Microsoft Xbox, Sony PlayStation, Nintendo: Video game earnings round-up

Microsoft Xbox, Sony PlayStation, Nintendo: Video game earnings round-up
Written by admin

A gamer plays on Sony’s PlayStation 5 console at his home in Seoul.

Yelim Lee AFP via Getty Images

The giants of the video game world saw their sales slide in the second quarter, as initial tailwinds from the Covid pandemic faded.

In the three months ending June, Microsoft, sony And Nintendo Each posted disappointing results in their respective gaming businesses.

The numbers reflect a broad contraction of consumer spending on video games. According to market research firm NPD, Americans spent $12.4 billion on games in the second quarter, down 13% year over year.

A number of factors are responsible, not least the easing of pandemic restrictions, as people eschew home entertainment options in favor of outdoor activities.

An ongoing shortage of semiconductor equipment didn’t help either.

“Overall game market growth has slowed in recent times as user exits have increased [the] Home as Covid-19 infections ease in key markets,” Sony Chief Financial Officer Hiroki Totoki said on the company’s earnings call last month.

Sony reported a 2% year-over-year sales decline in its gaming unit in the June quarter, while operating profit fell nearly 37%. The company also issued a gloomy outlook, cutting its full-year profit forecast by 16%.

The main reason? People are spending less time playing games and more time going out.

Total gameplay time among the PlayStation player base was down 15%, much lower than the company’s initial forecast.

The ‘Covid effect’ disappears

Gaming was a big beneficiary of the Covid pandemic, with publishers experiencing it Bumper increase As consumers spend more time indoors.

But with Changing consumer spending habits Post lockdown, and Inflation is running hotThe industry is taking a hit.

At Microsoft, overall gaming revenue fell 7% year over year. Sales of the company’s Xbox consoles fell 11%, while revenue from gaming content and services fell 6%.

The decline was “driven by lower engagement times and monetization of third-party and first-party content,” said Amy Hood, Microsoft’s chief financial officer, on the firm’s earnings call last week.

Activision BlizzardThe disruptive game publisher, acquired by Microsoft, reported a 70% plunge in net profit and a 29% drop in revenue.

The Call of Duty-maker blamed the slowdown on weak sales of the latest title in the popular shooter franchise.

UbisoftThe firm behind Assassin’s Creed, saw a 10% drop in net bookings.

Michael Pachter, managing director at Wedbush Securities, said the disappointing numbers were largely driven by an “outsized performance” compared to a year earlier. In other words, companies did not match the extremely high numbers posted in 2021.

“Everybody in the shelter has seen record numbers, with older titles leading the way in catalog sales,” Pachter told CNBC. “It set up an impossible comparison, and the year-over-year decline was well-telegraphed and expected.”

Electronic Arts Gaming was one of the rare companies to defy contraction, posting a 50% increase in profits and a 14% increase in revenue.

Console shortages remain

A major factor hindering performance in the gaming world is the constant scramble for key console hardware.

Nintendo saw a 15% slide in operating profit in the April-June period. The company behind the Super Mario franchise blamed the poor performance on a global semiconductor shortage, which meant it was unable to produce and sell as many Switch consoles as it could.

Nintendo sold 3.43 million units of its portable Switch console in the quarter, down 23% year over year, while software sales fell 8.6% to 41.4 million units.

Sony sold 2.4 million PlayStation 5 consoles in the quarter, up slightly from the 2.3 million units sold in the same period a year ago. The company hopes the lifting of lockdown measures at its key manufacturing hub in Shanghai and a holiday season sales drive will help it reach its goal of shipping 18 million PS5 units in 2022.

“One of the biggest contributors is the slow rollout of hardware,” Pachter said. “New hardware buyers tend to buy a lot of software, and PlayStation and Switch sales are limited in supply.”

The remote-working trend has caused delays for new game releases, limiting the pool of games people want to buy. Microsoft, for example, has delayed the release of its highly-anticipated sci-fi epic Starfield to early 2023, while Ubisoft has pushed back the launch of a game based on the Avatar film franchise.

Does it hurt more to eat?

Rising prices of everything from gas to groceries and fears of an impending recession could spell more trouble for the sector.

According to data from Ampere Analysis, the global games and services market is forecast to contract 1.2% annually to $188 billion in 2022, the first annual decline in more than a decade.

“The cost of living squeezes the pressure on household budgets,” Ampere research director Piers Harding-Rolls told CNBC.

“The impact may be felt on higher ticket items that may include console hardware, although limited availability and pressing demand for high-end consoles in particular means the impact will currently be minimal.

Stock picks and investment trends from CNBC Pro:

Harding-Rolls added: “There may also be some additional pressure on in-game spending as gamers adjust their discretionary spending.”

Some companies are betting that a push toward subscription products will help offset the impact of declining sales

According to Microsoft, growth in the company’s Xbox Game Pass membership plan helped ease the blow of soft demand for the console and games. Although Microsoft did not provide an updated subscriber number for the service, there were more than 25 million total subscribers as of January.

Sony recently revamped its PS Plus subscription service and hopes the move will help combat the recent tail-off in gaming activity. According to Sony’s quarterly report, PS Plus subscribers totaled 47.3 million, down slightly from the previous quarter.

About the author


Leave a Comment