Games industry finance cheat sheet, Autumn 2023: Video Games Industry Memo, 23/11/2023
I looked at their balance sheets so you don’t have to
VGIM puts all the big industry financial results in one place
League of Legends’ Worlds finals heading to London next year
Black Friday is here, pray for our souls (and bank balances)
Thank you for all the kind words (and some excellent gossip) off the back of last week’s Saudi Arabia shakedown.
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I’ll be considering what this could look like further over the Christmas break. But in the meantime, I’ve turned on Substack pledges to allow people to let me know if they’d pay for what I’m offering in the future.
If you subscribe from VGIM today you should be able to pledge at sign up if you’re interested. And if you’re already signed up, you should be able to pledge at the bottom of the email where the subscribe button usually is.
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The big read - Games industry finance cheat sheet, Autumn 2023
It’s tough keeping track of games industry financial results. As well as being, let’s be honest, a touch dry, keeping across a large number of international publicly traded games businesses reporting numbers at different points of the year isn’t easy.
That’s why I’m rolling out a quarterly cheat-sheet to summarise industry financials, so you can see how the biggest businesses performed and what the secret to their success was (or otherwise).
I’m keeping things straightforward by focusing on the main headlines for each business and making a few minor stylistic edits (e.g. reporting all numbers in US Dollars first) for clarity’s sake.
But there are two bits of terminology that I thought were worth explaining here.
Bookings: Bookings allows companies to report value recorded in the period that may in part, or in full, be realised later in the financial year. Games companies use bookings to measure purchases of digital consumables like in-game items or subscriptions because a player might not activate them straight away (e.g. they buy a $20 gift card for an in game currency now but don’t activate the code until Christmas Day). Tl;dr - it’s a key metric for service games.
Shipped: Consoles are reported as ‘shipped’ rather than ‘sold’ to reflect that the manufacturer has sold devices to retailers. This doesn’t mean it is in the hands of a consumer, so avoid using it as a proxy measure for how many devices are actually sat underneath TVs across the world.
Right, enough of all that - time for some financials *air horn noise*.
Nintendo: Motion picture heroes
Nintendo recorded its strongest combined Q1-Q2 results since the launch of the Nintendo Switch, generating revenue of $5.3bn (¥796.2 billion).
The Legend of Zelda: Tears of the Kingdom was the best performing new release across the period, generating 19.5m sales worldwide following its launch in May 2023.
However, it wasn’t a game that had the most interesting impact on Nintendo’s financial results.
The Super Mario Bros movie had a powerful double effect for the business, generating both $1.36bn at the box office and providing an uplift to sales of games within the Mario series after it arrived in cinemas in April 2023.
Summary: Cinematic pester power knows no limit.
Electronic Arts: EA Sports FC 1 - 0 FIFA
Electronic Arts took a big bet last year to step away from its licensing deal with FIFA and build its own brand for its long running football series. Fortunately, it seems to have paid off.
The company recorded a 4% increase in net bookings year-on-year for Q2, hitting $1.82bn, while keeping revenue steady at $1.9bn.
Importantly, it reported that EA Sports FC has accrued 14.5m accounts since launch - putting its newly rebranded football game ahead of the previously record breaking FIFA 23 first time out of the traps.
Summary: Turns out FIFA’s brand wasn’t worth $300m after all.
Sony: PlayStaton 25 mill?
Sony’s games division has continued to demonstrate its value, despite a 29% year-on-year drop in overall operating profit to $1.74bn (¥263 billion) for the wider company in Q2 2023.
The company said its games division is posting higher than expected performance this year, boosted this quarter by 2.5m sales of Spider-Man 2 and by shipping 4.9m PlayStation 5 consoles as long-term supply chain issues finally fully eased.
However, the company may be wondering whether its target of shipping 25m consoles this fiscal year is achievable.
The combined total shipped in the first half of the financial year hit 8.2m - leaving it with a hefty amount of work to do over the festive period to sell its new slimline PS5.
Summary: If you haven’t bought a PS5 yet, you’re getting a great deal this year.
Roblox: It’s looking meta all the time
Roblox shares jumped 11% after it announced its third quarter results, with the platform showing increasingly strong vital signs.
It reported a 20% year-on-year jump in daily active users to hit 70.2m worldwide, with bookings also up by a similar percentage to $839.5m across the year as the platform grew across Europe and Asia.
While this still meant it recorded a net loss of $277.2m that was down from $297.8m in the same period last year - sparking optimism amongst investors.
Roblox also reported that it has nearly finished the construction of a data centre in Virginia, likely improving its long-term financial picture further upon completion.
Summary: Please let me go on a tour of your new data centre, Roblox.
Tencent: Licensed to bill
The biggest games company in the world reported a 10% year-on-year bump to its revenues in its third quarter results, after it generated sales of $21.4bn (154.6bn yuan) to the end of September 2023.
Tencent’s fortunes have been revived by a softening of China’s regulatory landscape. The Government’s crackdown on games in 2021 had a significant downward impact on the business, causing it to record its first decline in revenues in its history in August 2022.
But the Government’s decision to resume granting licenses for game releases in the territory helped Tencent’s domestic games revenue to grow by 5% this quarter, driven strongly by the releases of Valorant and Lost Ark in the summer.
The company also expects that launches of Honor of Kings: World (a spin-off to its highly popular MOBA), Monster Hunter Mobile and Assassin’s Creed Mobile will further boost its position in the market in the year ahead.
Summary: Selling in China sounds like fun.
Ubisoft: up on cloud (gaming) nine
Ubisoft has been feeling cheerful about its performance in Q2 of this year. It reported that its net bookings are up year-on-year by 36.6% to $605.1m (€554.8 million), which Yves Guillemot described as “well above expectations.”
While Ubisoft’s strong growth numbers were enabled in part by its relatively empty release slate last year, excellent launches for Assassin’s Creed Mirage and The Crew: Motorfest - combined to the ongoing strength of service titles such as Rainbow Six: Siege - helped the company over-perform across the quarter.
The business also noted its acquisition of Activision Blizzard’s cloud streaming rights has been finalised, giving it a useful position in the cloud-gaming market in the decades to come.
Summary: Launching and selling games makes money, more news as we get it.
Quick hits
Microsoft doesn’t report until December so we’ve not had a chance to see the new Xbox/ABK behemoth at work yet. I’ll update the online version of this piece when they report.
Unity’s revenues may have been up by a nice 69% year-on-year to $544m this quarter but it still intends major lay-offs to reduce losses of $125m.
Embracer Group’s net sales are up to $3.5bn, but a combination of underperformance of key releases and its failure to secure a $2bn cash injection earlier this year = pain for the business in years to come.
And finally, Paradox Interactive’s CEO Fredrik Wester gave an excellent one line summary to his company’s latest results. Read it here.
Conclusion for bluffers
Do say: “The industry has had a challenging year but the latest results show that many businesses are effectively navigating through the worst of it.”
Don’t say (loudly, at least): “...so tell me again why everyone is being fired.”
News in brief
League of London: Riot’s League of Legend's Worlds final will be held at London’s O2 Arena in November 2024. Get ready for top level LoL play and a load of MPs blagging free tickets to show they’re down with the kids.
Portal Combat: PlayStation’s new Portal device, which allows players to stream PS5 games to a handheld device in their own home, has sold out - sparking a scramble to get one in time for Christmas. Good news for PlayStation scalpers at least, eh?
Just the Aonic: nDreams, the UK based VR games developer, has been bought by Aonic for $110m. The company has said that the acquisition will lead to no major changes to the way it operates aside from, presumably, having a very hefty Christmas party this year.
Creative campaigning: The Creative Industry Alliance is looking for UK games industry types to sign a letter calling on Government to increase investment in art, design and technology education. Reps from Devolver Digital, Rockstar and Build a Rocket Boy have thrown their support behind it.
Bluey Funday: Will Freeman interviews the creators of the new Bluey videogame, which we shamefully missed from last week’s release round-up. As well as being a typically engaging Freeman read, I audibly chuckled at the thought of the production director becoming “steeped in Bluey lore.”
Job news
Emmett Shear, former CEO of Twitch, became the interim CEO of Open AI and then stopped being the interim CEO of Open AI? *shrugs shoulders*…Jagex is on the lookout for a new Executive Producer…Amazon is searching for a Creative Strategy Lead for its Twitch Brand Partnerships Studio…Formula 1’s hunt for a Gaming Lead is still on…and PlayStation London updated its call for Open Applications on Tuesday this week…
Events and conferences
IRL, London - 29th November
Slush, Helsinki - 30th November-1st December
The Game Awards, Los Angeles - 7th December
Pocket Gamer Connects (20% off), London - 22nd-23rd January 2024
Game Developers Conference, San Francisco - 18th-22nd March 2024
London Games Festival, London - 9th-25th April 2024
Games of the week - Black Friday edition
It’s Black Friday this week, which means that all right minded developers have decided they’d rather do anything than release a new game.
So I cobbled together a list of deals instead of the usual release round-up to satiate your relentless desire to consume, ya filthy capitalists.
Get a Nintendo OLED Switch with Mario Kart 8, Super Mario Bros Wonder and three months of Nintendo Online online via Game for £329.
Buy an Xbox Series X bundled with Diablo over on Amazon for a tidily reduced £379.
While you can get this in a number of places, Game’s deal for a PS5 bundled with EA Sports FC for £400 looks to be a shade cheaper than the rest.
Give the metaverse a shot in the arm by buying a Meta Quest 2 with a £50 gift card for a much reduced £250 over at Argos.
There are also reductions on games laptops like the MSI Thin GF63, which is down at £700 from £1200 over on Amazon.
Before you go…
You’ve got a week and a half to go to submit your copy for Video Games Industry Memo’s games of the year piece. And given the calibre of stuff submitted so far, you should definitely get involved.
Chuck me 150-200 words on your favourite release of the year to my Substack email - videogamesindustrymemo@substack.com - by Monday 4th December to get your name up in lights for the final VGIM of 2023.