People Are Going Out More and Spending Cash. Not So Good For Video Games.

Game Over

Recent figures from video game makers tell the story: fewer people are buying games and the hardware used to play them. Industry analysts explain there are a number of reasons why, including the easing of pandemic-related lockdowns. People are going out more often to bars, restaurants, and concerts. During the summer months they’re also taking more vacations. That means less cash spent on discretionary items like video games.

Rising prices are of course another factor in the sales slowdown. Generally speaking, inflation has put pressure on retail spending, which includes video games and consoles. Activision Blizzard (ATVI) reported lower sales and profit in the quarter ended June 30. Both Take-Two Interactive (TTWO) and Electronic Arts (EA) have reported slower sales growth this year in comparison to 2021.

Chips and Hardware

It’s not just game sales that are slipping. Americans are also buying video game hardware at a reduced rate. Nintendo (NTDOY) reported lower net sales and operating profit in the second quarter. Xbox maker Microsoft (MSFT) and Playstation maker Sony (SONY) reported lower video game revenue over the same period.

Of course chips are an important component of video game consoles, and the downstream effect has some manufacturers losing business. For the second quarter, Advanced Micro Devices (AMD) reported lower sales of its gaming graphics cards. This week NVIDIA (NVDA) noted gaming revenue has dipped in recent weeks, adding it now expects to miss its sales forecast.

Play the Hits

Analysts note while inflation and a preference for experience-based spending has taken a bite out of video game sales, a lack of blockbuster releases has also contributed to malaise in the space. Last holiday season, Activision released a new Call of Duty game, and Electronic Arts put out a new edition of its Battlefield franchise. Neither were overly popular, limiting sales.

Still, analysts say compared to a year ago more people are traveling and engaging in activities that were put on pause during the pandemic. Various market-research firms have predicted video game sales will decline 8.7% for 2022 as a whole on an annualized basis. That would mark the first such decline since 2016. It seems the constant imploring from parents to shut that TV off and get outside to play have taken root — much to video game companies’ chagrin.

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James Flippin ABOUT James Flippin James Flippin is the son of a financial advisor who grew up hearing and learning about bond yields, interest rates, the stock market, and the ins and outs of Wall Street. After stints as a licensing and business broker for Marcus and Millichap in New York City, James moved into broadcasting and became a reporter and anchor. He covered crime, politics, finance, and tech at NBC News Radio while working part-time as a producer for SiriusXM. James graduated from the University of Delaware with a bachelor’s degree in political science and economics. He's also an accomplished podcaster with over 10-years of experience.

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