Can the Videogame Industry Bounce Back From Its Recent Lows? – Zacks Investment Research

The dream run for the videogame industry seems to have come to a sudden halt. After a solid 2020 and 2021, when sales hit record highs, videogame makers have struggled to hold on to the momentum in the second quarter as well as the first half of this year.

While soaring commodity prices have made people cut down on consumer discretionary spending, the videogame market, which was thriving until some time back, is facing several other challenges. According to market research firm NPD, videogame sales slumped both in the first half and second quarter, as gamers have drastically cut down on buying both consoles and gaming accessories. Moreover, not too many big games have been launched in recent times, waning the interest of gamers.

Videogame Sales Decline in Q2

According to the latest report from NPD, videogame sales fell by $1.78 billion in the second quarter of 2022, with overall spending on videogames in the United States totaling only $12.35 billion. This reflects a 13% year-over-year decline.

This comes as both Microsoft Corporation (MSFT Free Report) and Sony Corporation (SONY Free Report) reported revenue declines in gaming in their recent quarterly results. Almost all big videogame manufacturers are shying away from launching new consoles or releasing new games and reported a sharp decline in revenues in the second quarter.

SONY reported a year-over-year decline of 2% in its gaming revenues in the April-June quarter. Sony Corporation’s operating profit declined 37%, with the company now painting a gloomy picture. Sony also cut its profit forecast by 16% for the full year.

The story at Microsoft isn’t any different. MSFT said that its revenues at its gaming unit declined 7% year over year in the second quarter. Microsoft also reported a 6% decline in its content and services revenues, while Xbox console revenues declined 11% year over year in the second quarter. Microsoft has a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Activision Blizzard (ATVI Free Report) , which is being acquired by Microsoft, came up with even worse numbers. ATVI reported a 70% decline in its net profit, while its revenues plummeted 29%. While Activision Blizzard blamed the massive decline on poor sales of its latest title of the popular franchise Call of Duty, there are several other factors that have been posing as major challenges for all game makers.

Nintendo (NTDOY Free Report) , one of the top performers during the peak of the pandemic, saw a 15% decline in operating profit in the second quarter. NTDOY managed to sell only 3.43 million units of its portable Switch console, declining 23% year over year. Also, Nintendo’s software sales declined 8.6% year over year to 41.4 million in the April-June period.

Electronic Arts (EA Free Report) was the only company that reported profits. EA reported a 50% jump in its profits, while its revenues climbed 14% year over year in the …….

Source: https://www.zacks.com/stock/news/1969009/can-the-videogame-industry-bounce-back-from-its-recent-lows

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