U.S. video game spending fell 5% year-over-year in June, says Circana "Game On" is The Fly's weekly recap of the stories powering up or beating down video game stocks.
CIRCANA JUNE RESULTS: Circana analyst Mat Piscatella said that projected U.S. spending on video game hardware, content and accessories totaled $4.6B in June 2024, falling 5% when compared to a year ago. First half spending grew 1% compared to the first half of 2023, reaching $27.3B. Content spending dropped 2% in June vs. YA, to $4.1B. June mobile content spending growth of 12% combined with a 4% increase in non-mobile subscription content spending was ultimately offset by a 26% drop in console content spending. June video game hardware spending fell 37% when compared to a year ago, to $287M, and finished 1H 2024 31% lower vs. YA. During the first half of 2024 Switch (NTDOY) hardware spending was 48% lower than YA, while PlayStation 5 (SONY) declined by 28%, and Xbox Series (MSFT) fell 18%. PlayStation 5 again led the month's hardware market in unit and dollar sales. Nintendo Switch once again finished 2nd in unit sales, while Xbox Series ranked 2nd in dollars. These same rankings were reflected across 2024's total first half. June spending on Accessories fell 7% when compared to a year ago, to $204M. Growth in the Remote Play Device segment was offset by a 9% drop in Gamepads.
On the software side, Piscatella said Bandai Namco's (NCBDY) "Elden Ring" was the best-selling video game of June 2024 in the U.S., returning to the top spot on the best-selling titles chart for the first time since it led the market during the May 2022 period. Sales of "Elden Ring" were boosted by the release of the "Shadow of the Erdtree" expansion. "Elden Ring" was the best-selling game of June 2024 across each of the PlayStation, Xbox, and Steam ecosystems. The release of Square Enix's (SQNXF) "Kingdom Hearts Integrum Masterpiece collection" on Steam helped it reach 3rd on the June 2024 best-selling titles chart. It previously had been available only on Switch via Cloud. Other top-selling premium games for the month of June in the U.S. were Activision's "Call of Duty: Modern Warfare III," Sega's (SGAMY) "Shin Megami Tensei V: Vengeance," Warner Bros. Discovery's (WBD) "Hogwarts Legacy," Sony's "MLB The Show 24," Nintendo's "Luigi's Mansion 2 HD," Electronic Arts' (EA) "EA Sports FC 24," and Microsoft's "Sea of Thieves."
EA EARNINGS: Last week, Electronic Arts reported Q1 results, with GAAP earnings per share declining year-over-year and net bookings or the quarter coming in lower than Wall Street estimates, though CEO Andrew Wilson said the company beat its net bookings guidance for the quarter. "EA delivered a strong start to FY25, beating net bookings guidance as we continue to execute across our business," said Wilson. "Our focus on delivering bigger, bolder, and more connected experiences for our players has never been sharper and is illustrated by the record-breaking launch of EA SPORTS College Football 25 as we head into another historic Q2 sports season at EA." Looking ahead, the company provided net bookings guidance for Q2 and fiscal 2025.
Following the report, at least six securities analysts raised their price targets on the stock, with Raymond James analyst Andrew Marok saying the results were ahead of expectations driven by "Madden" outperformance coupled with less severe declines in "EA Sports FC" and "Apex Legends" on a lighter release slate, the analyst tells investors in a research note. The company's September 17 Investor Day event should provide more visibility into some of the company's key pillars of their long-term strategy, including the creation and fostering of engagement-boosting communities around the company's largest franchises, Raymond James said. Additionally, Stifel analyst Drew Crum noted that management's outlook for Q2 "suggests record performance for the period, largely fueled by what appears to be a strong launch for College Football 25."
NINTENDO RESULTS: Nintendo (NTDOY) also issued Q1 results last week, reporting year-over-year declines in Q1 earnings per share, revenue, and operating profit. The company sold 2.1M Switch consoles during the quarter, compared to 3.91M in the same period last year, and reiterated its financial forecasts for FY25. "For hardware, by continuing to convey the appeal of Nintendo Switch, we try to not only put one system in every home, but several in every home, or even one for every person," the company said. "Another objective is to continually release new offerings so more consumers keep playing Nintendo Switch even longer and we can maximize hardware sales. For software, in addition to Nintendo World Championships: NES Edition, which was released in July, we have other titles planned for release, such as Emio – The Smiling Man: Famicom Detective Club (August) and The Legend of Zelda: Echoes of Wisdom (September). Other software publishers also plan to release a wide variety of titles, and we will strive to invigorate the platform by continually introducing new titles in addition to the existing titles."
Looking to software sales, Nintendo noted that new games "Paper Mario: The Thousand-Year Door" and "Luigi's Mansion 2 HD," which both released during Q1, sold 1.76M units and 1.19M units, respectively, and that software sales totaled 30.64M units during the quarter. "The total number of million-seller titles during this period reached three, including titles from other software publishers," the company added. "Hardware sales totaled 2.10 million units, and software sales totaled 30.64 million units. Hardware and software sales in the first quarter of last fiscal year were substantially driven by the May 2023 release of The Legend of Zelda: Tears of the Kingdom, so compared to then, hardware sales were down 46.3% and software sales were down 41.3% year-on-year. Turning to our digital business for our dedicated video game platform, digital sales totaled 80.7 billion yen, down 32.6% year-on-year, mainly due to a decrease in the sales of Nintendo Switch downloadable versions of packaged software."
BUNGIE LAYOFFS: In non-earnings news, Sony's Bungie announced that it will eliminate 220 roles at the "Destiny" maker, representing about 17% of the game studio's workforce. "This morning, I'm sharing with all of you some of the most difficult changes we've ever had to make as a studio," said Bungie CEO Pete Parsons. "Due to rising costs of development and industry shifts as well as enduring economic conditions, it has become clear that we need to make substantial changes to our cost structure and focus development efforts entirely on Destiny and Marathon.That means beginning today, 220 of our roles will be eliminated, representing roughly 17% of our studio's workforce.These actions will affect every level of the company, including most of our executive and senior leader roles. Today is a difficult and painful day, especially for our departing colleagues, all of which have made important and valuable contributions to Bungie.Our goal is to support them with the utmost care and respect. For everyone affected by this job reduction, we will be offering a generous exit package, including severance, bonus and health coverage. I realize all of this is hard news, especially following the success we have seen with The Final Shape.But as we've navigated the broader economic realities over the last year, and after exhausting all other mitigation options, this has become a necessary decision to refocus our studio and our business with more realistic goals and viable financials. We are committing to two other major changes today that we believe will support our focus, leverage Sony's strengths, and create new opportunities for Bungie talent. First, we are deepening our integration with Sony Interactive Entertainment, working to integrate 155 of our roles, roughly 12%, into SIE over the next few quarters. SIE has worked tirelessly with us to identify roles for as many of our people as possible, enabling us together to save a great deal of talent that would otherwise have been affected by the reduction in force. Second, we are working with PlayStation Studios leadership to spin out one of our incubation projects - an action game set in a brand-new science-fantasy universe - to form a new studio within PlayStation Studios to continue its promising development."
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