When the pandemic hit the US, many things were affected, including the video game industry. Like many employees, developers had to switch to working from home. Press events such as E3 and Gamescom had to either cancel or shift to an online event. The release of Xbox Series X|S and PlayStation 5 was impacted by the pandemic due to a shortage of supplies. Despite everything, the video game industry saw a huge surge in sales across the board as many people turned to video games to cope with the lockdown. This year, with business opening, it appears that video game spending is declining amid the return of a potential recession. Nintendo, Microsoft, Sony and more have all reported declining revenues and missed earnings estimates in the past two weeks.
Nintendo reported operating profit of 101.7 billion yen ($764 million). This fell about 13.5 billion yen ($101.4 million) short of analyst expectations. Last year, Nintendo Switch sales totaled 4.45 million. This year they fell to 3.43 million. Software sales also fell from 45.3 million to 41.4 million units. PlayStation software sales fell by about 25%. Last year they sold 63.6 million PlayStation 5 and PlayStation 4 titles. This year, the number dropped to 47.1 million copies sold. Microsoft reported a $259 million drop in gaming revenue.
Publisher Activision Blizzard reported net sales of $1.64 billion, down $700 million from the same time last year. EA also reported its profit, which is positive compared to the other companies. EA’s sales increased by 22%. “Electronic Arts was wise to stick with its proven formula of monetizing popular franchises. EA has been able to conquer the sports video game market with FIFA, NFL Madden and the recent addition F1,” said Joost van Dreunen, lecturer on games at the NYU Stern School of Business. “EA proves it is good at monetization with record sales for FIFA Mobile for the quarter, highest sales for the FIFA franchise and a 40% increase in the daily average player count.”
All companies attributed the decline to the weakened supply chain caused by the pandemic. They can’t get their consoles in stores. Nintendo said that despite the issues, they expect to sell a total of 21 million units in the fiscal year ending in April.
Chief Financial Officer Hiroki Totoki said the main problem for PlayStation’s decline was meeting the demand for consoles while addressing supply chain issues. He also mentioned that fewer major games were released this fiscal year than last year. “There are two major restrictions imposed on us. One is the availability of parts and components. The other is the supply chain,” Totoki said after repeated questions about the PS5’s delivery issues. “We want to produce as many units as possible.” Totoki also attributed the decline in software sales to people getting more opportunities to move out of the house as COVID-19 infections ease in key markets.
Microsoft said the reduced demand for Xbox content and hardware, partially offset by the growth in Xbox Game Pass subscriptions, is the reason for the decline in profits. “Microsoft’s decision to take up subscriptions is timely as the new revenue stream is offsetting broader declines in software and hardware sales,” said Van Dreunen, a games business lecturer. “Subscriptions tend to provide more value to consumers during periods when the economy is weakening and inflation is high. However, it remains to be seen how Game Pass will stack up as rival Sony ramps up its offerings, and a wider range of entertainment services in adjacent categories such as video and music compete for share of the wallet.”
EA credited the supply chain issues that have affected the business, but CEO Andrew Wilson said they will be ready when the console units are replenished next year. “As the supply chain starts to ease up, we expect more and more people to pick up that next console,” Wilson said, adding that EA would invest in its sports titles to ensure it would have enough content to entertain gamers for the next eight years. . years of the current generation of consoles.
“Much of the world is no longer in lockdown,” said Laine Nooney, assistant professor and historian of video games at New York University. “There’s definitely a sense of global constriction right now. It’s pretty clear that the US – which still accounts for nearly half of all global gaming revenue – is already in a recession. Video games have always been discretionary entertainment. As costs for basic goods such as gasoline and food rise, there is less room in the budget for entertainment.”
0 Comments