Tag: Sales

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

DomsPlaying

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

*Digital Sales Not Included

^Xbox & Nintendo Digital Sales Not Included

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

-Dom

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

DomsPlaying

No rest for the writer!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

-Dom

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

DomsPlaying

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

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

With a couple of caveats. As always.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thanks for reading! Take care, all.

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

Sources: Bloomberg, Company Investor Relations Websites.

-Dom

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

DomsPlaying

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

-Dom

Starfield, Mortal Kombat & EA Sports FC Drive Gains in Circana’s September 2023 Games Industry Sales Report

DomsPlaying

It’s the fourth quarter of 2023 already?! Seriously, time. Slow down.

As we inevitably enter the final stretch of what’s been a tough year for the games industry yet a great year for new releases, not only does Microsoft finally own Activision Blizzard, it’s secured another big win with its latest hit Starfield.

Even so, Sony held its own in the hardware realm during a big September for industry sales as reported by tracking firm Circana (formerly known as The NPD Group).

Last month, consumers spent nearly $4.5 billion on gaming. That’s up 10% since the same time in 2022. It marks the fifth consecutive month of growth and the second best September on record behind 2021.

Within the premium software ranks, six of last month’s top seven top sellers were new to market.

Starfield proved to be best among them, rocketing to the top of September’s overall chart. The sci-fi role-playing game from Bethesda Softworks became the first Xbox console exclusive to top the monthly list since State of Decay 2 back in May 2018.

September’s solid sales result also benefited from the latest entries in long-running series. Mortal Kombat 1 from Warner Bros. fought to second place while Electronic Arts’ rebranded soccer series EA Sports FC 24 scored third.

As for Hardware, PlayStation 5 again led all console sales, as it has most of 2023. Which is even more notable in a month where software was led by an Xbox console exclusive. Sony’s supply consistency and third party offerings keep it relevant at all times.

Circana’s Mat Piscatella confirmed on Twitter that premium game sales are doing “great” right now, though September’s growth for this particular segment came in a bit below his expectations.

Scroll down for a detailed look at the numbers, then my predictions moving into yet another busy month in gaming.

United States Games Industry Sales (August 27th, 2023 September 30th, 2023)

As referenced earlier, people spent upwards of $4.5 billion across gaming in September, up 10%.

Two of the three major categories, Content and Accessories, also generated double-digit growth. Underlying this upward momentum was a decent boost from mobile, a slew of software launches and a fair bit of interest in premium peripherals. All of this was enough to offset a decline from Hardware.

That means across the first nine months of 2023, spending rose 2% to $39.4 billion. All three categories experienced gains during this time frame.

Beginning with the largest area of Content, last month it contributed $3.85 billion. That made up nearly 86% of September’s total. For the year so far, it’s up 2% to $34 billion.

During September, sales from mobile devices moved up 4%. The list of top earners was unchanged compared to August, led by MONOPOLY GO!, Royal Match, Roblox, Candy Crush and Pokémon Go in that order.

Moving to premium software, September’s winner Starfield was best on both Xbox and PC, with the latter being its lead platform here. It’s immediately the 7th top-selling title of 2023. Note: These ranks do include revenue from the early access version, but they don’t include Xbox Game Pass subscriptions because that’s more broadly tracked in the subscription category.

Circana put together a handy list of Bethesda titles for comparison, this time using dollar sales (as some earlier charts were based on units). Fallout 76, Fallout 4 and The Elder Scrolls V: Skyrim all started in second during their respective launch months. The only other recent Bethesda title to lead its debut was The Elder Scrolls IV: Oblivion in 2006, meaning Starfield is in rarefied air for the team.

Next up was Mortal Kombat 1 at #2, the latest in a long lineage of gruesome sellers from NetherRealm Studios. It led the PlayStation platform chart, and is already the 8th best-selling of 2023. For context, both Mortal Kombat X and current franchise leader at 15 million unit sales Mortal Kombat 11 led their first months.

Yes, not only does this fighting game franchise consistently kill it commercially, it’s also adopted a convoluted naming convention. Can’t wait until Mortal Kombat 2 launches (again) in a few years.

Rounding out the Top 3 was EA Sports FC 24, which starts in 14th on the annual chart to date. Turns out it didn’t necessarily need FIFA branding. This year gained double-digit growth in units and dollars compared to FIFA 23. Domestic success echoes globally, where Electronic Arts said it had 11.3 million players at launch, a million more than its predecessor, growing new players by 20%.

The next new titles to chart were Payday 3, NBA 2K24 and The Crew Motorfest in 5th to 7th place, respectively. The usual caveat being Take-Two Interactive, the publisher of NBA 2K, doesn’t share digital, so it’s likely the basketball sim would be higher all included. Still, Payday 3 securing a Top 5 start reflects strong demand for the first franchise title in a decade.

The Crew Motorfest continues to be a pleasant, if quiet, sales surprise, racing to 7th place here amidst a crowded field. The Crew 2 started in 4th back in June 2018. Ubisoft said this latest release had the best first week globally in the history of The Crew, a franchise that has attracted over 40 million players during its nine year history.

You might be asking: Where’s Baldur’s Gate 3 since it hit PC in August and PlayStation last month? According to Circana, its publisher Larian Studios is another that doesn’t share digital for the purposes of charting. Piscatella said it’s doing “exceptionally well” especially on engagement over time. It ranked second on their Circana Player Engagement Tracker, ahead of Starfield in 3rd. On console, it was #20 on that list.

Briefly touching on the 2023 to date sales chart, Hogwarts Legacy and The Legend of Zelda: Tears of the Kingdom kept their spots at #1 and #2 while Madden NFL 24 moved into the Top 3 after a full month of sales. Elsewhere, Armored Core VI: Fires of Rubicon is a big mover, jumping four spots to 16th.

Read on for a full look at September and 2023 software ranks.

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

  1. Starfield
  2. Mortal Kombat 1
  3. EA Sports FC 24
  4. Madden NFL 24
  5. Payday 3
  6. NBA 2K24*
  7. The Crew Motorfest
  8. Armored Core VI: Fires of Rubicon
  9. Hogwarts Legacy
  10. Call of Duty: Modern Warfare 2
  11. Star Wars Jedi: Survivor
  12. Resident Evil 4 Remake
  13. The Legend of Zelda: Tears of the Kingdom*
  14. Minecraft
  15. Mario Kart 8*
  16. Rainbow Six: Siege
  17. Gran Turismo 7
  18. Elden Ring
  19. Sea of Thieves
  20. Diablo IV

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

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

Hardware was the only main segment to see lower spending this September than last, down 8% to $451 million.

Underlying this, Xbox Series X|S generated single-digit growth while PlayStation 5 and Nintendo Switch declined. No specifics on the actual numbers, but this gives a sense of how last September was quite strong for PlayStation and Nintendo in particular, and Xbox benefited from Starfield demand.

Even so, console sales are up 10% for 2023 right now to $3.7 billion. Hardware is the only major category trending towards double-digit annual growth.

Despite having “slightly” lower unit sales year-on-year, PlayStation 5 continued its trend atop the console ranks, leading September as measured by both dollars and units sold.

For the second straight month, Xbox’s family of devices landed in second. Circana pointed out that last month saw the highest Xbox ecosystem units sold since September 2016. Plus, Xbox revenue was the best since September 2014. While Microsoft’s strategy is more diversified than its counterparts, of course it wants people to buy retail boxes.

Thing is that Xbox’s big console exclusives don’t necessarily sell as much hardware as they used to in generations past. What they do is bring people to Game Pass and can stimulate sales on other platforms, like PC.

Expanding to the full year, PlayStation 5 is best in hardware on both revenue and units, as it has been for most if not all of 2023. Sony recently announced a slightly slimmer revision to its latest box, while also upping the price of its digital only version in certain territories, which will hit U.S. stores next month. Thus, I expect its dominance this year to continue.

Moving onto our final category of Accessories, spending during September bumped up 11% when compared to a year ago, to $197 million.

Circana shouted out a couple sub-areas here with double-digit spending growth. Racing controllers moved up 18%, while Gamepads increased by 15%. The former perhaps due to the ongoing popularity of titles like Gran Turismo 7 and The Crew Motorfest alongside anticipation of Forza Motorsport which hit market last week, and the latter to play all the fancy new games.

In terms of last month’s best seller, that goes to the Marvel’s Spider-Man 2 Limited Edition version of the PlayStation Dual Sense controller. Makes sense, considering it became available well before its game counterpart launches tomorrow and was one of the most sought after products in all of gaming this year.

I’ve also confirmed directly with Circana that the premium PlayStation 5 DualSense Edge pad continues as 2023’s leading peripheral on revenue.

Lastly, a tidbit on augmented and virtual reality. Piscatella noted that February’s PlayStation VR2 continues to have a “low single digit attach rate,” implying that less than 5% of PlayStation 5 owners have purchased one. It’s a high barrier to entry, after all, considering it’s tethered to the console.

This category could see a decent boost soon as the Meta Quest 3 officially hit stores earlier this month. I think Meta’s new headset has some good upside. The product series is the closest thing the niche AR/VR market has to a commercial hit, even if it won’t be mainstream any time soon.

With its bevy of AAA game launches and a resilient hardware against a high comparable, September was great month overall for domestic industry sales. It highlights Xbox’s evolving dynamics in the console space, alongside the appeal of PlayStation 5 for multi-platform titles. Nintendo was a bit quiet, although that will certainly change in the fourth quarter.

On the subscription side within Content, Piscatella described its spending as having a lot of “churn” implying a good amount of turnover without moving too much in either direction. People moving from one service to the other, rather than being additive.

He and others have described how subscription growth hit a plateau after an initial ramp up phase. Domestically, Xbox’s Game Pass revenue rose last month (unfortunately no specifics publicly on actual numbers) however other services were lower year-on-year. This implies that PlayStation Plus had a down month.

Well then. No rest for the weary! October is shaping up to be massive.

There’s a monumental battle scheduled between Mario and Spider-Man. PlayStation and Nintendo. It starts tomorrow with new games for both big name brands, and these will dictate how high spending can go this month.

Due to this, among other new releases, I’m thinking spending will go up in October potentially in the double-digit range.

That will be driven by Content, which has two of the year’s best-reviewed titles in Super Mario Bros. Wonder and Marvel Spider-Man 2. The big question is which of these will have a better ranking on the premium chart, and lead one of the year’s biggest months?

My official Twitter poll is virtually neck and neck, with Spider-Man having a slight edge at the time of publishing. While Nintendo Switch has a massive ownership base and Mario is one of the biggest IP in the world, this will solely count retail sales for that title. Considering this, I’m guessing that Spider-Man swings into first during October.

Then there’s the likes of Assassin’s Creed Mirage, Detective Pikachu, Forza Motorsport, Sonic Superstars and Alan Wake 2. Shoot, there’s even Skull Island: Rise of Kong, a new dreadfully bad King Kong game!

I can see Assassin’s Creed Mirage jumping into the Top 7. Sonic Superstars maybe Top 10. Alan Wake 2 is a straight up digital release, and I don’t know if Epic Games is a chart participant. One thing I can safely say is Skull Island: Rise of Kong will regrettably miss the Top 20.

On the hardware side, I’m leaning towards PlayStation 5 on dollars and Nintendo Switch getting units. Partially because each will have special editions associated with their respective flagship games. (Talk about fence-sitting, hah.)

I’m way upbeat, basically all around, on the start to this final quarter!

Highly recommend checking out Piscatella’s thread on social for more pre-Halloween sales goodies. He’s been answering a lot of questions there too, especially around digital, Starfield and Baldur’s Gate 3. Much respect, Mat.

Thanks everyone for reading my latest recap! Be safe.

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

*Digital Sales Not Included

^Xbox & Nintendo Switch Digital Sales Not Included

Sources: Bethesda Softworks, Circana, Electronic Arts, PlayStation Blog, Ubisoft.

-Dom

Remnant II & PlayStation 5 Lead July 2023 Circana U.S. Games Industry Report to Solid Growth

DomsPlaying

As we hang onto the summer as best we can here in the Northern Hemisphere, people are still finding time to pick up and play games.

As it should always be!

Industry tracking firm Circana has posted its July monthly report for spending across the games industry in the United States, and it’s a good one with a few pleasant surprises.

July continued a positive trend of monthly growth lately, bouncing back to a year-over-year increase after last July’s decline. Total monthly spending moved up a modest 1% to nearly $4.2 billion. Circana attributed a boost from digital premium spend outpacing retail and add-on. Plus, subscription spending rose as well.

Gains were seen across two main categories of Video Game Content and Accessories, while Hardware was the only segment to see declining sales. The main drivers were a return to growth, albeit just slightly, for mobile alongside with sizeable launches in premium software, plus a resurgence for various older Call of Duty titles throughout the period.

The biggest July launch of all was a great one for Gunfire Games and Gearbox Publishing with Remnant II. This domestic performance echoes a fantastic global start for the follow-up to 2019’s Remnant: From the Ashes, an impressive run for a soulslike action series that’s become a darling of the industry’s middle tier.

There were two additional new launches charting during July in Nintendo’s Pikmin 4 and Exoprimal from Capcom, as the former outpaced its predecessors while the latter surprised me as I didn’t expect it to land within the Top 20.

For console sales, Sony’s PlayStation 5 can’t be stopped. It won July, just as it did during June and most of 2023 so far, on its way towards becoming the year’s top seller. Supply problems are a distant memory by now, and Sony is capitalizing on demand that’s still going for its latest generation.

“Hardware is no longer comparing to significant supply constraints,” noted Circana’s Mat Piscatella on social media. “[It’s] not likely to see big growth rates as we have over past months. Normalized demand curves may be back.”

Read below as I dig into last months’ numbers and provide predictions for August, the start of the year’s big commercial push!

United States Games Industry Sales (July 2nd, 2023 – August 2nd, 2023)

As mentioned in the intro, consumers spent 1% more on gaming last month than they did a year ago to upwards of $4.19 billion. Last July, sales had dipped almost double digits, meaning the latest result is a welcome return to growth for the industry.

During the year right now, overall spend is also up 1%. The current total is $30.68 billion, boosted by earlier performance in the Hardware category.

The largest contributor of Content rose 2% during July, to $3.72 billion or 89% of the monthly pie. Compare that to 87% of the total last year. Underlying this upward movement was improvement in mobile and key new software releases hitting market.

As I’ve written about over the last year and more, mobile has been lagging other areas of domestic spending. Now, according to Sensor Tower as part of the report, it’s bouncing back. Don’t get too excited, it hasn’t been doing that well. Spending came in less than a percent above July 2022, at 0.2% to be exact. This was partially due to shifts in the top earners, in which Royal Match led the charge, followed up by MONOPOLY GO!, Roblox, Candy Crush Saga and good old Pokémon Go.

Shifting to premium software, three new titles landed among July’s 20 best sellers.

The win for Remnant II parallels its global success, where it sold-thru over a million units to consumers during its first four days. I’d wager it’s well on the way to 2 million and beyond. The first game, as a new brand in an increasingly competitive landscape, took a bit to find its footing yet became a breakout hit at over 2.5 million copies lifetime, a great result for this sort of title that straddles the line between indie and AAA.

Following that up were two titles published by Activision Blizzard in Diablo IV, which I thought could win the month, in second alongside 2022’s Call of Duty Modern Warfare: 2 jumping back into the Top 3.

The next July release to chart was Pikmin 4 at #6. The first party exclusive to the Nintendo Switch began four spots ahead of its predecessor, which debuted in 10th place during August 2013 after hitting Wii U. I’ve said it before and I’ll say it again, this is yet another example of why I wish Nintendo included digital sales for these U.S. reports. I think Pikmin 4 had a legitimate chance at a Top 5 start, which would be fantastic for a series that’s not one of the company’s flagship offerings.

As much as I was surprised to see Remnant II win July, I might be even more shocked that Capcom’s Exoprimal managed to even chart. The multiplayer only dino-hunting shooter fought to 16th, which I’d call great for the new intellectual property that many critics called bare bones at best. Perhaps I underestimated the desire for fresh ideas, or the fact that people want to shoot dinosaurs. Either way, it’s a fine start.

One more minor story on the charts is how three Call of Duty games finished in the Top 20. Two legacy Black Ops titles, among others, experienced a ton of returning players because Xbox fixed matchmaking for their online components. (Might be related to that small deal Microsoft is finalizing..) It also shows the brand’s sheer dominance that a game from 2012 in Black Ops 2 garnered enough interest to grab July’s 13th spot.

Checking the annual ranks so far, it’s the same exact Top 10 as the first half of 2023 from back in June with minor shifts below that. The sole newcomer is Remnant II immediately at #18 after its strong launch, knocking Marvel’s Spider-Man Miles Morales out of the Top 20.

See below for the month’s and 2023’s full premium charts.

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

  1. Remnant II
  2. Diablo IV
  3. Call of Duty: Modern Warfare 2
  4. Hogwarts Legacy
  5. Final Fantasy XVI
  6. Pikmin 4*
  7. The Legend of Zelda: Tears of the Kingdom*
  8. Street Fighter 6
  9. Elden Ring
  10. MLB The Show 23^
  11. Star Wars Jedi: Survivor
  12. Mario Kart 8*
  13. Call of Duty: Black Ops 2
  14. Minecraft
  15. FIFA 23
  16. Exoprimal
  17. Marvel’s Spider-Man Miles Morales
  18. Marvel’s Spider-Man
  19. Dead Island 2
  20. Call of Duty: Black Ops 3

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

  1. Hogwarts Legacy
  2. The Legend of Zelda: Tears of the Kingdom*
  3. Diablo IV
  4. Call of Duty: Modern Warfare 2
  5. Star Wars Jedi: Survivor
  6. Resident Evil 4 Remake
  7. MLB The Show 23^
  8. Dead Island 2
  9. Final Fantasy XVI
  10. Street Fighter 6
  11. FIFA 23
  12. Dead Space Remake
  13. Elden Ring
  14. Madden NFL 23
  15. Mario Kart 8*
  16. Minecraft
  17. The Last of Us Part 1
  18. Remnant II
  19. God of War: Ragnarök
  20. Pokémon Scarlet & Violet*

As for major categories, Hardware was the only to decline as it moved down 19% to $292 million for the month.

All three major platforms across current gen PlayStation, Nintendo and Xbox experienced declines, even with ample supply. This is partially due to a healthy comp last year when inventories were improving. At the time back in July 2022, console sales were up 12%.

It’s to the point where availability has normalized, plus there weren’t any true system-sellers or multi-platform juggernauts in July whereas past and future months contain more enticing software for buyers.

Still, for 2023 at present, Hardware remains trending way up. It’s showing 17% growth to $2.92 billion, compared to last year’s $2.49 billion across the same time frame. Signs point to last month being an anomaly compared to others, seeing as spending gains are in double digit territory through seven months.

PlayStation 5 repeated, as it has often this entire year, as the month’s best-selling console by both dollars and units sold. In fact, other than May and Switch’s win on the back of a new Zelda, Sony’s big box has led every month of 2023 by dollars generated.

Speaking of Switch, it took home second place in July by both metrics. Then, as usual in what’s become somewhat of a meme for sales folks, Xbox was in third. A boring meme, granted, but one nonetheless!

What this tells me the most is supply has officially returned to where it needed to be, just in time for a potential new Switch successor and perhaps enhanced, juiced up models for the PlayStation and Xbox. July was just a quieter month than usual lately on the demand side of things.

Our final sales grouping is Accessories, which grew 8% last month to $173 million. Within products here, Circana attributed the most growth to game pad spending.

Even with this upward contribution from July, spending on Accessories has turned ever-so-slightly negative for 2023 right now because of a big corresponding month last year. Annual sales are presently at $1.25 billion, or 1% lower than a year back.

The best-selling peripheral last month was again the PlayStation 5 DualSense Edge top-end controller. It’s also 2023’s top seller, bolstered by that premium price point.

As its namesake title returned to the top earners on mobile, and The Pokémon Company launched its Pokémon Sleep app, the Pokémon Go Plus started as last month’s 3rd best-selling accessory. In case you were curious, because I know I was, it’s a literal “hand-held” device that uses Bluetooth to track sleep, launch Pokéballs and snatch up those coveted monsters.

Because we gotta catch ‘em all, even when we’re asleep.

July often proves to be the calm before the big budget side of the industry tends to pick up starting in August and beyond. This past month was a good one from a sales perspective, inching up in the low single digits while showcasing series bests like Remnant and Pikmin in great positions. Sony continues its run in both hardware and accessories, seeing PlayStation 5 snatch win after win, ramping up after too much time being held back by outside forces.

Even something like Exoprimal beat my expectations, low as they were.

Before I go, it’s time to put some predictions down on paper. Or online. You know what I mean.

It’s a massive time incoming with the annual Madden launch kicking off the season, among others. The Buffalo Bills’ Josh Allen graces the cover of Madden NFL 24, a premium title which will be August’s top-selling thus continuing the long-running streak of Electronic Arts winning its launch month.

Then we have a lot of juicy titles that can and will hit the top ranks. First, Larian Studios delayed Baldur’s Gate 3 on PlayStation to September, so it’s only PC sales that will be included next month. Even so, it’s already among the highest concurrent players on Steam of all time, so I’m super upbeat on its prospects here. I’m thinking a Top 5 position.

There’s also a new FromSoftware game hitting market in Armored Core 6: Fires of Rubicon. While I don’t think it will get anywhere near the heights of Elden Ring, the knock-on effect of that title’s success combined with FromSoft’s pedigree will greatly benefit an otherwise niche series. Let’s call it Top 10.

As for new franchises, Electronic Arts has another launch in Immortals of Aveum. The fantasy first-person magic shooter is a real crapshoot, and I’m leaning cautious due to its release window around so many established games. I’m looking at a Top 20 debut.

As for re-releases, I’ll keep my rant about Red Dead Redemption hitting PlayStation 4 and Switch short. Just like the Wild West characters it portrays, this game is robbery being priced at 50 bucks. The only “saving grace” here is that Take-Two Interactive doesn’t share digital sales. I really hope it flops. Putting aside personal politics, I expect it won’t chart, and only would if downloads were included.

Even shorter will be my guess for top-selling hardware: PlayStation 5, yet again.

Separately, Piscatella reiterated his “low single digit percent growth forecast” for 2023 overall. It’s certainly on track, with plenty of heavy hitters left. That includes, as those of you following me on Twitter have known for a while, an annualized Call of Duty sequel with the same name as an earlier game in the franchise Modern Warfare 3 set to launch on November 10th. I fully expect it to be the year’s top earner.

Thanks for stopping by for my latest recap. I recommend Piscatella’s full thread for more. I’m sending all my best to those impacted by the devastating fires in Maui. Here is a good list of resources to send relief. Plus, giving love to those on the West Coast with this weekend’s tropical storm.

Be well, stay cool everyone.

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

*Digital Sales Not Included

^Xbox & Nintendo Switch Digital Sales Not Included

Sources: Circana, Electronic Arts, Gearbox Publishing, Nintendo.

-Dom

PlayStation Generates Record Q1 Revenue in FY 2023 Q1 Despite Slower-Than-Expected PS5 Hardware Shipments

DomsPlaying

As August rolls on, I’m back with my latest and likely last results recap of the season.

Earlier today out of Japan, Sony Corp released its fiscal 2023 first quarter announcement. Both the company at large and the PlayStation business experienced similar dynamics in that revenue grew in the double-digits, yet profitability weakened on higher cost recognition.

Focusing on its largest segment of Game & Network Services (G&NS), it was a gigantic first quarter on the revenue side for the PlayStation business. Quarterly sales reached over $5.6 billion, up 28%, which is a record high. Main contributors to this historic Q1 were better third-party software sales, console growth and exchange rate movement.

Sony saw steady engagement for active users and play hours in the three months ending June. Unfortunately, it no longer reports a key metric on the player side related to subscriptions.

The firm moved 3.3 million PlayStation 5 consoles to retailers in the quarter, pushing lifetime shipments to 41.7 million. That’s 38% higher than last year’s 2.4 million, as supply lines are now shored up and pumping out enough to satiate demand.

While nearly 40% console growth looks great on paper, the company’s management specifically said that PlayStation 5 hardware units came in lower than expected. Which will make working towards its massive annual target a bit harder than originally surmised. Plus, its gap compared to PlayStation 4 sales widened with this latest number.

“We have positioned the accelerated penetration of PlayStation 5 hardware as one of the highest priorities in this fiscal year,” executives wrote in prepared remarks. “And we will try to work steadily to implement necessary measures to achieve our hardware sales target of 25 million units.”

At least yen sales of the hardware segment were among the fastest-growing product categories within this division, behind only that of digital software, as I’ll detail later.

The other main down note for PlayStation during Q1 was profitability. Operating income came in 7% lower than the same time in fiscal 2022 plus it continues to trail one of its main local competitors in Nintendo. While partly due to where each is in their console cycle, it also reflects Sony’s big investment in studios and live services development.

One thing I’ll mention throughout is the impact of the yen’s standing on Sony’s results and my conversions from the local currency into dollars. I’ll point this out when it’s relevant, as there’s a material impact on a global business like this.

See below for more on the individual numbers and a look ahead to the next quarter!

For the overall firm, revenue grew 33% to $16.7 billion. While positive impact came from its gaming and music segments, plus exchange rate, the most substantial bump came from financial services which was affected by an accounting change around its Sony Life insurance business. On the flip side, Sony’s total quarterly operating profit dropped 31% to $1.85 billion, mostly driven by that same financial services segment.

Within the G&NS unit, revenue rose 28% to $5.63 billion. Based on this, gaming currently makes up a third of Sony’s total business. Top-line was bolstered by external partner game sales, additional content buying and improved hardware availability.

Keep in mind, the exchange rate impact was upwards of $300 million. Even accounting for that, PlayStation would boast best-ever Q1 sales. In fact, for more perspective, it’s a sizeable bump from the previous best of first quarter fiscal 2021 when revenue reached $4.5 billion based on the same exchange rate conversion.

Paralleling the overall firm’s scenario, G&NS experienced declining operating profit during the quarter ending June. This number went down 7% to under $360 million, where third party game sales weren’t enough to offset ongoing cost recognition from Bungie and other acquisitions, among other expenses.

I’ll say, for the accounting nerds, this does account for an increase in depreciation and amortization, which impacts traditional operating profit (as opposed to an adjusted figure that Sony reports, which did go up).

Underlying the revenue momentum were double-digit quarterly gains across every single product sub-segment. As you’ll see in the gallery above, somewhat surprisingly, the biggest contributor wasn’t Hardware. It was Add-On Content at 27% of the total, after experiencing a solid 15% growth in revenue. Next was Hardware at 24% of the pie, with sales jumping 42% since last year. Digital Software comprised 20% of the total and had the best year-on-year growth of 52%.

Sony also introduced a new product segment called Other Software, which accounts for first-party titles sold outside of the PlayStation family of devices. Thus, its PC offerings like Horizon Zero Dawn and The Last of Us Part 1. While it’s slight from a slice standpoint, only contributing 2% at present, it grew 17% since Q1 last year.

Right now, annual gaming revenue for Sony is a best-ever $27.83 billion. This is the first time it’s been above $27 billion, no doubt boosted by the yen impact I’ve already mentioned many times. However, annual operating profit is currently $1.8 billion, down from $2.3 billion this time last year. That’s a substantial change in profit margin, from 12% to 6%. Looking at annualized figures intensifies Sony’s predicament of expanding revenue yet deteriorating profit, which I believe is somewhat temporary as the console cycle matures.

How does that annual figure compare across the biggest industry peers? Well, Sony’s last 12 month revenue from gaming leads the pack as reported. Then there’s Tencent, which doesn’t report for a few more weeks, around $26 billion for now. Microsoft has $15.47 billion yet could see over $20 billion or better once the Activision Blizzard deal finalizes in the coming months. Nintendo’s big first quarter bumped it to $13.46 billion at the top-line, yet it has $4.49 billion in annual operating profit versus PlayStation’s $1.8 billion.

New chart alert!

Here I’ve presented launch-aligned unit sales for the last two PlayStation generations. It’s a simple, yet effective in my opinion, way to put PlayStation 5’s quarterly bounce-back in perspective. Notably since the PlayStation 4 is Sony’s fastest-selling console, one of the biggest consoles of all time, and its newest sibling is trying desperately to keep pace amidst a more challenging macro environment.

What stands out immediately is the gap between the two widened this quarter, moving from a 1.8 million divergence to now 2 million. That’s the wrong direction, and I’d bet why management said it missed expectations because it wants to cross that trend-line as soon as possible. Occurring during this fiscal year will be challenging, considering PlayStation 4 had its biggest holiday ever in the corresponding period, with nearly 10 million sold in the October to December period of fiscal 2016 alone. That year’s 20 million was the PlayStation 4’s best result; Sony expects PlayStation 5 to ship 5 million more than that!

Moving on to an even more important hardware metric, PlayStation 5 achieved 40 million in sell-thru to consumers right after the June quarter ended, as of July 16th. Like the above, its predecessor reached that same milestone 2 months faster. I probably sound more negative than I should, because in the broader context of the industry’s history, and its Xbox counterpart, PlayStation 5 is selling quite well.

Supplemental stats shown in the report include full game PlayStation software unit sales increasing from 47.2 million last year to 56.5 million in the three months ending June. First party sales were flat at 6.6 million. Which means third party games were responsible for all of growth, namely the likes of new launches like Diablo IV, Final Fantasy XVI and Street Fighter 6, all of which I covered in my recent piece on June’s U.S. sales report from Circana.

Contribution from digital downloads as a portion of total software sales declined in the quarter, shifting from 79% last year to now 72%. That’s still slightly above fiscal 2022, when downloads made up 67% of the total.

The main engagement metric that PlayStation shares is Monthly Active Users or MAUs. This figure, which is an estimate of how many people used PlayStation Network in the last month of the quarter, came in at 108 million. This is the same as last quarter, and up from the 101 million last year. Essentially, about the same amount of people have been active on the network throughout the first half of the calendar year.

“Total game play time during the quarter was only 2% higher year-on-year,” cited management. “And we see the year-on-year growth in software sales as being driven mainly by a considerable increase in spending per play hour by the expanding PlayStation user base.” This fits with the MAU indicator, in that engagement has been mostly consistent lately without growing substantially.

Here’s where another type if disappointment enters, mainly for those of us that want more transparency from companies. Apparently, this is the first quarter during which Sony won’t be reporting PlayStation Plus memberships anymore. It’s an odd decision to me, considering how much trouble it went thru rebranding the service and how it’s seemingly a core part of its future growth strategy to keep people engaged in its library of games. Hopefully this will be updated on an annual basis, or when it hits a fresh milestone.

Thus, the last number we’ll have for PlayStation Plus subscribers is 47.4 million as of March 2023.

Oh, and there’s no mention of PlayStation VR 2 at all. Not entirely unexpected, I suppose.

Just like last quarter, which ended its 2022 fiscal year, Sony’s latest result was mixed when considering both financial elements and expectations for hardware against what happened through June. The firm is generating staggering growth at the top-line, a ridiculous record first quarter with the bump from external partners launching huge multi-platform or timed exclusives. (Plus, don’t forget about that exchange rate benefit.)

Then there was the solid increase in PlayStation shipments, making up for lost time due to earlier chip shortages and pandemic hurdles. Still, last quarter’s number came in below estimate, and expense recognitions due to M&A and other expense types are hitting the bottom line. Hard.

An aspect that’s exceedingly important for PlayStation, as opposed to say Microsoft’s gaming business, is growth due to new exclusive games. Which, as I mentioned in the software section, was nonexistent this past quarter. While third parties like annual iterations from Madden and NBA 2K annual will drive the quarter ending September, first party will certainly pick up in the holiday quarter.

Here’s a look ahead to forecasts and the near future.

Sony raised annual guidance for full year 2023 revenue, both overall and for the PlayStation business, then maintained other forecasts around profit values.

The firm increased total annual sales forecast 6%, to over $89 billion. Similarly, revenue guidance for its gaming division was bumped up 7%, to roughly $30 billion which would be a record. Even with these, it kept forecasts for operating profit the same, and reiterated the annual PlayStation 5 hardware estimate.

“Although we upwardly revised the sales forecast for third-party software which is performing well, we have incorporated a deterioration in the profitability of PS5 hardware mainly due to changes in promotions by geographic region and the sales channel mix,” management wrote, explaining why it didn’t change the PlayStation profit estimate for now.

While I certainly think the top-line is achievable, I’m more skeptical on profit guidance and think it could miss depending on where expenses go in later months. Then, for console sell-in, I had my estimate at 25 to 25.5 million three months back. I’m shifting towards the lower end, now at 24 million to 24.5 million. Partially because I maintain hesitance on a model refresh happening this year, still targeting Calendar 2025 for a slimmer or more powerful PlayStation 5.

While it’s more relevant for the quarter ending December, I’ll go on record now that Marvel’s Spider-Man 2 will have a super start at market in October. It will outpace the 3.3 million copies at launch for its 2018 predecessor. Though with it only on PlayStation 5, I’m hesitant to claim it becomes the fastest-selling PlayStation exclusive ever, currently held by 2022’s God of War: Ragnarök at 5.1 million. I’m more in the 4 million range, which will beat the 3 million of June’s Final Fantasy XVI for the highest launch of titles exclusive to PlayStation 5 (of which there aren’t many).

How about that internal live services push? Well, it will certainly have an impact on costs and profitability towards the downside because of staffing, investment etc ramping up. I don’t foresee a big impact this fiscal year on revenue, unless perhaps Concord from Firewalk Studios sneaks into the January to March quarter. Even then, it won’t sell like its usual exclusives. The largest, most concrete first party release that we know about might be Destiny 2: The Final Shape, which will be around February 2024.

That brings me to the end of my “big three” recaps for this quarter, covering the main manufacturers across the industry. I recommend heading back to the earnings calendar for more events. Thanks for reading! Be well!

Note: Comparisons are year-over-year unless otherwise noted. Exchange rate is based on reported average conversion: US $1 to ¥137.

Sources: Bloomberg (Image Credit), Company Investor Relations Websites, Sony Interactive Entertainment.

-Dom

Zelda Tears of the Kingdom & Super Mario Bros Movie Catapult Nintendo Results to Record Highs in 2024 Q1

DomsPlaying

Here we dough!

Turns out, the Switch is still paying off during its twilight years. Quite literally, for Nintendo.

It sure doesn’t hurt to have a film based on one of the world’s most recognizable mascots either.

Yesterday in Japan, Nintendo reported fiscal year 2024 first quarter financial results. It proved to be a massive three months for the gaming giant, achieving all-time Q1 highs for both revenue and operating profit.

Underlying this record quarter was a historic start for The Legend of Zelda: Tears of the Kingdom and the blockbuster hit that is The Super Mario Bros. Movie. Nintendo shows, yet again, its brands are powerful and management knows how to deploy them, producing some of the highest quality content in games and beyond.

This combination led to Switch hardware output growing since last June. In impressive fashion, the system is steadily approaching 130 million units globally as its its seventh birthday approaches. After moving 3.91 million Switch in Q1, up 14%, lifetime shipments are now 129.53 million.

“In addition to the increase year-on-year in unit sales of both Nintendo Switch hardware and software, another main factor in this growth in net sales was the larger percentage of hardware sales accounted for by Nintendo Switch OLED Model, which has a higher unit price,” management wrote in the slide deck. “The depreciation of the yen also had an effect.”

Nintendo couldn’t have secured a best-ever Q1 without, of course, Tears of the Kingdom. It’s the premier open world adventure of 2023, an easy Game of the Year contender. Plus, unit sales are ascending faster than Link himself. After shipping 10 million copies during its first three days, a Nintendo platform record mind you, it finished the quarter with a staggering 18.51 million.

That’s easily the best launch quarter ever for a Zelda game, and second fastest-selling opening for a Switch title. In fact, the fastest is really two titles: Pokémon Scarlet & Pokémon Violet at a combined 20.61 million.

The real added boost mode, and a genius move by management, was The Super Mario Bros. Movie hitting at the ideal time as theatergoers are back in their groove and it targets such a wide audience. It’s already the second highest-grossing animated film of all time. It launched in April! As a result, Nintendo’s Intellectual Property (IP)-related income segment tripled in sales. Talk about a perfect supplement late in the cycle of Nintendo’s top-selling home console of all time.

Before dipping into the numbers, a quick caveat on the mentioned yen exchange rate: It’s still historically weak. This has an outsized impact on conversions for Japanese companies. Now, let’s see what’s behind Nintendo’s record performance.

I’ve displayed the most important slides from Nintendo’s latest report above.

Overall company net sales jumped 50% in the quarter, to $3.36 billion. Operating income skyrocketed 82% to upwards of $1.35 billion. The strength of Zelda and Mario were in full force.

For perspective, as you’ll see in the chart gallery below, the last time Nintendo’s revenue was anywhere near this high was back in the Wii days. The last time it generated close to this much profit was Fiscal 2021 due to the craze around Animal Crossing: New Horizons.

One notable mention on the profit side was the higher cost of OLED model limits margins, as did a higher portion of retail sales as opposed to downloads, since Tears of the Kingdom is a popular buy in physical form.

“Although the proportion of hardware sales declined and the proportion of first-party software sales increased, our gross profit margin remained at the same level year-on-year,” management wrote. “This was due in part to the lower proportion of digital sales and Nintendo Switch ‒ OLED Model, which has a lower profit margin than the other models in the Nintendo Switch family of systems, accounting for a greater percentage of hardware sales.”

In terms of product types, the company said 41% of sales were from hardware. Compare that to 44% in the same quarter last year, and 46% for last fiscal. This tells me that, while Tears of the Kingdom did push some new systems, most buyers already owned one or more Switches. Digital sales were less than half of Nintendo’s total revenue, at 47%, versus last Q1 at 53%. Digital split was much closer to the full FY 2023 number of 48%.

There’s an intriguing dynamic happening for regional slices. From an overall standpoint, Americas was nearly the same at 44% vs last year’s 45%. The main difference was a lower portion from Europe, which was down to 23% from 26%. The Rest of World segment accounts for the change, moving from 10% to 13%. Then when looking at strictly hardware unit shipments, it’s growth in Japan leading the charge. Unit sales in the Americas and Europe declined 7% and 15% respectively, while Japan rose a whopping 67%.

Even so, Nintendo did point out that console sell-thru was up in all its regions, even if shipments weren’t. Most importantly, total revenue from all sources did in fact move up across all locales. The Americas saw 40% growth, Europe increased 32% while Japan increased 49%.

Another growth vector, albeit to less an extent because it’s still a small portion of business, was the firm’s category of mobile and IP related income on the strength of its animated film division royalties. Dollar sales jumped 190% here, to $232 million. That’s 7% of quarterly net sales, compared to 4% a year back.

Zooming out to annualized numbers really drives home how substantial this latest three month period. Nintendo’s current trailing annual sales accounting for this record Q1 are $13.46 billion. As you see in the chart, based on current exchange rates applied historically, that’s the best annual sales for a first quarter in its history. And nearly the highest ever, behind only FY 2009 Q3. On the profit side, it’s almost there as well. The best trailing 12-month revenue for a Q1 since peaking back in FY 2009 Q1.

Essentially, the company is currently on track for the best annual financial results of the Switch era.

It’s also time to update my peer comparison within the industry, which I started annual in my latest Xbox results piece here. Sony’s latest annualized revenue was almost $27 billion, followed by Tencent’s 26 billion. Microsoft reported $15.47 billion from gaming, then there’s Nintendo here at $13.46 billion. I’ll reiterate what I’ve said before: Sales aren’t everything. Nintendo’s profitability outpaces Sony’s games division for now, at least as of last reported, mainly due to high costs associated with making the PlayStation 5 and related big budget software exclusives.

Total hardware shipments for Switch started the fiscal year at 3.91 million, up an impressive 14% from the 3.43 million last year.

It’s the third highest Q1 shipment number for the hybrid console, behind fiscal 2021’s 5.67 million and 4.45 million in 2022. Nintendo clearly intended there to be enough stock to satisfy that Tears of the Kingdom demand. Plus, it’s clear the market isn’t fully saturated.

From an individual model standpoint, it’s Switch OLED that’s growing. Sales catapulted 86% to 2.83 million. It made up 72% of the total. The other two, Switch base and Switch Lite, declined 51% and 27% respectively to comprise the remaining allotment. This is why management mentioned margins before, as the OLED is the main seller now as the older models phase out.

It’s an effective final push for Switch, which will be seven years old in March.

Switch’s lifetime of 129.53 million, while certainly near another major milestone, still has a ways to go to reach the highs of best sellers Nintendo DS and PlayStation 2. Thinking back to 2017, when I was upbeat about Switch yet never thought it would reach even Wii numbers, it’s pretty wild the hybrid console is even in the conversation for top hardware ever.

Beyond shipment numbers, the report highlighted some sell-through to consumers information. Just like shipments, Switch sold-thru more units to people than the comparable quarter last year. Unlike shipments, all regions experienced growth in sell-thru. Tears of the Kingdom having an OLED special edition bolstered this growth at the consumer level, leading to quarterly sell-thru that beat last year and rivaled the one prior.

As for software, Nintendo shipped 52.21 million units in the latest three months. Not only is that up 26% compared to last year’s 41.41 million, but it’s also the single largest Q1 in Switch history. Even above 50.4 million in Fiscal 2021 after Animal Crossing: New Horizons.

Lifetime game sales for Switch passed a billion back in March, an enormous feat. Now it’s at 1.088 billion.

Since it’s early in the fiscal and late in the console cycle, Nintendo had only two million-selling titles. One of them being Tears of the Kingdom, the other being the never-ending Mario Kart 8 Deluxe.

Based on the 18.51 million shipped for Tears of the Kingdom, it made up 35% of the overall Switch record-breaking unit shipment figure for period ending June. Think about that. More than 1 in 3 games moved for a console with so many epic sellers and this all-time audience base was the new Zelda!

With this frankly absurd start, it’s already 9th best-selling Switch title ever, knocking Ring Fit Adventure out of the Top 10. With less than a quarter on market. This parallels regional data, where it’s 2023’s 2nd top-selling game to date in the U.S, behind only Hogwarts Legacy, according to Circana’s latest monthly report. Oh, and that doesn’t even include digital.

Zelda will compete for best-selling title with multi-platform titles like the yet unannounced Call of Duty 2023, Hogwarts Legacy and Diablo IV plus PlayStation exclusive Marvel’s Spider-Man 2. I believe it could, even on a single platform, be the biggest premium title of 2023 if Nintendo shared its downloaded portion.

Continuing the record Q1 theme, Tears of the Kingdom sold-thru over 15.7 million in its first 8 weeks, immediately making up half of the year’s Nintendo-published software unit sales for 2023. That pushed sell-thru of 1st party Nintendo-published titles to an all-time best since Switch’s start. By a wide above the prior record holder, FY 2021, based on the graph provided.

Separately, one of the rare down notes of this report is the fact that the million sellers list only had two titles. This means the likes of Advance Wars 1+2 Re-Boot Camp, from April, and June’s Everybody 1-2 Switch both did not achieve a million sold. Not that I was upbeat on either of them, especially the latter which is probably the least I’ve seen the Switch audience excited in all its years.

The company also provided its usual updates to lifetime figures for existing titles. Mario Kart 8 Deluxe had yet another quarter over a million, bumped up by all those new Switch owners picking up Zelda, moving 1.67 million. It’s achieved the 55 million mark lifetime, settling at 55.46 million. The Legend of Zelda: Breath of the Wild benefited from the knock-on effect of a new series game, passing the 30 million mark to 30.65 million. And, while not part of this report, October 2021’s best-selling Metroid game Metroid Dread hit a new milestone: 3 million according to its developer MercurySteam.

While we see plenty of date on copies sold, there’s limited stats from the firm around player engagement. Its made-up term of Annual Playing Users, or the number of Nintendo Accounts that used the Switch in the last year, jumped up to 116 million from March’s 105 million. There’s no new data on Switch Online memberships, which totaled 36 million in September of last year.

In a new portion of the report, there’s details into the epic box office earnings of The Super Mario Bros. Movie. Since its theatrical debut in April, the film has attracted over 168 million viewers. Current global box office revenue of nearly $1.35 billion makes it the highest-grossing video game movie ever, and second most successful animated flick only to Frozen II’s $1.53 billion since 2019. Executives noted that its popularity was global, plus it drove sales of various Mario titles on Switch alongside the release.

This is something I’ve said a lot during Nintendo’s historic Switch era: how it’s hard to oversell how incredible of a quarter it was, and how deftly management continues to executive on its strategy, notably its focus on quality experiences and leveraging its legendary IP in smart ways. The fact that a movie led to Nintendo’s best Q1 to date, alongside its re-imagined Zelda approach, shows that the company continues to adapt while remaining true to its core identity.

“By expanding Nintendo IP in areas outside the dedicated video game platform we create new opportunities for consumers to encounter Nintendo IP, and this invigorates our overall business,” management wrote. “Based on the various effects that we have confirmed through the release of this movie, we will continue our efforts towards visual content-related initiatives.”

As expected early in the fiscal year, Nintendo maintained its financial and unit sales guidance for the 12 months ending March 2024. Management anticipates 10% lower annual net sales, near $10.56 billion, with operating profit in that same period declining 11% to $3.28 billion. I think there’s the potential for an upward revision soon, and I expect the company to achieve these. At least, right now.

On the hardware front, the team there anticipates shipping 15 million Switch units for the year. After the 3.9 million of Q1, that leaves only 11.1 million for the remaining three quarters. I expect a slight upward revision from the company in Q2 or Q3, to at least 16 or 16.5 million, which is right at my personal estimate of 16.5 million to 17 million.

Beyond that, it’s about time to be looking ahead to what’s next for Nintendo’s hardware business. It’s a major challenge for management, akin to moving past the Wii and we know how well that went with the disastrous Wii U. The company is in uncharted waters after Switch’s meteoric, historic success that rivals only the Nintendo DS in sales.

Just this past week, the rumor mill began swirling in earnest around a Switch successor, which I will continue to call the Super Switch until told otherwise. Video Games Chronicle and Eurogamer both claim they have sources indicating Nintendo’s next device will have a portable mode, a cartridge slot, could have an LCD screen (as opposed to OLED) in consideration of cost. No word on backward compatibility, which is a key feature question for the almost 130 million owners. Most importantly for yours truly, it’s likely targeting a 2nd half of Calendar 2024 launch. Studios making games for the device apparently have development kits as we speak.

When writing and chatting on social media, I’ve had Early 2025 as my estimate, lining up nicely with the anniversary of Switch’s March 2017 start. While I’ll keep that for the time being, it sounds like I might have to adjust that by a quarter, to Late 2024.

If that’s the case, we won’t have to wait long for more information!

As for software in the future, let’s take a glance at Nintendo’s upcoming lineup. Pikmin 4 hit stores in July, to a breakout start in Japan that points to a potential record launch for the franchise. That’s really all for its published exclusives in the quarter ending September.

October is when the product suite really ramps up, starting with Detective Pikachu Returns. Then it’s the standout title of Super Mario Bros. Wonder, scheduled for late October. Throw in WarioWare: Move It!, probably a premium Pokémon as usual, alongside a remake of Super Mario RPG in November, and these will provide ample momentum leading into the holiday months, and the latter parts of its financial year.

Both Luigi’s Mansion: Dark Moon and a new Princess Peach, yet untitled, have 2024 as the release timing in Nintendo’s material. Could they hit before the Super Switch reveal? Might they come out before fiscal year end in March 2024? Maybe. Then there’s the evasive Metroid Prime 4, still listed as TBA without any sort of information. I’m doubling down in saying that Metroid Prime 4 will be a cross gen title, launching on both current and Super Switch, alongside a premier 3D open world Mario title. Like Breath of the Wild hitting both Wii U and Switch, except with less commercial upside.

Well then, in the meantime until these new games release and Nintendo shares what it’s been cooking up for its console biz, check my earnings calendar and other recent articles for more coverage of the industry.

Thanks for reading my latest recap! It was a substantial one. Be safe, everyone.

Note: Comparisons are year-over-year unless otherwise noted. Exchange rate is based on reported average conversion: US $1 to ¥137.34

Sources: Box Office Mojo, Company Investor Relations Websites, MercurySteam.

-Dom

Diablo, Final Fantasy & Street Fighter Launch June 2023 U.S. Games Industry Sales to Near Record in Circana Report

DomsPlaying1 Comment

A busy season, featuring earnings calendars and Xbox write-ups, continues here at the site today with another major U.S. sales update. Industry tracking firm Circana (formerly The NPD Group) shared its June monthly report for the domestic games market, signaling the halfway point of 2023.

It was a massive month for consumer buying on games and hardware, nearly hitting an all-time June high.

According to Circana, June monthly sales jumped 9% to $4.73 billion. This is the second biggest June month in tracked history, which dates back to the mid 1990s, behind only 2021 when spending was peaking during the middle of quarantines due to coronavirus.

Last month’s increase also marked the second consecutive month of sales growth, after a couple down periods during springtime. All three segments of Video Game Content, Hardware and Accessories experienced growth, with the latter two boosting up double-digits.

In fact, Hardware had its best June in over a decade!

Premium releases in long-running franchises drove the near monthly record as Diablo IV, Final Fantasy XVI and Street Fighter 6 topped the charts, while additional new releases scattered the remaining software ranks.

These big budget projects also impacted the hardware front, where PlayStation 5 returned to the lead and won June by both revenue and units sold. Square Enix’s flagship Final Fantasy XVI launch had a lot to do with that, since the game is currently exclusive to Sony’s current generation platform.

“Big new premium games drove the market,” said Circana’s Mat Piscatella on Twitter. “Momentum continues to swing away from subscriptions/add-on spend towards big new premium games. Hardware [was] helped a bit by new portable PC gaming hardware, it’s an exciting new-ish segment.”

This one-two combination of blockbuster releases and the best supply we’ve seen since the console cycle began back in 2020, alongside macro elements like easing inflation, proved to be a recipe for commercial success to heat up the start of summer.

Check below for a full rundown of the numbers, then a preview of July kicking off the back half of 2023.

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

As I alluded earlier, total spend on games in the second best June on record rose 9% to over $4.7 billion. Until this excellent result, 2023 sales were looking flat for the year. Now, first half spending gained 2% to $26.56 billion, edging out the $26.11 billion from last year.

It’s a welcome return to growth for the domestic market after a shaky, uncertain 2022. It helps to have AAA titles launching at a time when people can find consoles at retail.

The largest segment of Content, which includes software, game downloads and related services, moved up 7% in June to $4.06 billion. During the first six months of 2023, spending declined ever-so-slightly to $22.79 billion. Content accounted for 86% of both the monthly and 1st half sales, compared to 87% last year.

“Console & PC Digital Premium Download spending in the month increased by more than 50% year-on-year.,” Piscatella said. “An 8% increase in content spending on Console and a slight gain in Non-Mobile Subscription spending were offset by declines in the Mobile and the PC, Cloud and Non-Console VR segments.”

Ongoing weakness for mobile, the source which consistently represents a huge portion of Content sales, continued in June as the report said spending was “relatively flat” without putting a number on it. Top earning mobile titles were Candy Crush Saga, Roblox, Royal Match, Coin Master and Monopoly GO!.

Premium software is where the action took place, where five of the Top 20 were brand new to market, including all of the Top 3.

Diablo IV topped the overall chart in June, just as its predecessor did in May 2012. Blizzard Entertainment’s action role-playing banger, with less than a month of sales under its best, was in third place during 2023’s first six months. Within the publisher’s recent second quarter results, management said Diablo IV was Blizzard’s fastest-selling title in its three decade-plus history, already delivering over $1 billion in net bookings.

Next up was Final Fantasy XVI, coming in second place despite being available on just a single device. As a quick comparison, that’s the same slot as Final Fantasy XV during its launch month of December 2016. The latest mainline Final Fantasy already ranks ninth on the 2023 chart, again with less than a month on record, echoing its early global success of 3 million units shipped and downloaded during its launch week. I expect that to increase when the publisher reports earnings this month.

Rounding out the Top 3 was Street Fighter 6, instantly ranked #10 for 2023’s first half. Capcom’s highly-praised entry sold double what 2016’s Street Fighter 5 did during its launch month domestically, earning the highest spend for a head-to-head fighting game since April 2019’s Mortal Kombat 11. At last count, Street Fighter 6 has achieved 2 million copies sold-in globally.

F1 23 and Story of Seasons: A Wonderful Life both also launched during June, and occupied spots a bit lower on the overall software chart. The former started in 15th, while the latter hit 17th. Then, for older titles, Sony’s pair of Marvel’s Spider-Man and Marvel’s Spider-Man Miles Morales launched back into the monthly Top 10.

Warner Bros’ Hogwarts Legacy was the best-selling title of 2023’s first six months, followed by The Legend of Zelda: Tears of the Kingdom. While we’ll never know, I’d be super curious to see if Zelda might be ahead if downloaded copies were counted, seeing as Nintendo doesn’t share its digital share.

Scroll down for June’s full list, plus the best-selling software of 2023 so far here in the States.

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

  1. Diablo IV
  2. Final Fantasy XVI
  3. Street Fighter 6
  4. The Legend of Zelda: Tears of the Kingdom*
  5. Hogwarts Legacy
  6. Call of Duty: Modern Warfare 2
  7. Star Wars Jedi: Survivor
  8. MLB The Show 23^
  9. Marvel’s Spider-Man Miles Morales
  10. Marvel’s Spider-Man
  11. FIFA 23
  12. Mario Kart 8*
  13. Dead Island 2
  14. Minecraft
  15. F1 23
  16. Elden Ring
  17. Story of Seasons: A Wonderful Life
  18. God of War: Ragnarök
  19. Resident Evil 4 Remake
  20. Super Smash Bros. Ultimate*

Top-Selling Games of 1st Half 2023, U.S., All Platforms (Physical & Digital Dollar Sales):

  1. Hogwarts Legacy
  2. The Legend of Zelda: Tears of the Kingdom*
  3. Diablo IV
  4. Call of Duty: Modern Warfare 2
  5. Star Wars Jedi: Survivor
  6. Resident Evil 4 Remake
  7. MLB The Show 23^
  8. Dead Island 2
  9. Final Fantasy XVI
  10. Street Fighter 6
  11. FIFA 23
  12. Dead Space Remake
  13. Madden NFL 23
  14. Elden Ring
  15. Mario Kart 8*
  16. The Last of Us Part 1
  17. Minecraft
  18. God of War: Ragnarök
  19. Pokémon Scarlet & Violet*
  20. Marvel’s Spider-Man Miles Morales

Fitting perfectly with the strength of this entire report, spending on Hardware increased 22% in June to $454 million. For context, that’s the best June month for the category since June 2008’s $617 million.

You read that correctly. It’s been 15 years since we’ve seen this much money splurged on game consoles during June. And, that month in 2008 was an all-time June record driven by Nintendo Wii, Xbox 360 and PlayStation 3.

Back to present day, even thru May, Hardware was trending way up for the year as supply continued to flood the market and demand kept pace. Across the first half of 2023, people spent $2.61 billion on this category, an increase of 23%.

PlayStation 5 continued its amazing run in 2023, regaining the top spot on the best-selling console list. It won June by both dollars and units after gaining double-digits since last year. That’s because spending on PlayStation overall had its best June on dollar sales since 2008, the same year as mentioned above, and its highest unit sales since June 2010.

Sitting in second place during June was Nintendo Switch, measured by dollars and units. Actually, Circana highlighted that Switch and Xbox Series X|S sales both declined last month. Which makes a lot more sense for the aging Switch, which rumors speculate could have a successors as soon as next year, than the Xbox family which is going the complete wrong direction due to a lack of appealing exclusives and a mismanaged pipeline.

If you want to hear more of my thoughts on Xbox’s hardware approach, or lack thereof, visit my aforementioned recap of Microsoft’s first quarter fiscal 2024 results. PlayStation continued as the premier headliner in the industry, and I’m expecting a monster quarter for Sony’s gaming division when it announces Q1 figures next week.

One thing that caught my eye within Piscatella’s comments was the mention of handheld PC gaming hardware. While Nintendo is the only traditional manufacturer currently investing big in this slice, there are newer portables like Valve with Steam Deck, ROG Ally from ASUS and Logitech’s G Cloud clearly garnering interest, and dollars, from a core yet loud gaming audience. While I don’t expect Sony (which does have its Project Q home streaming device incoming) or Microsoft to put beaucoup dollars behind a native handheld anytime soon, or at all, it’s a worthwhile segment for PC-aligned brands to explore.

Our final area of Accessories jumped up 14% during June, to $214 million. It’s yet another segment that started slow this year, yet it’s managed to trend in a positive direction over recent months. During the 1st half of 2023, spend on peripherals reached $1.15 billion, or 5% higher than last year’s $1.1 billion.

Running in parallel to the exceptional hardware month from Sony, PlayStation controllers occupied the first four spots in this category during June.

The Japanese platform holder’s top-end PlayStation DualSense Edge was last month’s best-selling peripheral. Because of the game pad’s price point and attraction when folks upgrade to a new console, this device also held the top spot during 2023’s initial six months.

While the bread and butter of Accessories continues to be controllers, I believe Virtual Reality headsets will be key for its direction during the year’s back half. Despite a low profile, PlayStation VR 2 is selling better than its predecessor did worldwide. Then, Meta has its Quest 3 scheduled for sometime this Fall. As the follow-up to one of the most popular headsets ever sold, it should provide a noticeable impact.

It seems the games industry is a hot as the weather here in the States, with June proving to be a near record heat wave for consumer spending on all fronts. It’s a blockbuster start to the summer, at a time when school is out and people are ready for fun, especially when air conditioning and a good game can provide much-needed respite from Mother Nature.

Software publishers are capitalizing on beloved franchises, while hardware makers reap the rewards.

While it’s already August on the calendar, there’s still a couple weeks to go before Circana’s next monthly report. That means it’s prediction time! Fair warning: after a better-than-expected result for my June predictions, I’m feeling slightly confident.

July tends to be the calm before August and Madden provide the unofficial kickoff to the commercial season. There’s still plenty to discuss. Plus, titles are evergreen these days and will continue to sell throughout the year, especially as new content hits for some of 2023’s biggest titles.

When it comes to overall spending, I’m expecting a bounce back for this July after 2022’s decline. (Remember MultiVersus? That was last July’s winner.) I can see growth in the low to mid single digits.

The most notable premium releases aren’t necessarily major sellers, with the likes of Nintendo’s Pikmin 4 and Remnant II from Gearbox Publishing containing the most upside. The former will benefit from the Switch effect, as it already has in Japan as the best start in franchise history, and the latter is already at 1 million copies in less than a week. I expect both can achieve Top 10 starts, with upside on the edge of the Top 5.

Then, Capcom launched Exoprimal, and I can’t say I’m that optimistic. I think it misses the Top 20. As for new platforms for older titles, the PC version of Ratchet & Clank: Rift Apart might bring that one back into the Top 20.

I expect an existing title to lead July. Honestly, I’m not sure which will do it, so let’s say Diablo IV repeats just because Final Fantasy XVI is one platform and Tears of the Kingdom doesn’t include digital. It’s going to be a surprising month at the top end.

On the other side, I think July hardware is a foregone conclusion: PlayStation 5 earns and sells the most units.

My time recapping the latest Circana results is now at an end. I recommend reading Piscatella’s thread on social media, even if you rarely visit Twitter or whatever the billionaire baby is calling it this week. It’s worth hanging around just to follow me and like-minded analysts, after all.

Thanks for stopping by. Be well and take care!

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

*Digital Sales Not Included

^Xbox & Nintendo Switch Digital Sales Not Included

Sources: Activision Blizzard, Capcom, Circana, Game Data Library, Gearbox Publishing, Square Enix.

-Dom

The Legend of Zelda: Tears of the Kingdom & Nintendo Ascend to Top of May 2023 Circana U.S. Games Sales Report

DomsPlaying

As we near the end of 2023’s first half, I’m back with another monthly sales recap!

This time, industry tracking firm Circana shared May consumer spending results across the United States games industry. As I expected when I wrote a preview last month, and what was the easiest prediction I’ve maybe ever made, Nintendo dominated the conversation and charts.

Which it often does during flagship title launches, especially in the current Switch era. This time it was the month’s best-selling The Legend of Zelda: Tears of the Kingdom hitting market in mid-May, proving to be perhaps the most popular game during a year stacked with great releases.

In the scheme of things, last month was mostly quiet in terms of quantity of premium titles. Yet the one big launch was just that: massive. Between software sales and corresponding hardware units, Tears of the Kingdom boosted total spending to double-digit growth for the first time in 2023.

All three categories of Video Game Content, Hardware and Accessories moved up, the latter two also in the double-digit range. Hardware dollar sales alone jumped over 55%.

Content saw positive contributions from full game premium software and add-on content, even with Tears of the Kingdom being the only new game among the Top 20 best sellers, however other key areas like mobile and PC suffered declines.

Hardware reflected this mainline Zelda push in that Nintendo Switch returned to win by dollars and units. It’s the first time all year the aging Switch has led on revenue. In fact, Nintendo’s hybrid console generated the most ever May month dollar sales since its launch in 2017.

“Improved PlayStation supply has been one of the most talked about stories of the market in 2023, said Circana’s Mat Piscatella on Twitter. “Every month leading into May it’s been all about PlayStation 5. This month Zelda is the big story.”

Check below for a deeper look at the data set, then a recap and predictions leading into June.

United States Games Industry Sales (April 30th – May 27th, 2023)

Overall video game sales reached $4.12 billion during May, up a strong 12% since last year. This means that for the first time since February, year-to-date spend has turned positive. It’s now at $21.83 billion, up from $21.77 billion thru the same five month period in 2022.

This positive momentum has picked up steam with better console availability and mainstream AAA releases, even as mobile continues to show weakness and subscription growth keeps slowing. People are hitting retail to buy the latest family of PlayStation devices or supplement their Switch ownership with an additional unit for family members to experience Tears of the Kingdom, the biggest global Nintendo launch on any of its storied platforms.

Content as a category, which includes software and related sales, rose 9% last month to $3.62 billion. Thus making up 89% of May’s spend, compared to 90% last year. One area of strength was retail software sales, in particular. For 2023 so far, it’s trending towards growth although not quite there. Currently, annual Content spend is down 2% to $18.73 billion. It was over $19 billion through May in 2022.

As I’ve written about extensively in recent reports, mobile spending keeps trending down. While Circana didn’t share a year-over-year comparison, Sensor Tower said in the announcement that May mobile spending was 2% lower than April. The month’s top earning mobile titles were Candy Crush Saga, Roblox, Royal Match, Gardenscapes and Homescapes.

Tears of the Kingdom comfortably led the premium software list and is immediately 2023’s second top-seller behind only Hogwarts Legacy, which has three months of sales under its belt. All of this accomplished without digital, since Nintendo doesn’t include that portion. That’s right: Using solely retail box sales, which are an increasingly smaller slice of the industry as it shifts towards downloads, Tears of the Kingdom was May’s winner and presently the year’s runner-up.

“New physical video game software spending reached its highest May total since May 2014.” said Piscatella. Not that physical really dictates where the market goes anymore. (Except for Nintendo in this context, I suppose.)

Below the aforementioned Warner Bros product Hogwarts Legacy, which ranked in second, April’s winner Star Wars Jedi: Survivor from Electronic Arts moved down to third place. Rounding out the Top 5 were a pair of sequels in Dead Island 2 and Call of Duty: Modern Warfare 2 from Embracer Group and Activision Blizzard, respectively.

Two of the month’s biggest movers were Ubisoft’s Far Cry 6 jumping back into the Top 10 plus The Legend of Zelda: Breath of the Wild returning to chart in 13th, clearly benefiting from Zelda fever.

In a fun twist, at least for us data nerds, Circana provided additional tidbits around player engagement. The team shared the most played games of May, as measured by percentage of the polled panel playing at least one of these titles in the tracked period. On PlayStation platforms, it was Fortnite, Call of Duty: Modern Warfare 2, Grand Theft Auto V, NBA 2K23 and Apex Legends. For Xbox, it’s a similar list: Fortnite, Call of Duty: Modern Warfare 2, Grand Theft Auto V, Minecraft and Roblox.

Swapping back to premium, the 2023 annual ranks so far stayed pretty stagnant except for the introduction of Tears of the Kingdom into that second slot. Resident Evil 4 Remake now rounds out the Top 5, while Dead Space Remake fell a couple spots to #9. Elden Ring is no longer among the Top 10, ever slightly below in 11th, while Forspoken is hanging on for dear life in the Top 20 at 19th.

Here’s a full look at the overall software charts, which are sorted by dollar sales.

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

  1. The Legend of Zelda: Tears of the Kingdom*
  2. Hogwarts Legacy
  3. Star Wars Jedi: Survivor
  4. Dead Island 2
  5. Call of Duty: Modern Warfare 2
  6. MLB: The Show 23^
  7. FIFA 23
  8. Mario Kart 8*
  9. Resident Evil 4 Remake
  10. Far Cry 6
  11. Elden Ring
  12. Minecraft
  13. The Legend of Zelda: Breath of the Wild*
  14. Super Smash Bros. Ultimate*
  15. Madden NFL 23
  16. God of War: Ragnarök
  17. New Super Mario Bros. U Deluxe*
  18. Pokémon Scarlet & Violet*
  19. LEGO Star Wars: The Skywalker Saga
  20. Super Mario 3D World + Bowser’s Fury*

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

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

As the Hardware segment has done all year, it again exhibited resilience in May, completely rebounding from earlier inventory issues. Spending here skyrocketed 56% to $338 million. This leads to 2023 sales of $2.16 billion right now, or 23% higher than the $1.76 billion thru May last year.

It’s Nintendo and Sony leading the charge yet again, establishing that anyone can go out and purchase their respective consoles as hearts desire. Both companies are seeing hardware sales growth domestically, while Microsoft’s Xbox family isn’t faring nearly as well.

Nintendo Switch boosted to double digit growth since last May, securing the month’s top spot by revenue and units. I mentioned earlier this was its best May ever for dollars. In addition, this was the second best May ever for unit sales, behind only May 2020 which was near the peak of the Animal Crossing: New Horizons craze and quarantine-fueled interest in gaming at home.

Sony secured May’s second best-selling console in PlayStation 5, generating even more percentage gains than Switch. In the “triple digits” according to Circana, meaning at least double the dollar sales of May 2022. PlayStation 5 is still this year’s best-selling hardware, by both dollars and units sold, proving that Sony has been consistent in attracting players to its current generation.

The glaring omission from any performance or growth comments was Xbox Series X|S, thus its sales were lower than last May. It’s again in third place, as its top brass has repeatedly reiterated during the ongoing Microsoft vs The Federal Trade Commission (FTC) trial. In fact, the company’s gaming lead Phil Spencer outright declared that Xbox has “lost the console war.” Even if that war is a “social construct,” according to him, the referenced 16% global market share for Xbox is certainly lacking.

This year’s U.S. sales reports reinforce how Microsoft is consistently behind its peers. Never mind how its business does $16 billion a year in revenue, partially due to a shift of focus away from traditional consoles and towards services like Xbox Game Pass and cloud. But I digress.

Anyways, back to May to wrap up the last of its three major categories in Accessories.

Last month, spending across game pads, peripherals and the like moved up 14% to $159 million. It’s steadily moving upwards for 2023, now at $937 million or 3% higher than the corresponding five month period last year.

In terms of individual accessories, the premium PlayStation 5 DualSense Edge Wireless Controller in all black generated the most dollar sales during May. It’s also maintained its annual lead so far.

Echoing earlier comments around Nintendo and its contributions, The Legend of Zelda: Tears of the Kingdom Series 1 Amiibo Character Pack was May’s top-selling accessory when measured by units.

This report was one of the most straightforward in recent memory. When Nintendo puts out the follow-up to one of the best games ever made, the market tends to listen. And, importantly, spend. Zelda and Switch were the conversation in May, especially since mobile is performing so unevenly and there’s not many brand new premium titles competing for the charts.

Piscatella noted on Twitter that he sees “software getting more top heavy” which “could be tough sledding for games not at the top of the charts.” This is especially true in a modernizing industry that values evergreen, big budget titles.

There’s also subscriptions, where Circana said growth is regulating and normalizing during a user retention phase, as opposed to a user attraction period. Sounds like Xbox Game Pass and the rebranded PlayStation Plus have their base, and aren’t adding as many payers as they were in recent years.

Going forward, June will mark the end of 2023’s first half already!

At present, domestic games spending is trending to be flat for the first six months. Unless June provides a notable boost, which I don’t think it will because I see low single-digit growth, the first half of 2023 might be up a percent or two.

Within premium Content, I expect Tears of the Kingdom to have another great month as a carry-on from May. It’s the type of game that will appear in these charts all year. Just like Hogwarts Legacy has done, which will be among the best-sellers.

For new releases that can compete, I expect Diablo IV from Blizzard to be the best-selling title of June with a potential record first month for the franchise. It’s had a Hell of a start globally, the best in Blizzard’s history, and is a multi-platform juggernaut. It should easily make 2023’s Top 5 list instantly, and could compete to be the year’s top-selling premium title.

Then there’s a pair of Japanese games that will be among June’s top sellers in Capcom’s Street Fighter 6 and Square Enix’s Final Fantasy XVI.

Street Fighter 6 crossed the 1 million copies sold mark within three days of launch, and I believe will fight to a Top 5 position on the overall ranks. And even with Final Fantasy XVI launching on a single platform in PlayStation 5, I expect a similar positioning. Publisher Square Enix announced today that shipped over 3 million units globally during its initial week on sale.

Elsewhere, the F1 series is usually a quiet seller, even if not the most popular. I say F1 23 will be among the Top 15. Then, talk about quiet, there’s Nintendo’s Everybody 1-2 Switch, the successor to Switch launch game 1-2 Switch that debuts a couple days before the June tracking period ends. While I’m usually upbeat on Switch games, that’s not the case here. With it being a lower-priced title and Nintendo not sharing digital, I expect it to miss the Top 20.

For the Hardware segment, it’s going to be a classic battle between Sony and Nintendo. I’m guessing PlayStation 5 will top on revenue while Switch will win on units, the former bolstered by a major third-party exclusive in Final Fantasy XVI and the latter affected by late Tears of the Kingdom purchases.

We’ve come to the end of May’s recap, and June’s predictions. I highly recommend Piscatella’s thread for further details and insights. Check back later for more sales and industry coverage right here.

Be safe everyone. Thanks for reading!

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

*Digital Sales Not Included

^Xbox & Nintendo Switch Digital Sales Not Included

Sources: Circana, IGN, Nintendo, Square Enix.

-Dom