The year 2020 was an interesting one for video games to say the least. Unlike the suffering faced by much of the world, video game sales thrived as a prime entertainment option during stay-at-home orders. Of course, many companies were not planning for COVID, so they were not able to take full advantage of the opportunity. The question becomes what can the industry expect for 2021 in regards to video game sales?
It was expected that sales for video game software would be down in 2020 as existing console systems were replaced by new hardware. Large publishers held off on major releases, preferring to wait until the next generation systems gained a larger base.
Major new titles in 2020 were few, but those that did release had record sales. Consumers were starving for new products and sales forecast went out the window.
The most notable product was Nintendo’s Animal Crossing: New Horizons which launched in March for the Switch right as stay-at-home orders went into place. Nintendo reported sales for New Horizons reached 26 million units in six months (by 9/30/20) significantly above powerhouses like Super Smash Bros Ultimate, Legend of Zelda Breath of the Wild, Super Mario Odyssey and the Pokemon titles.
Unfortunately for the large publishers they simply did not have a major lineup of big titles to take advantage of market conditions. Nevertheless, sales for catalog product and annual releases of existing franchises was enough to result in an uptick in revenue for most game companies.
Some of the biggest winners were some long running PC/console online titles that had social features. This included Roblox and a pay version of the mobile game Among Us. There were also products like No Man’s Sky that seemed to get a new life.
No Man’s Sky is an open-world space exploration/building game. It received lukewarm reviews upon release in 2016. However, since that time the game has been enhanced significantly. In 2020, many consumers revisited the game, setting the stage for a larger turnaround.
The 2016 release of No Man’s Sky was actually a precursor to 2020’s biggest launch, Cyberpunk 2077. No Man’s Sky had a significant marketing buildup, followed by a buggy and underwhelming product launch.
For the release of Cyberpunk 2077, it seemed no lessons were learned from the No Man’s Sky launch. DFC Intelligence will do a deeper dive into the Cyberpunk 2077 fiasco, but the basic lesson is that marketing and public relations are still important in a time when rumors and news seem impossible to control.
The PlayStation 5 and Xbox Series S/X barely needed any marketing given consumer demand for cool new hardware. However, even here there was a surprisingly large disparity between the systems. The PlayStation 5 was able to position itself as the clear system of choice prior to launch.
Of course, both new console systems were hard to find during 2020. However, this was also the case for the existing console systems, surprisingly both hardware and software.
During an end of the year channel check at GameStop, it was noted that Sony’s Spider-Man: Miles Morales was impossible to find in its physical PS4 version. However, GameStop had plenty of physical copies of the PlayStation 5 version.
This leads to an interesting challenge for 2021. Demand exceeded supply in 2020. Will that continue in 2021? Sony had an excess supply of physical PlayStation 5 titles, but was sold out of the PlayStation 4 version. What will that mix look like in 2021?
Of course, in the digital age one can simply download a title like Spider-Man. However, many consumers want a physical copy and not manufacturing enough units risk losing a sale.
DFC Intelligence will be looking hard at these issues in the first part of 2021. Market conditions are changing rapidly and there are some major issues such as 1) will the COVID-related sales spike continue…and 2) will companies rush to release product, thus creating a product glut that leads to sales disappointment?
There is also the mobile game side of the equation. Right now, the mobile game business is really a separate industry focused on low-end free-to-play products that can generate huge user numbers. However, there is some growing crossover such as the minor success of Activision Blizzard’s Call of Duty: Mobile. DFC Intelligence is continuing to look at the high-end potential of the mobile game market.
Overall, DFC Intelligence forecast for PC and console games are increasingly bullish for 2021. Record numbers are expected, it is more a question of how much growth will there be.
Stay tuned as we examine those issues!