Gaming

US video game sales are declining, but analysts predict recovery in 2023 – GameSpot

The analyst believes US video game sales will decline in 2022, but a looming recession and new releases could accelerate a recovery in 2023.

Stifel analyst Drew Crum said he estimates U.S. video game sales will decline 6% to $57 billion in 2022, based on data from the NPD Group. This contrasts with a 2% growth estimate for video game data research firm Newzoo, Kram said.

Meanwhile, according to IDC analyst Lewis Ward, global video game sales are expected to continue growing at an annualized rate of 0.4% to $275 billion. The IDC analyst includes data in his figures that some analysts don’t, such as mobile game ad revenue, which Ward predicts will grow 13% to $36.2 billion a year globally.

Read: Video game pandemic boom will end in 2022

2022 is expected to be weak compared to pandemic-related sales in 2021. Not only does this slightly improve 2023 numbers, but Crum said that video games also have the advantage of becoming a more popular form of entertainment during a recession.

“We view video games as a low-cost form of entertainment that should ‘hold out’ during a period of macroeconomic weakness, and companies that develop and release compelling content are more likely to attract and monetize their respective gaming communities,” Crum said.

Cram believes the industry’s profits could rise in 2023 as third-party console publishers in the US see growth of 40% or more.

This reflects “a stronger lineup and simpler lineups from Activision Blizzard Inc., as well as a stronger lineup and a full year of Zynga contributions to Take-Two Interactive Inc.,” said Crum, who credits Take-Two TWO.
-2.70%
one of its top picks as 24 immersive base games are scheduled to release between 2023 and 2025.

Read: ‘Grand Theft Auto VI’ Take-Two Hack: Severity Depends on Whether Source Code Is Taken, Analysts Say

Analyst Stifel believes that Electronic Arts Inc. ea,
-0.06%
should also hold up well with the composition of its portfolio: “sports account for over 60% of the company’s net bookings, a genre that is future-focused in nature and therefore can offer a lot of consistency in what could be a ‘hit’.” managed business. “Crum has a buy rating on EA and has stated its buy rating on Activision ATVI,
+2.27%
involves its acquisition by Microsoft Corp. MSFT,
+0.85%
it’s a done deal.

Krum also downgraded Ubisoft Entertainment SA UBI,
-6.75%
shares with a holding rating as he expects the company’s outlook to be “too ambitious” and the recently increased stake of Tencent Entertainment Co. Ltd. 419,
-2.21%
reduces the likelihood that it will be acquired in the near future.

Since the start of the year, Take-Two’s stock has fallen 35%, EA’s has fallen 11%, while Activision’s, which has spent most of that time waiting for the Microsoft acquisition to close, is up 16%. Ubisoft shares, listed on the Paris Stock Exchange, fell 29%. For comparison, the S&P 500 SPX index,
-0.84%
fell 21%, while the Nasdaq Composite COMP
-1.37%
decreased by 29% this year.

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