Video game retail sales witnessed modest growth in October,
primarily driven by higher software sales, which fully offset
declining hardware sales in the month. According to market
research firm NPD, sales increased 27.0% year over year to $791.1
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However, October sales were significantly down from $1.08 billion
reported in September but were much better than $521.0 million
reported in August.
Software sales increased 12.0% year over year to $482.5 million,
considerably lower than $754.3 million reported in September but
higher than $293.4 million reported in August. The strong
year-over-year growth was primarily driven by robust performance
Take Two Interactive's (
Grand Theft Auto V
, which remained the top-selling game of the month.
for 3DS was the #2 best selling game, pushing
Madden NFL 25
out of the list. Nintendo's
for 3DS captured the #3 position.
Hardware sales declined 8.0% year over year to $171.7 million,
slightly lower than $183.2 million reported in September but much
better than $90.8 million reported in August.
Nintendo's 3DS maintained its top spot as the bestselling
hardware platform in the month by selling 452K units.
Xbox 360 re-captured the #1 position as the best console in terms
of unit sales in the month. Both Microsoft and
are set to launch their respective next generation console
systems this month.
Accessories increased approximately 1.0% from the year-ago
quarter, primarily driven by robust sales of interactive gaming
toys from both
Walt Disney (
's Infinity and
's Skylanders in the quarter.
Digital Games Sales
According to market research firm Super Data, overall digital
sales increased 11.0% year over year to $1.03 billion in October.
This was higher than $970.0 million reported in September and
$846.0 million reported in Aug 2013.
Revenues from social games increased 12.0% year over year to
$173.0 million, but remained almost flat on a month over month
basis. Mobile gaming revenues surged 27.0% year over year, but
remained almost flat on a month-over-month basis at $264.0
Free-to-play revenues were up 15.0% year over year to $261.0
million in the month, while subscriber base contracted by
approximately 1.7 million. Subscription based MMO revenues were
$86.0 million, down 12.0% year over year. Downloadable game
content sales increased 25.0% month over month to $247.0 million
We expect video game retail sales to improve significantly over
the next couple of months due to the launch of new hardware
consoles from Microsoft and Sony and new game releases. Moreover,
anticipated higher consumer spending during the holiday season
will further boost sales in the near term.
We believe that increasing revenues from mobile and downloadable
contents (DLCs) will drive digital revenues going forward. Mobile
has strong growth potential due to improving gaming quality,
which is a major factor behind higher user spending.
Further, game developers such as EA and Activision are actively
using the digital distribution platform to provide additional
downloadable contents for popular titles such as
Call of Duty
. This will further boost revenues from DLC going forward.
Among the traditional gaming companies, we believe that EA,
Activision and Take-Two Interactive have significant growth
opportunities due to their innovative product pipeline in the
near term. However, market fragmentation remains a major headwind
in the near term.
Currently, Activision has a Zacks Rank #2 (Buy), while both Take
Two and Electronic Arts carry a Rank #3 (Hold).