NPD Group estimates that spending on video games fell $1.78 billion last quarter, down 13% on the year. Mobile content contributed the most to the quarterly decline according to NPD, falling 12% on the year. Hardware and accessories declined 1% and 11%, respectively.
If you've been following the corporate earnings reports you probably saw some of this coming.
Sony reported sales of the PS5 rose 4 percent on the year-- which is far from booming and game software sales fell 26%. Sony expects the market to continue to slow. It revised its annual profit forecast down 16 percent.
Microsoft didn't fare any better. Xbox hardware revenue fell 11% on the year, Xbox content and service revenue fell 6 percent and overall gaming revenue dropped 7 percent.
And Nintendo reported Wednesday that Switch sales fell 23 percent last quarter. Nintendo software sales also fell 8.6 percent.
Why the drops?
There were a few reasons companies gave for the shortfall. Sony and Nintendo both cited supply chain issues and both said they believe it will not be a problem by autumn.
Sony and Microsoft both cited reduced numbers of people playing games, with Sony citing a 3% drop in monthly active users on the PlayStation network.
But there was one bright spot.
NPD noted the one segment of the gaming industry that rose during the last quarter was non-mobile subscriptions PlayStation Plus subscribers are up to 47.3 million, from the 46.3 million at the same point last year, but down from the peak of 48 million in fiscal Q3 2021. Microsoft didn't update its Cloud Gaming or Game Pass numbers. And it's worth noting that Amazon Luna will be part of Samsung's Gaming Hub on 2022 smart TVs.
So to sum up, people are buying fewer games and spending less time playing them, but are spending more on subscriptions. The pivot to subscriptions by Microsoft, Gogole (which is NOT shutting down Stadia), Amazon, Nvidia and finally Sony seem to be the right direction at the moment.
In fact of Google doesn’t blow it, they (and Nvidia) are positioned to be the platform winners in the space by helping latecomers get into the subscription game fast. Stadia could in fact be Google’s AWS moment. Or they might never give it focus and it will go the way of Google Plus. Hard to say.