How Video Games Helped Microsoft And Sony Turn In Strong Quarters

Video games were seen as one of the biggest winners from the pandemic and the related stay-at-home orders around the world. New gaming figures and quarterly reports from Sony and Microsoft suggest strong growth could continue ahead.

NPD data shows video game spending increased 30% year-over-year in the U.S. in the first quarter. The revenue was driven by year-over-year gains of 25% for content, 42% for accessories and 82% for hardware.

For reference, video game industry sales were up 27% year-over-year in 2020. The new figures suggest that the beginning of 2021 could be even stronger for video game-related companies.

“We are also seeing cyclical gains from the November launches of both the Playstation 5 and Xbox Series consoles,” analyst Mat Piscatella said of the growth of video games during the pandemic.

Sony Group: In the last fiscal year, Sony Group SONY saw its game and network sales post a 34% year-over-year increase on higher gaming software sales and increased hardware in connection to the launch of the Playstation 5.

The Playstation 5 has sold 7.8 million units through March 31, compared to 7.6 million units of the Playstation 4 in the same time period last year. The company reported that 3.3 million Playstation 5s were shipped in the fourth quarter. 

Niko Partners senior analyst notes that the gaming segment turned in its most profitable year in fiscal 2020, but it could have been higher if the console was not priced lower than manufacturing costs.

The company sees fiscal 2021 sales increasing from the previous year for the gaming segment with an increase in hardware unit sales. For reference, Sony sold 58.4 million first party games in the last fiscal year.

Sony has sold 115.9 million Playstation 4 units as of March 31, and the model is nearing the end of its lifecycle.

Another catalyst to watch could be the launch of the Playstation 5 in mainland China on May 15.

Related Link: Could Sony Be Betting Heavier On Mobile Games, New Job Posting Suggests So

Microsoft Corporation: Third quarter Xbox revenue for Microsoft Corporation MSFT was up 34% year-over-year. Total gaming revenue was up 50% year-over-year in the third quarter.

Xbox hardware was up 232% year-over-year in the third quarter. Demand was higher than supply for Xbox consoles, Ahmed reported.

This was the best fiscal third quarter for the gaming division since the company began breaking out the segment six years ago.

Another piece of the gaming segment is Minecraft, which Microsoft acquired, which had 140 million monthly active users in the recent quarter, up 30% year-over-year. The game is a growing metaverse that continues to gain and keep its loyal customer base.

What’s Next: The next quarterly reports from Sony and Microsoft could be the key ones to watch to see if the growth in the video game sector continues into calendar 2021.

Nintendo Co NTDOY reports quarterly results on May 6, which could be another telling sign for growth in the sector.

Many have pointed to video game growth being driven by the pandemic. Based on the strong sales from the new consoles and strong first quarter calendar sales for the segment, it appears that video games could have a strong 2021 ahead, even as people get back to work and back to school in person.

Photo courtesy of Sony.