Video Game Sales Up in Feb, Software Sales Dismal - Analyst Blog
March 14 2014 - 2:00PM
Zacks
Video game software sales continued
to disappoint in Feb 2014. Software sales declined 9.0% to $318.0
million according to Venturebeat.com, which tracks video games
market research firm NPD’s monthly data. However, according to The
Wall Street Journal (also quoted NPD data), software sales actually
declined 11.0% to $328.0 million in February.
Although the difference between the sales figures is immaterial, it
is easy to note the fundamental problem that is crippling sales.
Games for new consoles from big players such as Electronic
Arts (EA) and Activision Blizzard (ATVI)
have failed to offset the plunge in retail unit sales for older
hardware.
NPD cited few game releases in the month as another reason behind
the dismal software sales. Moreover, gamers continued to spend on
new consoles from Microsoft (MSFT) and
Sony (SNE), which further affected software sales.
Hardware sales soared 42.2% year over year to $347.0 million.
Total retail sales increased 9.0% year over year to $887.0 million.
NPD figures do not include digital and online sales.
Activision’s Call of Duty: Ghosts retained the #1
position. The Lego Movie Videogame from Warner Bros.’
subsidiary TT Games grabbed the #2 position, pushing
Take-Two Interactive’s (TTWO)
NBA2K14 to #3 spot.
Nintendo announced that it sold 200K and 180K
units of 3DS role-playing game Bravely Default, and Wii
U’s Donkey Kong Country: Tropical Freeze, respectively.
The strong performance from Donkey Kong Country: Tropical
Freeze drove Wii U sales by 25.0% from the year-ago
period.
Microsoft announced that it has sold 258K Xbox Ones in February.
Per NPD, Sony’s PlayStation 4 sold more units than Xbox One, but
earned less revenues in dollar terms. On a month-over-month basis,
most of the hardware consoles achieved double-to-triple digit
growth in the month.
Digital Games Sales
According to market research firm Super Data, the highly
anticipated launch of EA’s Titanfall (finally hit stores
on Mar 11, 2014) negatively impacted digital game sales in
February. This, coupled with sluggish social gaming performance,
overall digital sales declined 5.0% month-over-month to $959.0
million. However, on a year-over year basis, digital sales jumped
17.0%.
Revenues from social games decreased to $167.0 million in February.
Zynga’s (ZNGA) Farmville
dropped to #3, while International Game
Technology’s DoubleDown Casino grabbed the #2
position.
Average revenue per user of King Digital’s Candy Crush Saga
remained almost flat at 58 cents in both January and February,
while Supercell’s Clash of Clans increased from $1.29 to $1.34
during the same period.
Downloadable content (DLC) revenues surged 23.0% year over year to
$291.3 million. Revenues from free-to-play games jumped
approximately 27.0% from the year-ago quarter to $584.8
million.
Our Take
We expect video game retail sales to improve slightly in 2014 due
to strong unit sales of new consoles from Microsoft and Sony.
Although we expect retail software sales to increase in 2014 (due
to new game releases), the long-term outlook remains bleak.
According to PwC, worldwide console game sales are expected to grow
4.2% to $26.0 billion in 2013 and 6.4% in 2014. However, this is
much slower than the 28.0% growth reported in 2007, after the
release of Xbox 360 and PlayStation 3 consoles.
We believe slow software sales growth reflects the ongoing consumer
transition to smartphones and tablets. We expect increasing
revenues from mobile and DLCs to drive digital revenues, going
forward. Mobile has strong growth potential due to improving gaming
quality, which is a major factor behind higher user spending.
Among the traditional gaming companies, we believe EA, Activision
and Take-Two Interactive have significant growth opportunities due
to their innovative product pipeline in the near term. However,
market fragmentation remains a major near-term headwind.
We believe Titanfall will boost EA’s sales in March. The
game’s exclusive availability on Xbox One will boost the consoles’
unit sales, driving Microsoft’s near-term revenues.
Currently, Microsoft has a Zacks Rank #2 (Buy). Take-Two has a
Zacks Rank #2 (Hold), while EA and Activision carry a Zacks Rank #3
(Hold).
ACTIVISION BLZD (ATVI): Free Stock Analysis Report
ELECTR ARTS INC (EA): Free Stock Analysis Report
MICROSOFT CORP (MSFT): Free Stock Analysis Report
SONY CORP ADR (SNE): Free Stock Analysis Report
TAKE-TWO INTER (TTWO): Free Stock Analysis Report
ZYNGA INC (ZNGA): Free Stock Analysis Report
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