It’s been rough few months for video game sales in the European markets as there’s been a shortage of consoles and a lack of new game releases.
In July, according to Game Industry.biz, sales of physical and digital video games dropped 38% year-over-year to 8.62 million units sold. The best-selling game was F1 22 and the highest charting new release was Xenoblade Chronicles 3.
As for game console sales, year-to-date sales in the European markets are down over 26%. The biggest factor creating the decline in sales is the shortage of consoles like PS5 and Xbox Series S and X. That said, Nintendo Switch sales have increased, as it has remained the most popular console in the region.
Sales of gaming accessories have also dropped. Just 8.99 million add-on products, including toys-to-life, were sold. This figure was down 9.4% compared to July of 2021. The PS5 DualSense Controller was the top accessory sold. Furthermore, only 11.6 million points cards were sold, which was down 5.9% year-over-year. The PlayStation Wallet Top-Up card continues to be the most popular points product.1
While European video game and console sales were down, Nvidia Corp.—a high-end graphics cards maker—had some bad news for the video game industry. In its financial results, the company said that a slowdown in the gaming industry is impacting the company’s financial performance. Aside from Nvidia, other major gaming companies like Microsoft and Sony have also recently reported weaker demand and a dismal outlook.
The CFO of Nvidia, Jensen Huang, said that throughout the recent quarter, the company saw a significant decline in gaming products. Nvidia’s gaming revenue fell 44% in the most recent quarter and 33% year-over-year.2
Activision Blizzard and Microsoft’s Acquisition
Activision Blizzard, Inc., a developer and publisher of video games, was recently in the headlines as the U.K Competition and Markets Authority (CMA) said it was concerned that its acquisition by Microsoft Corp. could lessen competition in gaming consoles, multi-game subscription services, and cloud gaming services.
Not too long ago, in a letter to employees, the CEO of Activision Blizzard, Bobby Kotick, said that he expects the deal with Microsoft to go through. However, it is a long process. He said that Activision Blizzard has entered into the second phase of its review with U.K. regulators.3
Neowiz Launching New Video Game
Neowiz is an online game publisher based in South Korea. Recently, the company said that it will launch “Lies of P”, a role-playing game (RPG) based on a dark retelling of Pinocchio. This was selected as one of the most highly anticipated PlayStation games at Gamescom 2022.
According to Oh Dong-hwan, analyst at Samsung Securities, Neowiz may sell two million units of the game annually, and this could bring in a revenue of between $20 billion won and 90 billion won (between $19 million and $86 million CAD).4
Investing in Video Games with HERO ETF
Interested in a diversified approach to investing in video games? Evolve E-Gaming Index ETF (TSX Ticker: HERO) may be the right investment for you. HERO ETF gives investors access to equity securities of companies, listed domestically and globally, with business activities in the gaming industry. This ETF invests in companies involved in hardware, software and services relating to the electronic gaming industry. Learn more about this fund by clicking here.
HERO ETF PORTFOLIO STRATEGY AND ACTIVITY
For the month of August, Ubisoft Entertainment made the largest contribution to the Fund, followed by Activision Blizzard Inc. and Krafton Inc. The largest detractors to performance for the month were Nintendo Co Ltd, followed by Nexon Co Ltd., and Applovin Corp. On the last rebalance, these securities were added to the portfolio: Neowiz, Nexon Games Co Ltd., Gamania Digital Entertainment Co Ltd, Digital Bros SpA, Playstudios Inc., and Sciplay Corp. By weight, the Fund’s largest geographic exposure was to the United Sates, followed by Japan and China.
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- Drig, C, “Video game sales drop in July as release schedule dries up | European Monthly Report,” Game Industry.biz, August 12, 2022; https://www.gamesindustry.biz/video-game-sales-drop-in-july-as-release-schedule-dries-up-european-monthly-report.
- Schuetz, M., “Nvidia disappoints with big miss in revenue on slump in gaming,” BNN Bloomberg, August 8, 2022; https://www.bnnbloomberg.ca/nvidia-disappoints-with-big-miss-in-revenue-on-slump-in-gaming-1.1802992.
- Gelsi, S., “Activision CEO still sees Microsoft deal closing by June,” Market Watch, September 1, 2022; https://www.marketwatch.com/story/activision-ceo-still-sees-microsoft-deal-closing-by-june-2022-09-01.
- “Neowiz shares fly on high expectations for Playstation label ‘Lies of P’,” Pulse, August 26, 2022; https://pulsenews.co.kr/view.php?year=2022&no=756151.