Video game giants Sony, Microsoft, and Nintendo posted low figures for Q2 2022 due to inflation, semiconductor shortages and the end of lockdowns.
The video game industry experienced a lull in sales in Q2 2022, according to a CNBC report. This setback is primarily due to the fact that more people are now predisposed to outdoor activities instead of playing video games indoors. According to Sony’s chief financial officer, Hiroki Totoki during a company earnings call in July:
“The growth of the overall game market has recently decelerated as opportunities have increased for users to get out of [the] home as Covid-19 infections have subsided in key markets.”
The video game sector thrived during the height of the pandemic because people had to remain indoors. With limited options while quarantining, a wave of consumers resorted to gaming for entertainment and as a way to pass the time. However, as lockdowns began to ease gradually, and with more options opening up to people, interest in gaming also began to let up. Furthermore, this unsavory development intensified once inflation also began to impact consumer spending habits.
From a production standpoint, the ongoing paucity in semiconductor equipment supply is also posing headwinds to the gaming industry.
For Q2 2022, video game giants Sony, Microsoft, and Nintendo each reported disappointing results in their respective markets. This reflected the relatively lower figure of $12.4 billion, or 13% year-on-year drawdown that Americans spent on games during Q2.
Video Game Heavyweights Q2 2022 Figures
Sony said its gaming unit sales for the period ended June 30th declined 2% YoY, with operating profits sinking approximately 37%. As a result, the Japanese multinational conglomerate corporation has shaved 16% off its full-year profit forecast. Furthermore, reports also state a 15% reduction in total gameplay time by Sony’s PlayStation player base in Q2. This turned out to be substantially lower than the company initially forecast.
Xbox, PlayStation’s biggest competitor, saw a 7% YoY drop in overall gaming revenues for the quarter. Sales of the Microsoft-produced consoles also declined 11%, while there was a 6% drawback in gaming content and services revenues.
In addition to reduced engagement hours, Microsoft chief financial officer, Amy Hood, stated that declines were due to “monetization in third-party and first-party content.”
Foremost video game company Nintendo experienced a 15% decline in operating profit for the second quarter. According to the Kyoto-based gaming giant, this was due to the global semiconductor shortage that hampered the production and sales of its Switch console. Nintendo sold 3.43 million units of its flagship console in the second quarter, representing a 23% decline YoY. In addition, the company’s software sales also dropped 8.6% to 41.4 million units.
Michael Pachter, managing director at Wedbush Securities, offered a perspective-driven take on the underwhelming gaming industry numbers. According to him, Q2’s underperformance seems more apparent because it did not match the expectations promised by Q1’s soaring numbers.
“Everyone saw record numbers during shelter-in-place, with catalog sales of older titles leading the way. That set up an impossible comparison, and the year-over-year declines were well telegraphed and were expected,” said Pachter.