Video game Forecast

As Warner Bros Hogwarts Legacy becomes the latest title to announce record sales it is clear that the video game industry is back on track.  Consumers are in a buying mode, and it is up to companies to execute by delivering quality products.  Blaming the economy is no longer a valid excuse.

PlayStation 5 is Now Available!

Last year was tough for the video game industry as hardware shortages continued and products were delayed.  The limited availability of the PlayStation 5 was a major issue because it was supposed to be a prime platform for new software.  Instead, the installed base was limited due to product shortages.

In the fourth quarter, Sony shipped 7.1 million units.  For the first quarter of 2023, Sony plans to ship an additional 6 million units which will be a record for a first quarter.  This will still have PlayStation 5 shipments behind PlayStation 4 at the same period in the lifecycle.  However, DFC Intelligence is forecasting that PlayStation 5 sales will start to match PlayStation 4 sales by the second half of 2023.

As PlayStation 5 finally becomes widely available there are many signs that consumer spending continues to be strong.  Warner Bros. Games announced Hogwarts Legacy sold more than 12 million units and had $850 million in sales in its first two weeks.  That figure is particularly notable because the game was only available on PlayStation 5, Xbox X/S, and PC.  Versions for the more established PlayStation 4, Xbox One, and Nintendo Switch do not launch until later.

Many Sales Records Continue to be Broken

Other games have had similar success in recent months.   Call of Duty: Modern Warfare II broke records with Activision Blizzard claiming its $800 million sell-through in the first three days was not only a franchise record but the “highest-grossing entertainment opening of 2022.”  Blizzard also had success with Overwatch 2 and the upcoming Diablo IV is looking strong.

Nintendo set records with the new Pokemon titles (Scarlett/Violet) selling over 20 million units.  Including 10 million units in the first three days.  Nintendo claimed this was a record for any software on any Nintendo platform.  Meanwhile, Splatoon 3, sold 6 million units in Japan online after its September launch.

Of course, some products did not sell as well as expected.  That is always the case in the entertainment business.  Some products do not live up to expectations.  However, blaming the economy is simply not an excuse, when many products are breaking records and consumer spending on video games appears to be robust.

In the recently released DFC Intelligence forecasts the PlayStation 5 software economy is expected to grow 36% in 2023 while the Xbox Series X/S is expected to grow 26%.  This will more than offset declines in the PS4 and Xbox One.  Meanwhile, Switch revenue is expected to decline but not by that much.  It is worth noting that in 2022, Nintendo software sales set a record and were up 8% even as hardware sales declined.

These numbers are all good news, but the mass media has tended to focus on declines and layoffs.  The reality is COVID continued to have an impact in 2022 as a primary driver of hardware shortages and product delays due to major disturbances in product development cycles.  Some of these issues continue into 2023.  Nevertheless, for companies that are able to release quality products, consumers are ready to spend in record numbers.

The new DFC console forecasts have just been released.  For a full discussion of these issues and recent company performance, see the latest DFC Intelligence quarterly video game market overview.