The last few years have not been great for hardware sales; gamers are waiting for new consoles from Sony and Microsoft later this year and even Nintendo’s Switch is reaching its peak. In the year to the end off March total console sales were 46m – down 9% from the 50m of they year before.
In total we spent $39.3b on gaming products, 3% less than the year before. However software has been doing better than hardware for some time (see my Figure above). In the year sales were down 3% to $19.6b, although they grew by 4% in Q1 – partially due to the lockdown in place in many countries to stem the spread of Covid-19.
At a regional level the Americas remain top, ahead of EMEA and Asia Pacific in terms of spending on gaming (see my Figure above). The slight uptick in business in Q1 2020 shows the growing importance of these products at a time when many were forced to stay at home due to the pandemic.
Mainly due to product life cycles Nintendo was the market leader in the year to the end of March (see my Figure above). On the software side Activision Blizzard and Electronic Arts have the advantage of designing games for PCs alongside those made under license for consoles. Microsoft could grow its software business if it decided to do the same, although that would have a negative impact on its Xbox sales of course.
The three hardware suppliers have done a number of things to help during the pandemic and two have plans for new products to be introduced later in 2020. In particular:
- Sony – in April set up a $100m relief fund mainly in medical, education and creative content fields. It offered its customers two free games during the pandemic and slowed software download speeds in the US and Europe to reduce their effect on vastly increased Internet speeds. Has announced the Playstation 5, which will be launched later in the year.
- Nintendo – allows employees in America to work from home. Demand for the Switch reported to have been strong, resulting in shortages.
- Microsoft – The new Xbox X console (based on AMD multi-core CPUs) has been announced for shipment the end of the year.
Backward compatibility has helped Microsoft to transition easily from one model to another (I show cumulative annual shipments by quarter in my Figure above and in the subsequent two charts below).
I expect the Xbox X will take off quickly from the Xbox One from its introduction for the Xmas season this year.
Lack of compatibility between models has allowed Nintendo to make huge advances in the scope and function of its software; however it’s also led to stochastic peaks and throughs in its hardware business (see my Figure above). Its Switch is now approaching the annual shipmen levels of the Wii a decade ago. The loss of revenue from its late introduction was eased by the Wii U, which was essentially a ‘mid range kicker’.
Sony (like Microsoft) has built backward compatibility into its new consoles, which has allowed it to build relatively stable annual shipments. Nevertheless its failure to renew the Playstation Portable has given the whole mobile gaming market to Nintendo.