Outlook: Next-Gen Consoles Remain Supply-Constrained

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After the market close on Thursday, February 13, NPD is expected to release the January 2014 (four-week period ending February 1) U.S. retail video game software sales data.

We expect console/handheld software sales of $300 million, down 20 percent compared to last year’s $373 million. We expect sales to be down significantly due to a shorter retail month this year and continued current-gen sales weakness, although we expect this to largely be offset by next generation sales. In addition, the release slate was light ahead of a number of high-profile releases later in Q1, including Activision Blizzard’s (NASDAQ:ATVI) Diablo III: Reaper of Souls (PC) and EA’s (NASDAQ:EA) Titanfall (XB1, 360, PC). The comparison to January 2013, which was up 1 percent, is deceiving, as January 2012 was a four week retail period and January 2014 is also a four week period.

Software sales were down 17 percent in December, driven by multiple factors that should also have impacted January results. Next-gen consoles remained supply-constrained, delaying next-gen spending for those gamers unable to buy a PS4 or Xbox One. For many consumers able to purchase a next-gen console, current-gen software spending was down as a result. The industry’s top-selling console game, Activision Blizzard’s Call of Duty: Ghosts, a November release, sold well below our expectations for the second consecutive month, and like two of the quarter’s other big releases, EA’s Battlefield 4 and Ubisoft’s Assassin’s Creed IV: Black Flag, ended up being down for the quarter from the prior iteration. Nintendo’s Wii U continued to perform well below the levels expected for a new console, with software sales lagging those of its predecessor despite a recent hardware price cut, an improving release slate, and only having been available for just over a year.

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