The holidays won’t save the game industry’s terrible year

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Wednesday, November 9, 2022

The holidays won’t save the gaming industry from its terrible year

Global video game sales have plummeted in 2022, and experts predict that even the holiday shopping season won’t save the industry from its terrible year.

Pandemic lockdowns fueled the growth of video games last year and into 2020, as couch-locked gamers sought a distraction from COVID-19. From 2019 to 2021, the global market for video game content and services grew by 26%, from $151 billion to $191 billion, according to Ampere Analysis.

This growth slowed in 2022 as the pandemic subsided and the economy weakened. Microsoft (MSFT), Sony (SONY), EA (EA) and Take-Two (TTWO) each saw lower year-over-year sales. Nintendo (NTDOY) says it expects to sell 2 million fewer Switch consoles this year due to continued chip shortages, although it has raised its sales forecast thanks to the weak Japanese yen. Even mobile game sales are down, with NPD Group predicting a 9% decline in Q3 2023 compared to the same period a year earlier.

While the holiday season traditionally brings huge game sales, experts are predicting a muted fourth quarter due to a lack of exciting new content. We’d usually see hot titles for the holidays, but pandemic-related delays have pushed many games into 2023. Yes, the pandemic has eased enough to get people off their couches – but it’s still creating problems in the supply chain. These disruptions could deal a blow to an industry that is already suffering from year-on-year comparisons to its pandemic-induced highs in 2021.

“This holiday season is designed to be a natural disappointment purely from a quantity perspective,” Jefferies analyst Andrew Uerkwitz told Yahoo Finance. “If you look at the number of games from last year to this year, it’s actually down. There have been over 100 games delayed in the last 24 months. And those are publicly announced delays.

Few games, but many enthusiastic players

Game companies traditionally release their biggest titles before the holidays to spread their hits during the busiest shopping season of the year.

A man walks a Nintendo Switch advertisement at a chain of electronics stores in Tokyo on Oct. 13, 2021. Japanese video game maker Nintendo posted a 34 percent increase in profit in the fiscal first half on Tuesday, Nov. 8, 2022, as products for its Switch console like

A man walks a Nintendo Switch advertisement at a chain of electronics stores in Tokyo on Oct. 13, 2021. Japanese video game maker Nintendo posted a 34 percent increase in profit in the fiscal first half on Tuesday, Nov. 8, 2022, as products for its Switch console like “Splatoon 3”, a paint shooter, sold well. (AP Photo/Koji Sasahara)

Last year, the gaming giants launched a slew of big-name titles, including ‘Halo Infinite’, ‘Battlefield 2042’, ‘Metroid Dread’ and ‘Call of Duty Vanguard’, to name a few. . While “Battlefield” and “Call of Duty” underperformed expectations, the titles were still among the best performers of the year in terms of sales in the United States. This year will be different.

“As it happens, this holiday season, we don’t have a very big release schedule,” Wedbush analyst Michael Pachter told Yahoo Finance. “There is no ‘Cyberpunk’. There is no ‘battleground’. We have the games that come out every year, which are ‘FIFA’ and ‘Call of Duty’.”

“God of War Ragnarok” and “The Callisto Protocol,” two highly anticipated games that will launch on Wednesday and in December, respectively, could help boost sales, but there’s no guarantee they’ll lift the industry overall.

Certainly, people are always looking for games to play. Activision Blizzard’s “Call of Duty Modern Warfare II,” released in October, sold $1 billion in copies in its first 10 days on the market. At EA, some 10.3 million players jumped on “FIFA 23” in the game’s first week of availability in September.

Even so, EA cut its full-year net booking forecast on the strong US dollar, which is hurting overseas sales, from $7.89 billion to $8.1 billion at 7.65. billion to $7.85 billion.

FILE - The Activision Blizzard booth is shown on June 13, 2013 during the Electronic Entertainment Expo in Los Angeles.  Microsoft is buying Activision Blizzard on Tuesday, January 18, 2022, for $68.7 billion to gain access to hit games like Call of Duty and Candy Crush.  The all-cash deal will allow Microsoft to accelerate mobile games and provide it with building blocks for the metaverse, or virtual environment.  (AP Photo/Jae C. Hong, File)

Activision Blizzard sold $1 billion in copies of “Call of Duty” in 10 days this year. (AP Photo/Jae C. Hong, File)

Players will have to wait until next year to get their hands on new titles. According to Uerkwitz, more than 100 games originally slated to release in time for the holiday season are being delayed until 2023, either due to quality checks or COVID-related slowdowns.

“And these are publicly announced delays,” Uerkwitz explained. “These are not games that have been quietly delayed internally or otherwise. And so just a lack of quantity of high-profile AAA games, I think, was a big part of the year-over-year decline of PC and console.

Then there’s the drop in mobile game sales. According to SensorTower, spending on mobile games fell 6% year-over-year to $21.1 billion in the first quarter of 2022 and 6.9% year-over-year in the second quarter to $20.1 billion. .

“The reason 2022 will be down overall isn’t necessarily that consoles and PCs had a tough year, although they did, it’s because mobile gaming seems to be on the right track. to drop 6% or 8%,” Lewis Ward, IDC director of gaming, eSports, and VR/AR research, told Yahoo Finance. “If that happens, even though consoles and PC have had a great year, we could probably still be down year over year.”

PlayStation's PS5 is displayed at a GameStop in Manhattan, New York, U.S., December 7, 2021. REUTERS/Andrew Kelly

PlayStation’s PS5 is displayed at a GameStop in Manhattan, New York, U.S., December 7, 2021. REUTERS/Andrew Kelly

That doesn’t mean the holiday season will be a complete failure. According to Pachter, if there’s a year-over-year drop in sales, it’s likely to be between 1 and 2 percent. That said, even a small drop means that the overall downward sales trend for the year will not change.

A brighter 2023

While the holiday season could be disappointing for the gaming industry, the year ahead should offer some relief despite high inflation and exchange rate headwinds. Indeed, a large number of big-name games are expected to hit the market in 2023.

“Assuming recessionary concerns dissipate and inflation returns to either below a reasonable level of control or back to a low single-digit norm in 2023, the basis on which the gaming industry stood before COVID will likely reassert itself,” Ward explained.

High-profile games slated for launch in 2023 include Nintendo’s “Legend of Zelda: Tears of the Kingdom,” Ubisoft’s “Skull and Bones,” Activision Blizzard’s “Diablo 4,” Bethesda’s “Starfield,” and many others.

These titles alone will likely sell millions of units. Add in annual releases like “Madden” and gamers dumping their money on online games like “Call of Duty: Warzone 2.0,” and 2023 will be much better than the game’s terrible 2022.

By Daniel Howley, technical writer at Yahoo Finance. follow him @DanielHowley

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