus top accessory.

The white version of PlayStation 5’s DualSense Wireless Controller still holds the crown for now as 2021’s best-seller, driving category spending over the year so far to $1.4 billion. That’s 13% higher than the same period in 2020, almost mirroring Content spending growth.

Viewing July’s trend-lines in terms of growth within domestic games spending shows that ever since declines in the months prior to April 2021, monthly spending is now back on the rise. A July record nearly solidifies it. Spending across the industry right now reveals a blend of new audience members plus ongoing spending from casual and core players.

New software releases are helping of course, as is supply for new generation platforms. There’s consistency in both mobile and ongoing spending on the content side, and companies are selling-thru to consumers as many pieces of hardware that suppliers can push out.

It’s also the accretive nature of those people trying gaming for the first time or returning that’s defining this time over a year into the pandemic. Combined with an enthusiast audience still gobbling up Nintendo games plus pumping demand for PlayStation and Xbox, I’m not surprised by ongoing growth.

August marks what I like to consider the first major commercial push of the back half, marked by the launch of perennial seller Madden NFL from Electronic Arts. This year’s Madden NFL 2022 football franchise release kicks off on August 20th. Fully expect it to be the best-seller. August also has a couple notable updates to existing titles in Marvel’s Avengers: War for Wakanda expansion on August 17th plus August 20th’s Ghost of Tsushima Directors Cut. Even with Nintendo bereft of a major first party title and chip shortages ongoing, I’m leaning bullish on the month.

Thanks for reading, be safe and see you next time!

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

Comparisons are year-over-year unless otherwise noted.

Sources: Alvaro Reyes (Photo Credit), Bloomberg, The NPD Group, Reuters (Photo Credit).

-Dom

Nintendo Reports Second Best First Quarter Results Since 2009

The last of the three major gaming console manufacturers to report this season is Nintendo, as it enters a new fiscal year starting this April to June.

And it was a very good one, as has been the trend for the company lately in this latest generation. Even if not quite as good as its ridiculously impressive highs during last year’s corresponding period.

The Japanese hardware designer and software developer reported first quarter net sales around $2.91 billion, 10% lower than last year’s Q1. Operating profit reached $1.08 billion, a decline of around 17% leading to a lower margin as well.

Sure, both of these are technically down. Expanding to a historical context shows it’s actually exceptional performance in the scheme of things. Other than the unprecedented time last year, it’s Nintendo’s best first financial quarter in just over a decade. Operating income in particular effectively matches the level of fiscal 2009 Q1. Nintendo is proving resilient, especially on the hardware side, as Switch sales are translating to software performance for both new and catalog titles.

When it comes to Switch hardware it remains, quite simply, on fire. The console sold-in 4.45 million Switch units in Q1, a dip of roughly 22% year-on-year though twice as much as the same period in fiscal 2020. Lifetime shipments of the hybrid console now total 89.04 million. This means it’s past yet another milestone in the industry, moving past the 87.4 million at last count for Sony’s PlayStation 3 since its launch back in 2006.

Lately Nintendo has also reported sell-through to consumers, which represents actual ownership in households. As of June, Switch family sell-thru hit 85 million consoles. This is up from 81 million in the quarter ending March 2021. That means upwards of 96% of all shipments have been purchased at retail to date.

The most attractive part of owning Nintendo’s hardware is, of course, to play games that aren’t available anywhere else. Nintendo reported both overall sales movement plus shipments for three main first party releases during the quarter. New Pokémon Snap, a spin-off in the series that’s all about photographing the famed pocket monsters, reached 2.07 million after launching in late April. (Note: This does not include sales from Japan, where it’s published by The Pokémon Company.) In comparison, its 1999 predecessor Pokémon Snap hit 1.5 million units by the end of its first year on sale and is estimated at 3.63 million lifetime.

Separately, the latest sports entry Mario Golf: Super Rush released on June 25th so it had less than a week on market by the end of this reporting period. Shipments over that time hit 1.34 million copies. Going way back, the original Mario Golf on Nintendo 64 is estimated at 1.47 million during its entire product life. Basically, Mario Golf: Super Rush is estimated to already be the second-best seller in franchise history. It’s a lower result for a mainline Mario game, though notably great within this particular spin-off series. That’s the power of the Switch right now, with the caveat that it’s difficult to track exact sales for older titles.

The last new launch of the first quarter was the role-playing game Miitopia on May 21st. The remastered version of the 2017 3DS game of the same name barely crossed the million mark, reaching 1.04 million. This is almost as much as the original scored during its first three years at 1.18 million, another rough estimate of course.

I’ll note that there was no word on June’s Game Builder Garage game creation software. Since it didn’t make the million seller list, have to assume it’s currently below that milestone.

Now, read on below for much more analysis behind the numbers plus forecasts going forward. It’s totally worth it. I wouldn’t lie to you. Plus, who doesn’t love charts!

Whew. I know it’s a lot of data. Let’s break it down.

First, broadening the time frame helps put the aforementioned $2.91 billion in net sales and $1.08 billion profit from operations during Q1 into perspective. Taking a peek at the quarterly revenue chart, this illustrates how it’s the second best 1st quarter since the $3.82 billion generated in April to June in 2008. Around the height of the Nintendo Wii’s popularity, a common trend we’ve seen before the darker days of the Wii U era starting in 2012.

Expanding the revenue chart using trailing 12-months smooths out performance and exhibits a familiar sort of trajectory. That’s $15.56 billion in aggregate sales during the last four quarters. This particular figure hasn’t been above $15 billion during a first quarter for Nintendo since fiscal 2010.

Flipping to profitability, it’s even more impressive how Nintendo is managing costs lately. Quarterly operating profit is nearly the best it’s been in a decade. Other than last year’s peak during the pandemic, the last time operating income reached $1 billion in a Q1 period was that Wii era of fiscal 2009. Trailing 12-month profit hit $5.56 billion or so during June, and this time that’s the best first quarter since the same time during 2009.

On regional splits, the Americas hit nearly 44% of overall dollars sales for Nintendo. Europe up next at 24%, then Japan around 22%. Which means the proportion of sales outside of Japan is upwards of 78%. This is a notable shift towards the Americas, which itself made up 38% last year.

For a quick quarterly comparison amongst its peers, Nintendo had the lowest revenue during Q1 under that $3 billion mark yet is more profitable than its Japanese counterpart in Sony. The PlayStation brand achieved $5.62 billion in revenue while Microsoft generated $3.74 billion. Still, Sony’s gaming profit of $760 million is notably lower than Nintendo’s. Which makes sense, since Sony is starting off a new console cycle with the PlayStation 5 while Switch is further along, has lower marketing spend and production costs.

Underlying this latest success is Switch hardware momentum, however what in particular is driving it? It’s actually the base model’s popularity.

Out of the 4.45 million consoles shipped during Q1, a figure down 22% as I noted earlier, 3.31 million were that standard edition. This is notable because it’s actually above the high comparable period last year when this figure was 3.05 million. Worth mentioning this model was more supply-constrained back then, according to comments from executives. Switch Lite is behind the overall decline, dipping to 1.14 million from 2.62 million. That’s a serious 57% drop, no doubt impacted by many portable buyers last year attracted to Animal Crossing: New Horizons on the go.

Even more than four years after its launch, Switch hardware sales are still just as much dictated by supply because audience demand is consistent.

Oh. Here’s a pretty wild stat I thought would be fun. Nintendo is, of course, the top-selling hardware manufacturer ever globally. It passed an absolutely wild margin this past quarter: 800 million console units sold since debuting the Nintendo Entertainment System (NES) in 1983. This of course includes handhelds, otherwise Sony’s PlayStation brand would be outpacing when using home consoles only. It’s still a fun big fact after this latest success!

Diving into updated software sales, Nintendo said 45.29 million copies sold on Switch during Q1 as compared to 50.43 million last year. Around a 10% decline, primarily due to the overwhelming success of the new mainline Animal Crossing a year ago.

Nintendo shared that nine games sold a million or more copies on Switch during April to June alone, seven of them first party exclusives. That overall figure is the same number as this time last year.

Apparently everyone can’t stop buying Mario Kart 8 Deluxe as it remains the top-selling Switch game ever, moving up almost 1.7 million to 37.08 million units lifetime. It’s like Nintendo’s Grand Theft Auto, except without the theft part. Animal Crossing: New Horizons retained the second spot, reaching 33.89 million units after selling 1.26 million in the quarter. Rounding out the Top 3 is still Super Smash Bros. Ultimate at 24.77 million to date after moving just under a million in Q1.

One major mover on the legacy side has been Ring Fit Adventure, originally out in October 2019. Last quarter, it joined the 10 million sold club. It has since moved 1.15 million more, pushing up to the 10th spot on Nintendo’s Switch best-sellers list at 11.26 million units. People are certainly exercising their right to spend!

Nintendo doesn’t often share much on the third-party side. Management noted that “sales of titles from other software publishers continued to grow steadily” without much context. Based on anecdotes around the industry, there’s certainly a Switch effect especially for independent publishers.

What about digital contribution, an area where Nintendo has lagged the broader industry? Well, it’s down 25% to $685 million, equating to roughly 24% of total quarterly dollar sales. Nintendo’s proportion of digital sales on the software side was 47% in Q1, meaning just under half of total dedicated platform software units were downloaded. Compare this to 56% last year, a somewhat inflated figure by retail store closures, buy-at-home convenience plus Animal Crossing: New Horizons skewing results.

“Although sales declined for downloadable versions of packaged software on Nintendo Switch, sales remained steady for download-only software, including indie titles,” said the leadership team. “In addition, Nintendo Switch Online sales also increased.” Though the company didn’t share any more specifics on the Nintendo Switch Online service. The last paid subscriber count was 26 million around September 2020.

Taking a look ahead, Nintendo reiterated its forecast for the current year when it comes to financial performance, consoles sold and software units. As often happens during its first quarter, especially as this management team leans towards a conservative nature.

During fiscal 2022, net annual sales are still expected to be $14.4 billion while operating profit will be at $4.5 billion. These would be down 9% and 22% respectively, yet still a major result looking back many years. Switch hardware guidance is flat at 25.5 million for the year, implying that Nintendo needs to ship just over 21 million more during the next three quarters.

So where would that put Switch lifetime compared to other consoles? Well, Nintendo Wii is next up. There’s a notable gap right now, the Switch’s 89 million compared to nearly 102 million for Wii. If Nintendo hits this year’s forecast, it will clear that milestone easily by the holiday quarter. And I fully expect that to happen, boosted by easing supply considerations plus the Nintendo Switch OLED Model iteration. In fact, I believe Nintendo’s hardware guidance is conservative and expect executives to move it up next quarter. I’ll stick to my 28 to 29 million estimate for the year ending March 2022, which I established a few months back.

Nintendo currently expects to ship 190 million software units on Switch this year, down from 231 million in the year ending March 2021. Again, that will be beat. Software slate in the near-term is a bit light, driven by last month’s The Legend of Zelda: Skyward Sword HD then WarioWare: Get it Together! in September. Then fan favorite Metroid Dread and party game compilation Mario Party Superstars are scheduled to kick off the holiday quarter in October plus two Pokémon remakes in Brilliant Diamond and Shining Pearl will bolster the schedule in November.

The company lists Splatoon 3 and the sequel to The Legend of Zelda: Breath of the Wild for calendar 2022, one of which could be January to March. Well, probably not Zelda if I’m being honest.

Regardless, it’s going to be another quite incredible year for the company’s bottom line and console sales in particular, unless some sort of unforeseen disruption hits on the production side. Even without the existence of that “Switch Pro XL” model, a rumor that’s been going on for what feels like years now. Maybe the “insiders” will be right eventually. Me? Catch me here, looking at the numbers.

Thanks as always for reading and be safe everyone!

Note: Comparisons are year-over-year unless otherwise mentioned. Exchange rate is based on reported conversion: US $1 to ¥ 110.74.

Sources: Aishah Mulkey (Photo Credit), Celene on ResetERA, Microsoft Corp, Nintendo Co Ltd, Sony Corp.

-Dom

Sony Reports Biggest First Quarter Ever for PlayStation Revenue

The latest gaming manufacturer to report earnings is Sony Corp, this time sharing fiscal 2021 first quarter results. During which the Japanese company revealed its PlayStation division recorded its highest first quarter sales ever even as PlayStation 5 shipments slightly lag its predecessor. Though sell-through to consumers for this latest generation of hardware is still going at a faster pace, driving gaming segment results for the consumer tech conglomerate.

This is the first full quarter that’s compared against highs set during the height of stay-at-home requirements, so the impact of a global pandemic on gaming and consumer spending is coming into focus. A record Q1 for Sony’s gaming department shows that audience demand is resilient, especially on the console side, even if software spend is descending from a very tall peak.

Suffice to say, PlayStation is making history even considering supply challenges facing the industry alongside easing pandemic restrictions.

Sony’s Gaming & Network Services (G&NS) i.e. PlayStation brand revenue rose just under 2% to a Q1 record of $5.62 billion. Higher than even last year’s impressive result of $5.5 billion, this performance was mainly driven by PlayStation 5 demand and exchange rate changes despite lower 3rd party software and add-on content sub-categories.

Essentially for Sony at this stage three quarters into a new generation of gaming consoles, hardware is selling out though its audience spend on games is slowing.

On the profit side, G&NS segment quarterly operating income dropped 33% to roughly $760 million on higher costs associated with making and marketing a new console cycle. More so, that lower third-party software and add-on spending relative to last year. Still when taking a broader perspective, this is actually fantastic output. It’s the third best operating profit performance in a first quarter in the history of breaking out the gaming segment.

Speaking of PlayStation hardware sales, Sony shared updated shipment figures for both of its latest boxes. PlayStation 5 shipped 2.3 million units in the quarter ending June, bringing lifetime to 10.1 million. This is notable for a couple reasons. First, it’s about 500K lower than PlayStation 4 did in the same quarter during April to June 2014. So its pace of shipment is slowing compared to its predecessor, no doubt impacted by a global chip shortage that’s adversely affecting everything from automobile to graphics processor output.

However, shipments can’t tell the whole story when there’s more information available. Sony Interactive Entertainment said recently PlayStation 5 sell-thru to its audience hit the 10 million milestone as of July 18th. That’s 3 weeks faster than PlayStation 4 took to reach that same amount. Which means the number of PlayStation 5 consoles getting to consumers (or perhaps scalpers, I know) at this stage in the cycle is higher than any other in the brand’s history.

There’s also the underlying profitability dynamics for these PlayStation 5’s moving through to households. According to executives on the earnings call, its standard disc edition is actually now profitable per unit after the tradition of being sold at a loss during initial quarters. I’ll note the version without a disc drive is not yet breaking even.

As expected this late in the PlayStation 4 life cycle, quarterly shipments dipped below the million unit mark for the first time since launch back in November 2013. This brings its lifetime mark to roughly 116.5 million. I expect this slowing to continue, and wouldn’t be surprised if Sony’s reporting tops out around the 120 million mark.

Well then. It’s time to get into the nitty gritty for a bit, then end with forecasts and predictions!

The above gallery above shows relevant slides and a handful of charts I compiled to illustrate where the PlayStation division is starting out this new fiscal year. I know it’s a lot of data. But it’s goods stuff, I swear!

Expanding broadly, Sony overall saw sales rise 15% in Q1 to $20.6 billion. Growth in both Electronics Products & Solutions (EP&S) plus its Music category outpaced all other categories, although gaming is still the main contributor from a dollar (or really yen) standpoint.

Quarterly operating profit for the company topped $2.56 billion, up 26%. Driven by that same EP&S category, dragged down by higher expenses within PlayStation.

I mentioned the record quarterly sales and lowering operating profit for G&NS before, so let’s see how these compare when expanding over time to smooth out the results. This helps put quarterly performance into context.

When looking at trailing 12-month gaming revenue accounting for this latest quarter, it’s again at another record high of $24.35 billion. That trend-line is impressive, no doubt bolstered by people trying to get their hands on the coveted new console. Trailing annual operating profit hit $2.75 billion, with the dip in the latest time period. Still, it’s higher than this same time last year. As the company gets more efficient in making PlayStation 5’s plus sees component costs potentially lower, I expect it to bounce back again.

You’ll also see a chart above drilling into category sales results within gaming. Of course, Hardware is the biggest gainer as it’s more than double the amount last year for obvious reasons. Consistent with earlier comments, both Physical and Digital Software decreased in the double-digits as did Add-On Content. Sony attributed that to 3rd party declines. Network Services is proving resilient, moving up compared to last year. The final category Others encompasses peripherals, PlayStation VR and first-party software on non-PlayStation platforms almost doubled, I imagine boosted by DualSense game pad demand.

On the software and engagement side, Sony shared new figures for game sales, PlayStation Plus subscriptions plus Monthly Active Users (MAUs) in its supplementary filing, the last of which is the estimated number of unique accounts that uses PlayStation Network during June 2021.

Full-game software sales totaled 63.6 million across PlayStation 5 and PlayStation 4 during the quarter, substantially lower than the 91.4 million during Q1 last year. Within this, 10.5 million were first party exclusives, down from 18.7 million.

Thing is, this is more a reversion to the average than a decline. There’s also how last year saw the massive launch of The Last of Us Part II. Executives said every new release during April to June 2021 exceeding internal expectations. Ratchet & Clank: Rift Apart is at 1.1 million units since June 11th. MLB The Show 21 hit market on April 16th and has since sold 2 million units while attracting 4 million players, certainly benefiting from a simultaneous Xbox Game Pass launch. Returnal also released in April, reaching 560K copies in the interim.

There’s also a specific shout out to PC versions of Horizon Zero Dawn and Days Gone as Sony opens up its legacy first-party catalog to a brand new audience.

Paid PlayStation Plus subscriptions reached 46.3 million from an even 45 million last year, while MAUs were down to 104 million from 114 million. This movement shows a bit lower average engagement, though it looks like new console owners are signing up for the PlayStation Plus service that allows online multiplayer and provides access to certain games each month.

The leadership team provided a bit more color on these stats, saying that total gameplay time of PlayStation users declined 32% from the highs of quarantine impact. It’s up 18% compared to the same quarter of 2019 fiscal year, a more normalized period even if well into PlayStation 4’s lifetime.

Now, how does Sony’s $5.62 billion revenue and $760 million operating income quarter compare to recent results from peers in the industry? As I covered in my piece on Microsoft’s latest financial year last week, the Xbox division generated $3.74 billion in sales during the same time frame. And Microsoft unfortunately doesn’t report Xbox’s profit. Hardware was the driver again, though it’s clear that PlayStation is outpacing Xbox in that department early in this generation based on expert unit estimates and these dollar sales.

Separately for the other major Japanese games manufacturer in Nintendo, it reports first quarter results tomorrow. So we’ll have a better picture then. Last year during the height of stay-at-home, Nintendo generated roughly $3.27 billion in sales and $1.3 billion in operating profit, implying a much higher margin with Switch towards the middle of its life span so we’ll see where it lands this year.

Edit on August 5th: Nintendo’s Q1 revenue totaled $2.91 billion while operating income reached nearly $1.1 billion. Consistent with it being the more profitable of the two, at least right now.

Back to Sony and looking ahead, the company provided updated 2021 fiscal year forecasts for its overall and segment operations. Sales guidance remained unchanged for the company overall at $89 billion, though it did boost operating profit by 5% to upwards of $9 billion. Within gaming, it confirmed annual guidance of $26.5 billion in revenue and $3 billion in profit. The former would be a record and the latter I believe the second best in its history, revealing just how bullish the Sony team is on the modern PlayStation brand.

Leadership also reiterated that it still expects to ship 14.8 million PlayStation 5 consoles during the financial year ending March 2022, which would be the same as PlayStation 4. This implies lifetime PlayStation 5 consoles would be 22.6 million after its first six quarters, slightly outpacing the 22.4 million of PlayStation 4.

Broadly speaking on the topic of looking forward, there were slides and additional comments related to general strategy that stood out from management too, consistent with recent trends of company spending and approach.

“PlayStation Studios, which oversees our first-party software production on a global basis, is accelerating investment to strengthen its production capabilities” said the team. They cited the purchase of Housemarque in June then Nixxes in July, two notable acquisitions for the PlayStation portfolio in this quarter alone. This sort of investment activity this year is even more than I anticipated from Sony when I wrote about broader predictions back in January. I expect another announcement in the back half of this fiscal year, this time of Bluepoint Games based in Texas.

Backing this up, executives shared more about future potential. “Going forward, we intend to continue to proactively make strategic investments with the aim of developing new IP, supporting our multi-platform strategy, and strengthening our service offerings including through add-on content.”

What this all means to me is Sony remains supremely confident in the PlayStation business and how the PlayStation 5 will continue as the fastest-selling console in its history. I’m doubling down on my original estimate for this fiscal year of 15 million hardware shipments, which I established in last quarter’s piece.

On the financial side, I believe Sony will match or exceed its guidance. A record year is in sight for gaming revenue. It’s selling as many consoles as its suppliers can make, cost of general marketing will flatten and segments like network services will prop up if software doesn’t keep pace with last year’s explosive growth.

Major questions still swirl around supply of components and the global semiconductor environment, which has limited the number of new consoles these manufacturers can produce. Imagine if that weren’t the case! Record numbers could be even higher. Then, can new hardware sales translate into player engagement remaining near recent highs? There are audience members that either started playing or returned to games sticking around, the pie is growing. It just depends on how much.

If this quarter is any indication, Sony is certainly having its fair share of slices.

Thanks for reading everyone. Check back to my earnings calendar for more dates, and there will be even more coverage here and on social media in the coming days. Be safe!

Note: Comparisons are year-over-year unless otherwise mentioned. Exchange rate is based on the reported conversion: US $1 to ¥ 109.5.

Sources: Charles Sims (Photo Credit), Insomniac Games (Image Credit), Microsoft Corp, Nintendo Co Ltd, Sony Corp.

-Dom

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

-Dom

Xbox & Ratchet & Clank Set Records in June 2021 U.S. Games Industry Sales Report

I know it feels like 2020 never ended. Yet somehow, the front half of 2021 is now in the books. It was another challenging one for a variety of reasons, yet one of the bright spots continues to be video game sales which I hope has provided some much-needed joy and respite for everyone.

And with that, we have.. numbers, of course!

Recently, industry tracking firm The NPD Group dropped both a monthly and second quarter 2021 report on the domestic games market. With it, sharing some notable records in the process and showing how spending on all categories this year is trending upwards.

In terms of growth, overall monthly consumer spending on games in the U.S. rose a steady 5% against a high comparable last year, set in the middle of stricter quarantine guidelines. Led by a Hardware category that more than doubled its level this same time in 2020. Within that, Microsoft’s Xbox Series X|S topped dollar sales. Even setting a new June record within the Xbox platform’s 20-year history. Separately, Nintendo Switch maintains a staggering streak when it comes to leading on unit sales, which it did again in June, as it has every month for 31 consecutive months! Both of these impressive feats occurred amidst a global chip shortage, signaling a boost in otherwise limited stock lately.

Content i.e. software, subscriptions and add-on sales moved up slightly, propped by usual suspects like Call of Duty and MLB The Show plus three new releases in the Top 5 on the general chart: Sony’s Ratchet & Clank: Rift Apart, Nintendo’s Mario Golf: Super Rush and Scarlet Nexus from Bandai Namco. Accessories was the only segment showing a decline in June 2021, though only 1% as PlayStation’s DualSense continues its consistency there.

Expanding to second quarter, total spend inched up 2% compared to the same three month period last year. However for the full first half of 2021, total sales climbed a solid 15% as all categories exhibited double-digit bumps. Spending on games isn’t slowing down compared to the height of the pandemic, proving new audience members are sticking around and core players are keeping up the hobby.

It’s time to delve deeper into each segment individually, including a close look at the software charts for both June and 2021 to date!

United States Games Industry Sales (May 30th, 2021 – July 3rd, 2021):

During June 2021, overall consumer spending in the domestic games market reached $4.93 billion, rising 5% compared to the same time last year. That’s now two consecutive months of year-on-year growth after a dip back in April.

While Content remained the leading segment by spending, it was Hardware making the biggest splash as production slowly yet surely ramps up. The last category of Accessories dipped slightly in June, cooling off a bit in the hot summer months domestically.

“Hardware was the obvious big story of June,” said The NPD Group’s Mat Piscatella. “Xbox Series was the star of the month, but all major platforms showed double or triple digit dollar sales growth vs year ago. Demand is nowhere near satiated, supply is still a massive challenge.”

Across the second quarter between April to June, total spend in the U.S. hit $14 billion. That’s up 2% since the same time in 2020. The NPD Group reported Q2 growth across a variety of sub-groups: personal computer (PC), cloud, non-console virtual reality, mobile, subscriptions plus, of course, gaming consoles.

“Consumer spending has not only maintained the elevated levels reached a year ago, but exceeded them in key areas such as hardware, mobile and subscription spending,” said Piscatella in the Q2 report at the firm’s website.

This trend is illustrated even more when looking at the entire first half of 2021. The total for consumer spend jumped 15% to $28.94 billion during the six month span ending June, driven by console growth in particular. Demand for new consoles still outstripped inventories, though manufacturers proved resilient with production even as it’s difficult to source certain parts in the supply chain.

When focusing on Content alone, sales in June reached $4.32 billion. Up a modest 1% year-on-year. Looking at second quarter, this major category saw $12.6 billion in sales, growing 2%. Notably driven by subscription spend, showing double-digit growth in Q2 (although the firm wasn’t specific in that figure). Across the time frame from January to June, Content bumped upwards of $25.36 billion, 13% higher than first half of 2020.

New releases wrote the narrative here for June. Sony published Ratchet & Clank: Rift Apart, the month’s top-selling software title. The latest mainline Ratchet & Clank action-adventure platformer achieved the best dollar sales ever in franchise history, a staple within the broad portfolio of developer Insomniac Games. The prior record holder for the series was April 2016’s Ratchet & Clank, a counterpart to a movie launched that same month.

Right behind chart mainstay Call of Duty: Black Ops Cold War, which ranked #2, was Nintendo’s latest sports offering in Mario Golf: Super Rush. Within the States, this title set a new Mario Golf record for first month dollar spend, outpacing that of GameCube’s Mario Golf: Toadstool Tour way back in 2003. Nintendo hasn’t yet shared global unit shipments for its latest Switch exclusive sports game, though I expect a similarly solid start when it does on August 5th.

June’s biggest surprise to me was Scarlet Nexus fighting to the five spot on the combined platform chart. An action Japanese Role-Playing Game (JRPG) from Bandai Namco is the latest in splendid starts for Japanese titles expanding overseas during simultaneous global launches, echoing examples like Square Enix’s NieR: Replicant at #5 in April 2021, Capcom’s Monster Hunter Rise in the second spot during March 2021 plus Dragon Ball Z: Kakarot also from Bandai Namco, the best-selling title in January 2020.

Through the first half of 2021, chart composition is familiar. Call of Duty: Black Ops Cold War was the best-seller with Resident Evil: Village and MLB The Show 21 right behind it at #2 and #3, respectively. One notable position is the 9th-ranked Outriders from Square Enix, a quietly consistent seller during the first half even if it lost some ground compared to May.

It’s time for the lists themselves, both monthly and first six months of the year.

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

  1. Ratchet & Clank: Rift Apart
  2. Call of Duty: Black Ops Cold War
  3. Mario Golf: Super Rush*
  4. MLB The Show 21^
  5. Scarlet Nexus
  6. Resident Evil: Village
  7. Mario Kart 8*
  8. Minecraft
  9. Marvel’s Spider-Man Miles Morales
  10. Mortal Kombat 11
  11. Animal Crossing: New Horizons*
  12. Call of Duty: Modern Warfare 2019
  13. Super Smash Bros. Ultimate*
  14. Assassin’s Creed Valhalla
  15. Super Mario 3D World + Bowser’s Fury*
  16. Mass Effect: Legendary Edition
  17. Tony Hawk’s Pro Skater 1+2
  18. The Legend of Zelda: Breath of the Wild*
  19. Pokémon Sword & Shield*
  20. Sea of Thieves

Top-Selling Games, 1st Half 2021, U.S., All Platforms (Physical & Digital Dollar Sales):

  1. Call of Duty: Black Ops Cold War
  2. Resident Evil: Village
  3. MLB The Show 21^
  4. Super Mario 3D World + Bowser’s Fury*
  5. Marvel’s Spider-Man: Miles Morales
  6. Monster Hunter Rise
  7. Mario Kart 8*
  8. Assassin’s Creed Valhalla
  9. Outriders
  10. Minecraft

Moving onto gaming consoles during June 2021, the Hardware category saw gains across all three major platforms in PlayStation, Xbox and Nintendo, driving exceptional growth of 112% to $401 million. That’s the top June sales amount for Hardware since June 2009’s $617 million.

I mentioned before the great, record-breaking month for Xbox where Series X|S led by dollar sales. That’s the first time since its launch in November 2020. It recorded the best June month ever for an Xbox platform, beating out June 2011. No doubt driven by new content for console exclusive Sea of Thieves, continued pace from MLB The Show 21 plus the allure of Xbox Game Pass as the best value proposition in games.

Microsoft wasn’t the only manufacturer with an exciting month. Nintendo Switch led by unit sales in June 2021, as it has every month for years now during its wild run of success. PlayStation 5 continues its extremely quick start. Sony’s new generation (big ol’) box is still the fastest-selling home platform in tracked history, as measured by unit sales during the first 8 months on market. Note this statistic excludes handhelds, since Game Boy Advance is still the fastest-seller overall.

Stretching the time frame to second quarter, console spending moved up 12%. Then between January and June, this Hardware category earned $2.35 billion. That’s a fantastic 45% increase, even if compared to a time that was later in the console cycle last year.

It’s worth repeating that numbers during the early portion of a new platform generation are driven by supply rather than demand, more now than ever given the inventory environment. Essentially, Xbox produced enough Xbox Series X|S units to lead by dollar sales during June. Demand is for all platforms is stellar, even Nintendo Switch four years after its debut. This contrasts a chip shortage expected to block higher production output for a year or two, at least.

The only mildly disappointing category during both June and second quarter was Accessories, unable to keep pace with its counterparts. Understandable given the strength of spending this time last year. Although it did exhibit growth when looking at the aggregate during the first half of 2021, an encouraging sign.

Monthly spending on this category comprised of game pads, headsets etc declined 1% to $207 million in June and was 12% lower than last year when looking at the second quarter. Still, it saw 14% growth during the first six months of 2021, rising to $1.23 billion.

Sony is the consistent leader here. The PlayStation 5’s DualSense Controller Midnight Black edition topped this accessory group during June. Out of the four best sellers last month, three of those were DualSense game pads. Similarly, DualSense’s base White variant led the segment for the year so far.

It appears additional spending on these pieces of ancillary hardware is slowing in the early summer months, so will see where it goes leading into the back half.

The domestic games market saw many bright spots during June, especially for platform holders. Each of them had bragging rights in their own way, and all of them are doing well despite production challenges.

Individual software titles, subscriptions and mobile are keeping up consistency in spending, proving how the industry was not just able to grow its audience during the last year or so, but keep it around to maintain commercial momentum and interest in the medium.

Which makes sense to those tracking closely. Gaming is somehow both the most massive entertainment segment in the world and the quietest, a trend that last week’s reporting clearly shows especially when considering double-digit gains across each category since the year’s start.

I hope everyone stays well until next month when July marks the start of 2021’s second half, always an exciting time for those of us that love to follow. Feel free to drop a comment here or on social media. Be safe and thanks for reading!

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

Sources: Billy Freeman (Photo Credit), The NPD Group, PlayStation Press Center.

-Dom

Resident Evil Feasts During Upbeat May U.S. Games Industry Sales Report

It’s the middle of E3, gamers have finally seen more from Elden Ring, yet nothing can stop this sales train!

The NPD Group returned today with its monthly sales report for the U.S., this time for May 2021. It’s clear the industry is continuing to build momentum, considering spending is up slightly compared to this time last year when everyone was a couple months into stay-at-home restrictions. This movement is mostly due to upticks in the content category with the performance of new releases and attraction of ongoing titles.

Capcom’s Resident Evil franchise and a collection of Mass Effect titles from Electronic Arts headlined the Content segment, while the non-stop Nintendo Switch maintained a momentous streak on the Hardware side. Both of these categories saw single-digit consumer spending growth. Accessories was the only one of the three that saw declines year-on-year, though less than double-digits as new hardware supply is impacting consumer behavior for supplementary spending.

Still, year-to-date growth is nearly 20% for the domestic industry at large to upwards of $24 billion as of May. Each category is up 15% or more for 2021 to date right now, a great number during a lighter than usual release calendar with the impact of COVID-19 still being felt on publisher timelines.

“Tremendous demand for new hardware, supply will dictate performance.” said The NPD Group’s Mat Piscatella as a part of the report online. “Subscription spending is hot, no evidence of cannibalization yet. Confidence growing in market ability to [compare] to 2020.”

Speaking of those latest consoles, PlayStation 5 is officially no longer the fastest-selling ever in the United States in this its seventh month on market. It had a good run, but right now it’s feeling that inventory limit and semi-conductor shortage. A situation that might not drastically improve until 2022.

See more about that and many other details in the sections below, as I dig right into the numbers.

United States Games Industry Sales (May 2nd, 2021 – May 29th, 2021):

In total, spending across the U.S. games industry hit $4.5 billion in May 2021 which is a modest increase of 3% since last year. Which is quite good news, considering the April decline plus how last May proved to put up a sizeable fight with its own quality performance.

As I alluded to up top, 2021 to date spending rose 17% to more than $24 billion as of last month. Contributing to this growth is the combination of ongoing content and subscription strength, two new releases at the top of the software chart plus Nintendo Switch continuing as the hottest console out.

The largest segment of Content (software, add-ons etc), achieved $4.07 billion in spending during May, which is 91% of the full month’s total. This number is up 5% versus the same month in 2020, when it was $3.96 billion. For the first five months of the year, Content boosted 15% to just over $21 billion, again the largest contributor by a wide margin.

Partially pumping up this growth is the top-selling game on the software rankings, Resident Evil Village. The latest in Capcom’s long-running survival horror franchise achieved the best launch month for any game of the year. It’s immediately the second best-selling title of 2021 behind only Call of Duty: Black Ops Cold War. This means it’s the best single month launch for any new game this year.

Resident Evil Village topped PlayStation, Xbox and Steam individual charts here in the States during May. We also know that it’s doing well globally, considering Capcom shared that the title hit 3 million units shipped + downloaded within days of launch then tacked on another million within its first three weeks, for a total of 4 million copies to date.

Second place on the aggregate software chart went to Mass Effect: Legendary Edition. Developed by BioWare under the publishing of Electronic Arts, this compilation of the first three games in the beloved space opera role-playing series reached #3 on PlayStation platforms and the second spot on Xbox.

Compare this to prior titles, as 2017’s critically-panned Mass Effect Andromeda hit third on the total chart while the divisive Mass Effect 3 led its launch month in March 2012. (One thing to note is that back then, ranks were based on unit sales while it’s dollar revenue these days.)

One major trend that stands out to me is the continued performance of MLB The Show 21, carrying over from being last month’s chart-topping smash hit. As I mentioned in April, it’s the first time the game is multi-platform rather than a PlayStation exclusive. This is proving a smart decision commercially, considering the game rounded out the Top 3 in May, outpacing the juggernaut that is Call of Duty: Black Ops Cold War. And that doesn’t even include digital contribution on Xbox platforms! This is exactly why Major League Baseball made the call to open up its potential audience, and they are scoring big as a result.

Elsewhere on the chart is the resurgence of 2019’s Mortal Kombat 11, maintaining its spot at sixth place for the second straight month with that classic movie bump. The latest franchise film debuting in late April. Ultimately makes me wonder what’s next for developer NetherRealm Studio, especially given the team will be impacted by the shake-up at Warner Bros Media. No one knows, at least not publicly, where it will end up.

As for new titles, Biomutant is the only other May release on the aggregate chart, reaching #16. The first effort from a new studio called Experiment 101 and published by THQ Nordic, it did make the Top 10 on both PlayStation and Xbox ranks at #8 and #9 respectively.

That said, it’s chart time folks!

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

  1. Resident Evil Village
  2. Mass Effect: Legendary Edition
  3. MLB The Show 21^
  4. Call of Duty: Black Ops Cold War
  5. New Pokémon Snap*
  6. Mortal Kombat 11
  7. Mario Kart 8*
  8. Returnal
  9. Animal Crossing: New Horizons*
  10. Minecraft
  11. Call of Duty: Modern Warfare 2019
  12. Marvel’s Spider-Man: Miles Morales
  13. Super Mario 3D World + Bowser’s Fury*
  14. Super Smash Bros. Ultimate*
  15. It Takes Two
  16. Biomutant
  17. Assassin’s Creed Valhalla
  18. Monster Hunter Rise
  19. The Legend of Zelda: Breath of the Wild*
  20. Pokémon Sword & Shield*

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

  1. Call of Duty: Black Ops Cold War
  2. Resident Evil Village
  3. MLB The Show 21^
  4. Super Mario 3D World + Bowser’s Fury*
  5. Monster Hunter Rise
  6. Marvel’s Spider-Man: Miles Morales
  7. Outriders
  8. Mario Kart 8*
  9. Assassin’s Creed Valhalla
  10. Minecraft

Hardware is up next, where strength in Nintendo Switch helped to alleviate supply headwinds as category spend rose 5% year-over-year to $244 million. Last year’s figure was only a bit lower at $233 million. This led to the figure for 2021 so far to jump 36% against the same period last year, upwards of $1.9 billion in spend last month compared to $1.43 billion. Out of the three major categories, it experienced the best annualized growth by far.

The usual headliner is Nintendo Switch, and that’s no different in May. It has now led the hardware rankings by unit sales for 30 (!!) consecutive months, an ongoing record that I don’t think will be broken until new generation manufacturing ramps up during the holidays or even 2022.

Switch was also the best-selling platform as measured by dollar sales last month, and of course Nintendo retained the top spot when expanding to the full year. The steadfastness of the Japanese publisher’s hybrid hardware is more impressive every single month, leading me to wonder if those rumors about a more powerful, revised model aren’t as close as some think. (Well, some claimed it would be announced before the big E3 show, which clearly did not happen.)

On the PlayStation 5 side, The NPD Group didn’t share much in the way of details. I was able to confirm that its status as the fastest-selling console in tracked history has ended at six months. Its usurper is the Game Boy Advance, which had a tremendous holiday back in 2001. This is more due to production than demand, of course, a theme that you’ve seen me mention many times recently.

Performance of Xbox Series X|S isn’t clear from May’s report, other than Piscatella’s comments about very high demand. It seems like Microsoft is outputting the least amount of consoles, though that’s complete speculation. And we won’t know, because it won’t ever again share hardware units sold, instead opting towards Xbox Game Pass subscription and other player engagement statistics.

The final category is Accessories, which had the toughest time during May 2021. Monthly consumer spending here dipped 8% to a total of $142 million versus last year’s $154 million. No doubt impacted by its correlation with new hardware production, as new buyers often scoop up accessories with their purchases of a shiny new gaming box.

Still, for the year as a whole, Accessories segment crossed $1 billion in spending during May, which is 17% higher than the $877 million back in 2020.

As I confirmed directly with Piscatella, Sony’s White DualSense controller was the top-selling game pad of the month, reflecting a consistent trend since the PlayStation 5’s start. Personally I say it’s well-deserved as a great piece of modern tech, enhancing the experience of traditional input controls.

The report did share a bit of detail into Steering Wheels too! This sub-category jumped 45% year-on-year. Apparently the Logitech G920 Driving Force Racing Wheel is.. hm, driving this growth, since it’s the year’s top seller as of the latest report.

Another month, another big sales reaction piece!

Domestic spending proved resilient last month, as we’re in an era where subscriptions and ongoing content bolster the traditional delivery methods and console generational cycles. Demand for gaming is still high even as vaccinations increase, it’s just a matter of hardware companies keeping up with output. Which is somewhat out of their control, given the global chip situation.

For even more behind the numbers, including a variety of different software charts and further reading, check out Piscatella’s helpful thread here or The NPD Group’s website.

Moving into the heat of the summer here in the U.S., June’s release schedule boasts some of the biggest platform exclusives of the year in PlayStation 5’s combat platformer Ratchet & Clank: Rift Apart then Mario Golf Super Rush from Nintendo, which I anticipate will both chart very well. Bandai Namco’s stylish action game Scarlet Nexus also debuts later this month, will be curious if it can garner enough interest here to gain a Top 10 spot.

Anything surprise you in May? Have you played any of the new games charting here? What’s your prediction for best-selling title in June? As always, thanks for stopping by. Be safe and stay well, all!

*Digital Sales Not Included

^Xbox Digital Sales Not Included

Sources: Capcom, Chris Lynch (Photo Credit), Onur Binay (Photo Credit), The NPD Group.

-Dom

MLB Shows Well in April During Slight Decline in U.S. Games Industry Sales

While not quite another month full of record highs, April 2021 still boasted numerous commercial highlights for the U.S. games industry in the scheme of things.

Yesterday, The NPD Group shared its monthly sales report for consumer spending on various parts of the games industry within the domestic market.

More than a year into the COVID-19 pandemic, we’re starting into the time period where the impact from stay-at-home restrictions caused some of the biggest months in tracked history. Which means tough comparisons when looking at this year versus the same time in 2020.

Overall, total consumer spending was down a bit in April 2021 driven mainly by lower hardware output, offset by new launches, mobile, subscription and downloadable content within the software category. Still, consumers have spent nearly $20 billion on Content, Hardware and Accessories during the year so far. Which is over 20% higher than the same time period in 2020.

While Nintendo Switch and PlayStation 5 continue impressive runs, it wasn’t enough to stave off a double-digit decline in Hardware and Accessories for the month. No doubt affected by global semiconductor shortages and manufacturing slowdowns. Both of these categories are still showing notable spend increases when aggregating 2021 to date.

New annual sports release MLB The Show 21 stepped into the spotlight during its release month, snatching the top spot on the overall and PlayStation software charts. The ever-present Call of Duty series plus a brand new Pokémon side entry in New Pokémon Snap rounded out the Top 3, while strong debuts from both NieR Replicant ver.1.22474487139 and Returnal led the Content category to an increase.

“Hardware shortage impact [is] being felt, will continue to be felt throughout 2021,” said NPD Group’s Mat Piscatella. “Accessories [are] now being impacted by supply chain/logistics as well.”

That said, there’s still plenty of growth to cover, so it’s time to dig into all the numbers.

United States Games Industry Sales (April 4th, 2021 – May 1st, 2021):

Consumer spending in general declined 2% to $4.6 billion in April 2021. This marked the first time monthly overall sales have dipped since back in February 2020 i.e. right before the start of country-wide quarantines plus the massive success of Animal Crossing: New Horizons.

It feels like forever ago, I know.

Now, this isn’t actually a bad sign. In fact, it’s a perfectly healthy month historically. It’s just slightly lower because last April set the record for setting records when it comes to domestic industry spending as I documented at the time. (Note that since that time, NPD Group has reclassified its categories and added to its coverage, so the public numbers themselves aren’t necessarily comparable.)

When expanding the timeline and looking at the first four months of 2021, total spending is up 21% since this time last year to $19.6 billion. Mainly because of momentum during the first couple months of this year driven by demand for next generation consoles and games to play on those systems, especially mobile, services plus add-on content for existing titles.

Speaking of software, the largest category of Content generated $4.2 billion in sales during April. This is up from $4.1 billion in April 2020. Year-to-date is even more impressive, hitting upwards of $17 billion when compared to $14.3 billion.

Expansion in Content is due to the release schedule picking up, ongoing appeal of subscription services plus legacy title support as the biggest older games still continue to chart.

Taking the lead on the overall software rankings in April 2021 was MLB The Show 21, which is dual published by Sony Interactive Entertainment on PlayStation devices then MLB Advanced Media on the Xbox family. This is a huge year for the annual franchise, marking the first time it’s been available on Microsoft’s consoles. Not only that, it launched directly into the Xbox Game Pass subscription service. Judging by its placement, the impact on sales seems to have been additive rather than cannibalizing.

A combination of PlayStation’s usual player base plus a new audience of Xbox fans led the baseball game developed by Sony’s San Diego Studio to set a series record for launch month dollar sales. Because of this, it’s immediately the 3rd best-selling title of 2021. And this isn’t even considering digital revenue from Xbox. Is this an appropriate time to say that the team knocked it out of the park?

Another impressive start was Nintendo’s New Pokémon Snap, landing at the third spot overall. Similar to above, this also doesn’t even consider digital sales since Nintendo notoriously doesn’t participate in that part of reporting. Predictably, it was the biggest title on Nintendo platforms during April. First month retail sales more than doubled that of July 1999’s Pokémon Snap debut, marking a picture-perfect return for the previously dormant spin-off from one of the world’s most successful brands.

Elsewhere on the software ranks, Outriders now has a full month on record and dropped one spot to fourth place. Square Enix’s third person action game was another with a simultaneous release on Xbox Game Pass, a rare occurrence for third party titles. The shlooter attracted 3.5 million unique players during its first month, a result that saw its publisher hinting at future content by saying it’s on track to being its next hit franchise. Unfortunately, it’s still unstable for many folks, resulting in continuous patches from development team People Can Fly.

In what I’d call more than a pleasant surprise, another Square Enix title landed at #5 this time in NieR Replicant ver.1.22474487139 (yes, I always have to Google the full title like most of us). The “version update” of the first NieR game that released a couple generations ago was handled by Toylogic. Replicant charted well above 2017’s NieR: Automata which started at ninth in its March 2017 debut month, popularity no doubt bolstered by Automata engaging more mind-share towards the cult classic franchise.

Two other notable titles within the Top 10 were PlayStation 5 exclusive Returnal, with only two days of tracking, then It Takes Two published by Electronic Arts as part of its EA Originals indie program. Returnal at the 8th spot is a strong debut for new IP from Housemarque Games, long-time Sony collaborator and arcade game specialist. It Takes Two continues its quietly consistent success, climbing a dozen spots to #9. The co-op adventure game from Josef Fares’ Hazelight Studios recently sold a million units globally in under a month.

Full charts incoming.

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

  1. MLB The Show 21^
  2. Call of Duty: Black Ops Cold War
  3. New Pokémon Snap*
  4. Outriders
  5. NieR Replicant ver.1.22474487139
  6. Mortal Kombat 11
  7. Monster Hunter Rise
  8. Returnal
  9. It Takes Two
  10. Mario Kart 8*
  11. Call of Duty: Modern Warfare
  12. Marvel’s Spider-Man Miles Morales
  13. Super Mario 3D World + Bowser’s Fury*
  14. Minecraft
  15. Animal Crossing: New Horizons*
  16. Super Mario 3D All-Stars*
  17. Super Smash Bros. Ultimate*
  18. Assassin’s Creed Valhalla
  19. Pokémon Sword & Shield*
  20. The Legend of Zelda: Breath of the Wild

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

  1. Call of Duty: Black Ops Cold War
  2. Super Mario 3D World + Bowser’s Fury*
  3. MLB The Show 21^
  4. Monster Hunter Rise
  5. Marvel’s Spider-Man Miles Morales
  6. Outriders
  7. Assassin’s Creed Valhalla
  8. Mario Kart 8*
  9. Minecraft
  10. Animal Crossing: New Horizons

Hardware and Accessories tell a marginally different story, declining from last year’s staggering highs.

For Hardware, overall console dollar sales came in at $296 million which is 30% lower than April 2020. Console manufacturers are facing supply-side constraints as inventories can’t keep up with rabid demand. This is going to continue even throughout the full year, as explained by executives from Nintendo, Sony and Microsoft alike during recent earnings presentations.

Even so, year-to-date figures aren’t as gloomy. These are up 42% compared to the same time frame during 2020, hitting $1.7 billion compared to $1.2 billion.

Nintendo Switch continues to be the bellwether, leading both units and dollar sales for the month of April. By my calculation, that’s 29 consecutive months of Switch leading the U.S. by unit sales. An incredible streak, I’d have to imagine it’s the best in domestic tracking history for a single console. It remains the top seller for 2021 so far, and that’s ahead of rumors swirling around a potential new model. (Which, in fairness, have been happening for a while. It’s only recently they have solidified into more tangible information.)

I wrote recently about how Nintendo reported its most profitable year ever, driven by global annual Switch unit sales of nearly 29 million for last fiscal alone ending in March. The introduction of a more powerful iteration, estimated around September or October based on the rumor mill, would continue its consistent pace into the holiday season and beyond even at a higher price point.

That’s not to say competitors aren’t doing big things either. Now in its six month on sale, Sony’s PlayStation 5 remains the fastest-selling console ever domestically. No doubt driven by the appetite of early adopters purchasing new and old games alike then many PlayStation 4 versions carrying over to the current generation, making for a smoother transition.

Not much in the way of information on Microsoft’s Xbox Series X|S performance on the hardware side. At present, it’s about production rather than customer appetite. It seems like Sony is outpacing Xbox in its supply chain, thus leading in the early goings.

In a theme that parallels Hardware, dollar sales for Accessories were down in April though are still exhibiting strength when taking the year as a whole.

The Accessories category dipped 23% in April, generating $168 million in domestic consumer spending. However, its total is $885 million for 2021 to date which is growth of 22%.

Sony’s PlayStation 5 accessories continue their category dominance. The DualSense White Controller led dollar sales for April and retained its spot as the year’s top seller. The Pulse 3D Wireless headset was the month’s runner-up. These often go as hardware goes, and PlayStation 5’s record pace is driving its accessories to be the most popular right now.

Note: The new DualSense colors with fancy names from the image aren’t out until June. Midnight Black (dope!) and Cosmic Red (not for me) are currently up for pre-order.

April 2021 saw various industry trends continuing. These include content growth supplemented by services, mobile and additional content, Nintendo’s evergreen titles constantly on the charts plus PlayStation 5’s record early momentum. Though it couldn’t contend with last year’s record April month itself when combining the various sales vectors. I won’t hold that against it, the year so far has been extremely impressive even with manufacturing limitations for hardware platforms.

“Given where we are with both supply and the pandemic-driven year ago comparable period, the market is holding remarkably well,” Piscatella added in additional commentary on the monthly report.

Looking ahead, next month’s report will be available in just a few short weeks covering May 2nd to May 29th. I expect a phenomenal start for Resident Evil Village, high demand for Mass Effect Legendary Edition plus ongoing strength for major third parties and Nintendo exclusives. Switch will probably lead again, though PlayStation 5’s record start should continue as well.

Until then, enjoy some fun games, stay healthy, and especially my American friends, please continue to be safe things as things open up here with vaccinations on the rise. See you again.

*Digital Sales Not Included

^Xbox Digital Sales Not Included

Sources: Electronic Arts, Enrique Vidal Flores (Image Credit), MLB Advance Media, NPD Group, PlayStation Blog, Square Enix.

-Dom

Switch & Software Sales Milestones Produce Nintendo’s Most Profitable Year Ever

It’s no secret that Nintendo’s Switch hybrid platform was a game-changer for the company after its difficult Wii U era. The hybrid console’s success and its corresponding software sales, especially for those that the Japanese gaming giant has published, have lifted it to the best revenue in over a decade plus record profits during its fiscal year ending March 2021.

These are staggering results. Fitting for Nintendo, I’m jumping right into it.

Previously I covered Sony and Microsoft’s gaming business results this quarter, with annual sales for those two competitors at $24 billion and $15 billion respectively. Nintendo’s latest fiscal result falls between them, generating approximately $16 billion overall. That’s an increase of 34% since last year and, most importantly, the highest yearly sales since the roughly $16.7 billion over a decade ago in 2010.

When it comes to profitability, the report is even more impressive. Operating profit boosted a staggering 82%, reaching just above $5.8 billion for the last 12 months. This is the best ever result for a company that’s been around longer than any of us. It’s also the second best growth rate since 2010, behind only 2018 at the start of the Switch generational cycle.

These figures blew past the company’s targets by a substantial margin, even if those estimates were conservative. During its presentation, Nintendo executives attributed it to a strong hardware presence especially in Australia and Asia, a shift in the ratio of digital sales plus three dozen million-sellers on Switch this past year. It’s attracting new customers and encouraging owners to snag an additional console. 20% of Switch purchases are second devices. And that’s only going to grow.

When I break it down more closely myself, the near or at record figures come from a combination of various underlying factors. Main one being a Switch hardware push, since the console represents more than half of the company’s business. Also, the launch of third party exclusive Monster Hunter Rise, continued momentum of nearly all first party software especially Mario Kart 8 Deluxe and Animal Crossing: New Horizons plus impact from the end of the company’s 35th anniversary celebration of the Mario franchise. Particularly on Super Mario 3D All-Stars as it went off market simultaneously (and conspicuously) at the same time the fiscal year ended.

Now, the best part. To dig into the nitty gritty!

Profit is off the charts, top-line revenue is the best in years, Switch hardware is selling at a rate that not even the most optimistic predicted and Nintendo’s software figures are keeping pace in the current unpredictable environment.

After shipping 4.72 million Switch consoles in the January to March window, sales to date reached a major milestone in terms of broader industry comparisons. With a lifetime hardware figure of 84.59 million shipped, it’s now passed both Sony’s PlayStation Portable, upwards of 82 million, in addition to the 81.51 million of Nintendo’s own Game Boy Advance family of devices. And depending on which source, it’s close to if not above the beloved Xbox 360 from Microsoft.

(I say that because there are slightly different reports of Xbox 360 sales since launch in 2005. It’s anywhere between 84 million and 85.5 million since Microsoft stopped reporting exact hardware statistics. Suffice to say, Switch may have passed it by now when taking into consideration the month since March end.)

Based on the latest quarterly numbers, Switch units reached 28.83 million for this past fiscal year. Its best to date. This is a increase of 37% year-on-year, plus more than 2 million units above guidance. Which Nintendo had even raised. Twice.

Within the console segment, 20.32 million of those shipments were the standard Switch model. Switch Lite contributed 8.51 million. Both of these are up the same 37%, consistent with the platform’s aggregate growth.

Now at the start of this past fiscal year, Nintendo’s target for Switch hardware was unbelievably low. Even more so that it was issued right during the early part of the global pandemic and Animal Crossing: New Horizon’s meteoric early prosperity. Which is somewhat understandable. Companies tend to be conservative, that way it’s easier to beat guidance. It’s still no less impressive, proving there’s considerable demand still at this middle portion of its cycle. Nintendo doesn’t seem as affected by the global chip shortage that’s plaguing other manufacturers.

This sort of momentum is consistent with domestic results, and The Americas make up nearly 42% of Nintendo’s overall sales so it’s notable to compare. As I wrote in April, Switch has been the leading console by unit sales in the United States for 28 straight months. Over 2 years. Sure, most of this was during the last legs of PlayStation 4 and Xbox One. Which is why 2017 was the absolute perfect time for Nintendo to launch, supported over the past few years by the quality of its exclusives plus ongoing third party support, notably within the independent development space.

Expanding to a historical context, Switch is on a faster pace than the Nintendo Wii, launched way back in 2006, and 2013’s PlayStation 4 when measured by unit shipments. Both of which are ubiquitous within gaming, the former being Nintendo’s top-selling home console and latter as the second best-selling home platform ever. Switch strength has especially accelerated since this time in 2020, a period of notable growth for obvious seasons. I included a thorough chart from friend of the site Daniel Ahmad, Analyst at Niko Partners, which illustrates launch-aligned growth for many of the major console releases in history.

Lastly on the hardware side, out of its updated 84.59 million lifetime shipment figure reported today, 81 million have been sold through to consumers. Console sell-through during the quarter ending March alone surpassed the record high of the same period last year. When Animal Crossing: New Horizons launched!

Moving over to game performance, Nintendo Switch software unit sales topped off at 230.88 million for the fiscal year alone. This includes first and third party, retail and digital, remakes and ports, any and all individual games sold that works on the platform. That’s a jump of just under 37%, nearly perfectly in tune with hardware growth. This shows folks aren’t only buying up Switches with increased demand, it reveals that they are buying multiple copies of its most popular games. A trend we’ve seen for this platform since it started.

For the fourth quarter alone, Switch recorded 54.78 million software units shipped which is up from 45.59 million. All of this contributed to lifetime Switch software rising a whopping 65% year-on-year, to 587.12 million. It’s hard to even consider that type of figure in context.

Individual title growth stemmed a lot from newer games in the Mario franchise in addition to the most green of evergreen from Nintendo, then a particularly monstrous seller from Capcom.

Compilation Super Mario 3D All-Stars crossed the 9 million unit sold-in threshold since launch last September, no doubt boosted by Nintendo pulling it from stores in what I still consider a questionable decision for the sake of preservation. Subsequently, Super Mario 3D World + Bowser’s Fury launched this past February during Nintendo’s final fiscal quarter. Since then, it’s shipped 5.59 million and sold 4 million of that thru to buyers. For perspective, the original game on Wii U has only moved 5.87 million copies across its entire time on market.

In one of the more ridiculous numbers when stepping back, Mario Kart 8 Deluxe sold 10.62 million units last year alone. We’re talking an increase of 43%! This is for a game whose first version started on Wii U back in 2014. It’s the highest-selling Switch title to date and probably will always be, currently standing at 35.39 million copies worldwide. That’s over 5 million more than The Witcher 3: Wild Hunt or The Elder Scrolls V: Skyrim, the latter of which is frequently parodied for being available on nearly every platform in existence.

Just behind Mario Kart 8 Deluxe on the Switch top seller list, Animal Crossing: New Horizons shipped a cold 20.85 million in the fiscal year despite a dearth of seasonal updates lately. Even when some people are unhappy with it, plenty of others are still purchasing it. This brings its lifetime total to 32.63 million.

Rounding out the Top 3 Switch platform sellers from Nintendo is fighting game (yes, it’s true) Super Smash Bros. Ultimate, moving exactly 5 million units across the last 12 months. A bit more pedestrian in its growth at 27% for the title that hit market in late 2018. 23.84 million is its count to date.

In other updates, New Super Mario Bros. U Deluxe and Ring Fit Adventure both crossed the 10 million copies milestone in March. That second one is really incredible, considering it’s a dedicated fitness game at a higher price tag because of its included accessory. Even a title like Clubhouse Games: 51 Worldwide Classics is selling, hitting 3.14 million this past quarter.

Honestly, I could list even more and they would mostly show the same trend. Sometimes even I have to stop and take stock of these figures. Rattling them off is like binge-watching classic shows like Breaking Bad or The Sopranos or trying to speed-run an Assassin’s Creed or Grand Theft Auto in a single sitting. It’s impossible to appreciate the bigger picture without taking a breather and really thinking about how many copies these games are selling right now on the platform, not to mention the impact it has on the popularity of those published by third parties.

Out of the 36 million-sellers this year alone, 22 were published by Nintendo. The remaining 14 were third parties and “grew steadily.” This includes Monster Hunter Rise, a major growth driver towards Nintendo’s record results. Capcom’s brand new Switch exclusive in the long-standing franchise reached 4 million copies shipped within *three days* of its March 26 release. It moved a million more by early April, making it already the 3rd best-selling Monster Hunter title of all time. Notable here is the companies collaborated on a special edition Switch model, no doubt a factor during this time right before the fiscal year finished up.

While it’s not as prominent a segment as other companies in the industry, Nintendo experienced a marked rise in digital sales recently. In terms of revenue, digital generated $3.1 billion or around 20% of the overall business. That’s up from under $1.9 billion. Note this measure is a combination of full game downloads, online services and add-on content. Within dedicated video game platform sales by dollar amount, 43% is digital which is up from 34% previously. When talking unit sales, digital is now 47% compared to 41% and 42% for the two years prior, respectively. When charting quarterly trends, it’s clearly pushed up by ample demand last summer during the height of quarantine times.

Whew! Got all that?

The hybrid console’s success and its corresponding software sales, especially for those that the Japanese gaming giant has published, have lifted it to the best revenue in over a decade plus record profits during its fiscal year ending March 2021.

Certain smaller items that didn’t take up much in the fiscal report were its online service, mobile, IP licensing and playing cards businesses.

The company didn’t share an updated figure on Nintendo Switch Online paid subscribers. The last we heard was 26 million during its Corporate Management Briefing over six months ago in September 2020. All executives said this time was that “in addition to the growth in sales of indie titles and other download-only software without corresponding physical versions, Nintendo Switch Online sales were also steady” and that the team was investing in this part of the business, though didn’t specify exactly how much or to what extent.

Mobile and IP related sales grew 11% year-on-year, though still represent a small portion of the total business. $519 million to be clear. Within this, sales from smart devices were constant so it was actually bolstered by royalty income gains. This is not an encouraging sign when it comes to mobile expansion. Still, Nintendo said the Pikmin mobile collaboration with Niantic, the same team behind Pokémon Go, is scheduled for a global launch in back half of 2021. So I expect smart phone contribution will raise at least slightly in the near future.

On its conference call in Japan, executives expanded on various areas within the financial report. Based on notes from those listening, the most curious comment to me is how the company saw record research and development spending recently. For the year, this reached roughly $850 million and it will increase a bit into next year. The reason is partly because of investment in the successor to Switch. To my knowledge, this is the first mention of such a follow-up platform.

Intriguing..

Anyways, looking ahead, Nintendo also provided initial estimates for various parts for fiscal year ending March 2022.

In terms of overall revenue, it expects a decline of 9% to around $14.6 billion. Operating profit target is 22% lower, starting at $4.55 billion. When it comes to Switch, Nintendo estimates shipping 25.5 million consoles and 190 million software units in the upcoming 12 month span. Both of these would be declines as well.

So, why the pessimism?

“The consolidated earnings forecast is based on the premise that we will be able to secure the parts needed for the manufacture of products in line with our sales plans,” executives said. “But this could be impacted by obstacles to the procurement of parts, including the increase in global demand for semiconductor components. There also remains the risk associated with COVID-19, which is difficult to predict.”

To me, this is prudent given the circumstances. Uncertainty around component availability and the dubious nature of selling products in a pandemic once they are manufactured. However, I think it’s too conservative and will be raised at least once. Probably during the mid-way point of the year. Especially given the rumor as recently as last week from Nikkei that annual Switch production could be upwards of 30 million based on sources from part suppliers.

My estimate for Switch hardware is much closer to that figure than Nintendo’s. I’m assuming right now 28 to 29 million plus well over 210 million software copies. I think there’s a good chance it could be the best year to date for the hybrid console, even five years later.

I was way upbeat at the start of the generation. Though not as much to predict this sort of trajectory. And we still don’t know if the rumors around a New Nintendo Super Switch Pro XL model in the near future are true! Either way, Switch will certainly pass Wii lifetime sales sometime in the next 12 months in what will be a momentous occasion.

Nintendo’s software pipeline definitely looks lighter right now. But isn’t that always the case? It’s probably because the biggest releases either aren’t dated yet or haven’t even been revealed. New Pokémon Snap came out in late April. Miitopia, Game Builder Garage and Mario Golf Super Rush are slated for the early summer months. The Legend of Zelda: Skyward Sword HD is July, then there’s the trifecta of Pokémon games between “late 2021” and “early 2022” listed in its report.

There’s also Splatoon 3 and Square Enix’s Project Triangle Strategy (Temporary Title) currently slated for a broad date of 2022. The heavier hitters that could push sales above that guidance are Bayonetta 3, Metroid Prime 4 and of course the sequel to The Legend of Zelda: Breath of the Wild. Even if the last one is the only one of the three out this fiscal year, which I believe it will be, it’s going to be a special one for the company, its shareholders and audience alike.

Indie support will naturally continue, with Switch being a most appealing platform due to its flexibility and on-the-go use case. Nintendo has shown more of a willingness for partnerships as well even with its most coveted brands, so could this be the year where we hear another collaboration with say Ubisoft? The most significant partnership would be anything with Microsoft when it comes to Xbox Game Pass or a Cloud offering. Talk about an industry-shaking event.

Overall, I can’t say much more about its financial year than I already have. It was record-breaking and wholly impressive 12 months, especially how hardware is penetrating to the point where 1 in 5 households currently buying a Switch already have one. Profit is off the charts, top-line revenue is the best in years, Switch hardware is selling at a rate that not even the most optimistic predicted and Nintendo’s software figures are keeping pace in the current unpredictable environment. Nintendo remains a company true to itself in quality, output and setting trends rather than chasing them. It’s the type of strategy that continues to, quite literally, pay off.

Thanks for reading!

Note: Exchange rate used for Japanese Yen to U.S. Dollar is as of today. 0.0091 JPY to 1 USD.

Sources: Capcom, Cláudio Luiz Castro (Photo Credit), Daniel Ahmad (Niko Partners), Guinness World Records, Manny Moreno (Photo Credit), Nikkei, Nintendo Investor Relations, NPD Group.

-Dom

Sony & Microsoft Gaming Division Sales Launch To New Record Highs

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

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

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

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

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

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

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

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

(Yup. Sony has a lot of businesses.)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

-Dom