How GameStop, Electronic Arts, Activision Are Coping With Lower Video Game Sales
Editor's Note: This article was originally published on Real Money at 12:47 p.m. on May 13.
Multiple facets of the video game industry struggled in April, according to a report from industry-tracking firm NPD. But video game software companies Electronic Arts (EA) - Get Report and Activision Blizzard (ATVI) - Get Report are proving to be immune to the report today.
Gamers spent $509.5 million on video game hardware and software-related products in the U.S. in April, a 15% year-over-year decline from the $598.1 million they spent last year. Hardware sales fell 23% to $142.1 million from $183.7 million, while software sales declined 21% to $203.9 million from $256.7 million.
Game and console accessory sales were a bright spot in an otherwise bleak April, rising 4% to $157.6 million.
"New physical software declined in April 2016 due to a few factors: poor comparisons to last year's new releases, and the poor performance of March launches in April compared to last year," said NPD analyst Liam Callahan. "Despite some record-breaking new launches, there were poor comparisons to the release of Mortal Kombat X in April 2015. Mortal Kombat X was a strong launch last year -- its April 2015 sales exceeded that of the entirety of all April 2016 new launches by 18%."
The decline in hardware sales is understandable, as the latest gaming consoles -- Microsoft's (MSFT) - Get Report Xbox One, Sony's (SNE) - Get Report PS4, Nintendo's (NTDOY) Wii U, etc. -- grow older and the next generation of consoles gets closer to their respective release dates. Several other factors could explain the decline in hardware sales, including Microsoft discounting the Xbox One for the entire month of April to $300 from its normal $350 price. While the move was designed to help the console outsell Sony's PS4, the latter remained the top-selling console in the U.S.
Despite the disappointing April numbers, publicly traded video game companies EA and Activision continued their impressive run Friday. EA was rising 0.7% while Activision gained more than 2% on heavy volume. EA has gained over 16% in the past month while Activision is up 10% over the same period.
However, video game retailer GameStop (GME) - Get Report was feeling the effects of the report, spending most of the session in the red. It was down by 0.8% in afternoon trading.
On the bright side, a couple of long-standing titles had record launch success in April.
"Ratchet & Clank had the best launch of any game in the Ratchet & Clank franchise, when adjusting for the number of days sold in the data month, with sales recapturing success not seen for the franchise since the height of the PlayStation 2 era," said Callahan.
Ratchet & Clank, which is published by Sony, was the second-highest-selling video game in April, behind another new launch, Dark Souls 3. "The launch of Dark Souls 3 marked the strongest launch in the franchise's history. Sales for Dark Souls 3 nearly doubled that of its predecessor, Dark Souls 2, when adjusted for days in the market," said Callahan.
