Games Industry Finance Cheat Sheet, Spring 2024, 16/05/2024
Nintendo basks in big year, Helldivers 2 saves Sony and ABK adjustment costs Xbox
VGIM runs the rule on company finances so you don’t have to
Epic fined $1.125m by Dutch consumer authorities for using “dark patterns” on children
Homeworld 3 offers succour for spacefarers in this week’s releases
Morning VGIM-ers,
It’s the middle of May already? Time, once again, proves to be a truly vexatious enemy.
Anyway, the arrival of the Great British Summer - or, as we like to call it in the UK, a single sunny weekend in May - has inevitably turned my focus towards the games industry’s summer conference programme.
First up, I’ll be heading down to Develop: Brighton between 8th-11th July. I recommend that VGIM readers who like events, networking and pastries should set aside a couple of hours in the morning of Wednesday 10th July. Details to follow shortly.
And second, I will be heading to Cologne for gamescom to see if I can, once again, survive for the best part of a week on a diet consisting solely of pork knuckles, overpriced bread at the Koelnmesse and pints of Guinness from The Corkonian.
If you’d like to meet me at either of those events to talk shop, pop me over an email at george@half-space.consulting. I’m especially keen to cram in a few final projects ahead of the end of my financial year in early October, so do let me know if you need a hand telling your story in the games industry in the months ahead.
But for now, let’s stop thinking about my finances for a second and take a look at how some big video games companies are doing instead.
The big read - Games Industry Finance Cheat Sheet, Spring 2024
Mmm, don’t you just love the smell of financials in the morning? Well if you don’t, I’ve got some disappointing news for you.
Yes, it is somehow already time for another VGIM financial cheat sheet. The purpose of this piece is pretty straightforward: I look through a load of company financial results, summarise them for you in one place and pop them in your inbox for future reference. Handy, eh?
As ever, the usual rules and regulations apply. Rather than repeat those, I’ll just link you to a previous cheat sheet to allow anyone who isn’t up to speed catch up on their own time.
But for the rest of you, let’s dive into, and ideally writhe around in, some good ol’ fashioned numbers.
Nintendo - Easing the path to the Switch 2
Nintendo has used a strong set of results for the past financial year to start rolling the pitch for the launch of the Switch 2 next calendar year.
The company reported that net sales rose by 4.4% to nearly $11bn (1.7 trillion yen) and gross profits increased by nearly 8% to $6.1bn (954.3bn yen) for the FY ending March 31st 2024, with The Legend of Zelda: Tears of the Kingdom, Super Mario Bros Wonder and The Super Mario Bros Movie powering its performance up.
It did, however, forecast a drop in net sales of 20% across the next financial year as the company prepares for a remarkably quiet year of first party releases.
And while the reason for the quiet slate is obvious, Nintendo decided to say the quiet part out loud by getting its President Shuntaro Furukawa to publicly announce that Switch 2 launch news will arrive this financial year - calming any potential jitters in the process.
Microsoft - ABK bedding in comes at a cost
Microsoft recorded a mixed picture in its games division as its efforts to embed Activision Blizzard King into its business came at a literal cost.
On the face of it, the deal has substantially changed Microsoft’s video games position for the better. Its game revenue grew by 51% year-on-year in the third quarter of the 2024 Financial Year, while its Xbox content and services revenue grew by 62% as a result of swallowing the publisher up.
However, it also revealed that the acquisition of Activision led to an operating loss of $350m this quarter as the business’s $1.97bn revenue was swallowed up by a range of purchase accounting adjustments, integration and transaction-related costs.
This, along with a sharp 31% year-on-year decline in the sale of Xbox hardware, is likely why the company recently shuttered the likes of Tango Gameworks and Arkane Austin as part of a cost saving exercise. A hefty price to pay indeed.
Sony - PS5 misses targets; Helldivers 2 hits it
Sony’s bold prediction for PlayStation 5 sales in 2024 proved to be too ambitious, as the company missed its punchy 25m target by a considerable distance.
The company sold a mere 20.8m units across the course of its 2023 financial year, missing its target by a little over 16% as consumer appetite for new consoles proved weaker than expected.
Despite this, sales in the company’s gaming division grew 17% year-on-year to $3.98bn (623.1bn yen) with adjusted operating income increasing by 21% to $453.3m (70.9bn yen) in the same period.
And while the company attributed some of that success to a favourable exchange rate, it also gave a shout out to Helldivers 2 for “far exceeding expectations” in its presentation to investors.
The game sold a whopping 12m copies in just 12 weeks, which is a new record for the company and enough to lift any potential gloom.
Electronic Arts - There may be trouble ahead?
EA recorded steady, but unspectacular, growth in its financial year ending March 31st 2024. The company edged its net revenue for the financial year up to $7.56bn, a 2% year-on-year increase, while its net bookings crept up by 1% to hit $7.43bn.
Its growth for the financial year was driven by a decent first year for EA Sports FC, which grew net bookings by what EA described as ‘high-teens percent’.
It also saw success for Madden NFL, with a 6% year on year increase in bookings pushed forward by a rapidly growing user base for Madden NFL 24 and Madden Mobile.
However, its results for the final quarter suggested there may be a little bit of trouble ahead.
EA recorded $1.78bn of net revenue for the three months ended March 31 2024. That’s a 4.8% decline year-on-year, raising a slight question mark about what this means for its wider business outside the lucrative world of digital sports.
Roblox - Growth, but at what cost?
Roblox has posted another impressive quarter of growth, despite its overall business remaining in the red.
While the company posted a net loss attributable to common stockholders of $270.6m, its revenue is up 22% to $801.3m and its bookings increased by 19% to $923.8m compared to this time last year.
Given that the platform now has 77.7m daily active users spending 16.7bn hours on the platform, Roblox is building solid foundations for long term growth and profitability - even if its share price may not be reflective of that strength.
The question is how that growth is being achieved. Dave Bazsucki noted in response to the results that one of the ways the company has run more leanly is through reductions in “trust and safety expenditures.”
One hopes that this achievement, which has been celebrated in the Lord’s year of the Online Safety Act and Digital Services Act, is down to improved processes rather than cutting corners…
Tencent - A mixed bag
And finally, Tencent may have had a strong financial year overall but the performance of its games business was somewhat mixed.
Overall, the company’s revenues grew 10% year-on-year to $86bn in FY 2023 while its operating profit leapt 44% on last year to reach $22.6bn. This leaves it with a tidy operating margin of 26%, up from 20% this time last year.
However, its deep dive review for Q4 2023 shows that video games played little part in pushing it to new heights.
Domestic games revenue declined by 3% year-on-year as a result of a downturn in performance from Honor of Kings and Peacekeeper Elite, while its international business nudged down by 1% as a result of Supercell repositioning.
However, there were some positive results from Tencent’s games business with “a strong upturn” from PUBG Mobile, robust growth from Valorant and a 50% increase in gross receipts from the company’s Mini Games platform showing their worth.
Is this enough to stave off Pony Ma’s concerns that the company’s games business is under threat? Only time will tell…
Notable results
Unity reported revenue of $480m for the first quarter of its financial year, an 8% decline year-on-year. Its net losses, on the other hand, rose from $254m last year to $291m as a result of its hefty internal restructuring. Good luck to its new CEO, eh?
Square Enix has announced it is pursuing an “aggressive multi-platform strategy” after profits dropped by nearly 70% year-on-year to $96.2m (32.5bn yen) despite a 3.8% increase in net sales to $2.28bn (356 billion yen). The company had announced on April 30th that it was expecting “extraordinary losses” for the financial year after writing off $140.3m (22.1bn yen) as a result of axing a series of development projects.
And three cheers to Capcom for once again smashing it out of the park. The company reported a record profit for a seventh consecutive year, raking in $278m (43.3bn yen) off the back of punchy (ha!) sales for Street Fighter 6.
The bluffer’s guide to the latest results
Do say: The chaos of 2023 and the forthcoming quiet of 2024 is at the front of video games companies minds, with businesses repositioning to future-proof themselves against incoming challenges.
Don’t say: Good video games still sell, more news as we get it.
News in brief
Epic Fine: Epic has been fined €1.125m by The Netherlands Authority for Consumers and Markets (ACM) for using unfair commercial practices to pressure children into making in game purchases. The offending tactics included using aggressive “buy now” language and running countdown timers in its Item Shop, suggesting that quite a lot of the games industry might want to take a look at their in-game stores pronto…
Out of the Xbox thinking: Microsoft has confirmed that the company is rolling out its first mobile games store in July. Sarah Bond, Xbox’s President, announced that the store will initially launch on the web first and sell consumable items for popular first party titles, including Candy Crush Saga, with the intention of expanding outwards to “facilitate gaming across consoles, computers and mobile devices” for players and partners. As industry boffin Eric Seufert says, don’t treat this as a full blown app store just yet.
Trouble in Stores?: Poland’s Office of Competition and Consumer Protection (UOKiK) has launched a preliminary investigation into potential anti-competitive practices of video game store fronts such as Steam and the PlayStation Store. While the thought of Polish competition officials kicking the doors in at games businesses to see if competition law is being breached is inherently hilarious - rifling through the cupboards to see if any video games are being unfairly stopped from releasing - UOKiK’s threat of a fine of up to 10% of the company’s turnover is, admittedly, a lot less funny for the businesses involved.
Ofcoming to get you (Part 248): Ofcom has secured a number of wins off Twitch as it warms up to the challenge of enforcing the Online Safety Act. After receiving a telling off in January this year, Twitch has agreed to measures restricting children’s access to content containing gambling or sexual themes - including lobbing that kind of content off its front page. It has also bumped up the parent information section of its site to provide greater guidance on content classification in an effort to assuage concerns.
Review get hurt, hurt ‘em back: The developers of Marvel Rivals have apologised after forcing content creators to agree to a non-disparagement clause to get their hands on an early build of the game. Creators were initially barred from making “disparaging or satirical comments” about the game, until critics hit back against the draconian restrictions on social media.
On the move
Hermen Hulst and Hideaki Nishino have been jointly appointed as CEO of PlayStation. Hulst will head up its Studio Business Group, with Nishino helming the Platform Business Group…Marc Whitten is leaving Unity, relinquishing his role as Chief Product and Technology Officer from the start of June…Derek De Filippo is the new Head of Business Development & Publishing at Space Ape…And Theresa Orille has popped up as Lead Artist at Tripledot Studios…
Jobs, jobs, jobs
Double Eleven is hiring a Senior Academy Advisor to support the delivery of professional accreditations through its business…Dambuster Studios is recruiting a Talent Acquisition Coordinator to support its team in Nottingham…Improbable would like a new Senior Producer…Epic Games wants a Competitive Operations Coordinator to support the competitive games scene around its flagship titles…And EA is signing up a Global Media Manager in Guildford to support the Battlefield series…
Events and conferences
Digital Dragons, Krakow - 19th-21st May
GamesBeat Summit, Los Angeles - 20th-21st May
Nordic Game, Malmo - 21st-24th May
Summer Games Fest, Los Angeles - 8th June
Games of the week
Homeworld 3 - Space strategy series delivered the 1.0 version of its third title to players earlier this week.
Baladins - Enjoy a whimsical role-playing adventure suitable for one to four players on Steam.
Please Fix the Road - Zen puzzler not based upon British local politics paves its way to PS5 and Xbox Series S|X.
Before you go…
I’m more about splitting hairs than infinitives when writing VGIM. But I am impressed by the YouTuber who has managed to boldly go where no player has gone before this week.
Polygon reports that speedrunner Alexpalix1 has become the first person to open a famously locked door in Super Mario 64, executing a tricky move involving a “quick turnaround” to make it past the barrier without forcing Mario to plunge to an untimely death.
Welcome to a brave new world, everybody…