An Industry of Truffles

I wrote previously that Xenoblade Chronicles 2 broke 1 million sales in a months time, an accomplishment for the series. Soon after, it came out that the game was made with only about 40 percent of the entire team as other members worked on The Legend of Zelda: Breath of the Wild. Naturally, discussion ensued of how the game would be different, better if the entire team worked on the title. Whenever news of development woes comes out, fans dream of what the game could have been. However, having a bigger budget or more time does not always make a better game. Often, direct investment doesn’t always equal success. The industry thrives on the spastic creation of truffles.

Truffles are a fungus that mankind has not been able to reliably farm. There are ways to improve the chances of a truffle, but there is no way to guarantee a truffle. Video games are a lot like the truffles as what makes a game a success may not be obvious. Sure, a bigger budget and more time can do more good than harm, but in no way does it create a breakout hit. Often, some of the most successful titles were produced under less than satisfactory conditions. Conversely, the landfill of the gaming industry is full of titles with almost limitless budgets.

Even within the last generation or two, we have seen numerous truffles created out of nowhere. Minecraft is a block game that was created by one guy with simplistic 3D models. The game became a massive success and made its creator a billionaire. Player Unknown’s Battle Ground was another game made by a small team that has become one of the biggest successes of 2017. None of these games were created in an “ideal” environment. Instead, the creators had to deal with limited time and resources; however, their limitations did not hinder the success of these titles.

Therefore, in order to be successful in the game industry, companies need to constantly cultivate new truffles. Companies must find new and interesting concepts that will capture the market’s attention. However, the AAA publishers often ignore this fact instead insisting on living on the truffles of the past. Activision Blizzard is one of the best examples. The company is keen on finding potential success, but they often drive them into the ground due to overuse. In fact, all the big publishers are relying on games that were made in the 8th generation. Look at the major successes of Generation 8: Call of Duty, Assassin’s Creed, and Destiny were all created in Generation 7, yet these companies have not produced any new titles to really hook the market.

The issue will be Generation 9. Sony and Microsoft depend on third parties to drive the install base. When the new systems come out, will consumers want to buy these expensive machines to play the same games they played in Generation 7 and 8? In the PC space, consumers have a plethora of choice and can just avoid the AAA games entirely. In fact, some of the biggest truffles have come out of PC gaming where consumers have more choice already.

Moreover, as EA and Activation focusing on microtransactions, will consumers risk putting up with these titles in the long run? Additionally, Microtransaction are somewhat of a curse as these publishers are more focused on running dry their successful series to get some short-term profiles all while not attempting to produce new truffles. This practice distracts them from their prime directive: make hit titles.

Time and time again, the path to success in the industry is to make truffle: great games that capture the market’s attention. Perhaps then, this is why budget and time alone don’t always create a hit title. I started this article talking about Xenoblade Chronicles 2. Now, Xenoblade is nowhere near the success of Minecraft of PUBG (and likely never will be), but from its initial sales and consumer reaction, it will likely go down as a cult classic for the system.

There a lot of conditions and factors that produce these truffles, and, sadly, the conditions needed aren’t replicatable. Nevertheless, if you want to succeed in this industry, you need to cultivate the kinds of titles that will be truffles and make the company millions. This may be a lesson that publishers will have to relearn in the future.

Thoughts on Nintendo’s Q3 Earnings (2017)

Nintendo released their earnings for the third quarter of 2017 (12/31/17). Naturally, we are going to go over every juicy detail.

Predictions:

I made some predictions for Nintendo’s sales figures. Below is a summary of those predictions and an explanation.

 

Switch: Just over 14 million* (around 14.5)

Zelda: 8 million **
Mario Kart 8 Deluxe: 7.6 million **
Odyssey: 7 million **
Splatoon: 4.5 million**
ARMS: 2.25 million
1-2-Switch: 1.75
Xenoblade: Less than 1 million (though I expect that it will break 1 million by 3/31/17)

* Switch sales: As of 12/3/17, Nintendo sold 4.8 million units in the US. In December, they sold 1.5 million. Since there is some overlap with the 4.8 and the 1.5 by three days, it should be about 6.2 million in the US. According to Nintendo’s Q2 numbers, the US makes up about 40 percent of all Switch sales. So 6.2 divided by 40% is 15.5. I think this number is a tad high. If you look at Japan, they have sold about 3.3 million. If you take their 27 percent, sales would be 12.2 million (if I use 25%, it comes out to 13.2 so you can see what I’m dealing with here). It wouldn’t be that low since the US sold around 6 million and 40% of 12.2 is 4.8. Essentially I’m taking the difference between the two and applying some judgment. If I was to give a reasonable range, it would be as low as 13.5 million and as high as 15 million.

** Game sales – These are all based on the above
Zelda – 55%
Mario – 60%
MK8 – 55%
Splatoon – 20%

For Mario, I assumed the rest of the world was closer to 40% as 3D Mario mostly sells in the US. For Splatoon, I weighed the game to 50% in Japan (though Splatoon 2 came out lower than I expect) ARMS, 1-2-Switch and Xenoblade are all just educated guesses.

With that, I decided to compare my results to actual.

I ended up over predicting Zelda and ARMS and underpredicting Super Mario Odyssey and Xenoblade Chronicle 2. What is interesting is that if I applied my assumption that I made of Odyssey to Zelda, I would have been spot on. Super Mario Odyssey was about 60 percent of Switch’s sales. If I take my 14.5 million, subtract the US’s 6.2, and multiply it by 40 percent, I’d get 3.2. At 55 percent of 6.2, you get 3.4. Added together, this would be 6.6 million, only 0.1 million off from the actual results. My judgment on ARMS and Xenoblade were a bit off as well. Nonetheless, 50 percent isn’t too bad.

With that said, let’s dive into some of the more interesting results.

Xenoblade Chronicles 2

One of the bigger surprises is that Xenoblade managed to sell over 1 million in less than a month. Now, Xenoblade sales can partially be blamed on the success of the Switch. As the saying goes, the rising tide lifts all boats as the saying goes. What is interesting, however, has been some of the reactions I’ve seen of the game. Browsing Nintendo communities, this games often come up with how much players were surprised by it and how much they enjoyed it. Xenoblade will likely be the Switch’s cult classic, thanks in part to the sales of the Switch.

That said, I would keep a close eye on Monolith. Its clear Xenoblade has some issues that will prevent it from being a mainstream success. However, the pieces are in place for a monstrous hit. If Monolith soft can tap into what makes their games loved and make that reach a wider audience, the game would be huge. I expect that would happen with a new series, not necessarily Xenoblade.

Super Mario Odyssey

With Super Mario Odyssey doing quite well (and beating my estimates), let’s look at another 3D Mario game in a similar situation: Super Mario Galaxy. As of Q3 of 2007, the game sold 5.19 million. The next quarter, it sold another 910,000 bringing sales to 6.10 million. Now, Super Mario Odyssey sold quite well, but it could have a wind-down period after the initial holiday rush. Mario Galaxy went on to sell 12.76 million over the Wii’s lifespan. It did not from short-term sales, but long-term sales (also dubbed “evergreen”). We’ll have to see. Interestingly, Super Mario 3D Land also saw a similar slowdown after the holidays.

New Super Mario Bros 2

Perhaps the biggest surprise was New Super Mario Bros 2. Despite releasing back in 2012, the sold 1.6 million units. The other 3DS games to sell over 1 million was Mario Kart 7 and Pokemon Ultra Sun/Ultra Moon. I think this, more than anything, highlights the strength of 2D Mario for Nintendo. Analysts want to focus on Pokemon on Nintendo Switch. I say focus on 2D Mario. The game could have a much bigger effect.

Software Sales

First, there is a significant split between software sales on the Switch and the 3DS. Every 1st party Nintendo Switch game the company released in 2017 has sold over 1 million copies. Conversely, only one game released on Nintendo 3DS this year sold over 1 million. Mind you, Nintendo released numerous titles for the system this year: Metroid Samus Returns, Hey Pikmin, Mario Party, and Fire Emblem Echoes. All of them fell below 1 million units. While Nintendo claims they 3DS will be supported in 2018, expect that the support will quietly stop over the next year.

 

On a similar note, the Nintendo Switch sold 52 million software units, just below their projection of 53 million. While this speaks volume to the success of software on Nintendo Switch, the vast majority of it still comes from Nintendo. The major complaint of third parties is that software doesn’t sell on Nintendo systems. This may be due to the lack on strong third-party software on the system, and several third-party titles are doing well, but how successful the Switch will be for third parties has yet to be seen.

Gross Margin

To close, I want to touch on something interesting I noticed while looking at Nintendo’s sales figures. Despite profits being up, it didn’t seem like much of an increase. So, I decided to look at the Gross Margin. Here are the results

Q3 16 Q4 17 Q1 17 Q2 17 Q3 17
Gross Margin (%) 45 40 42 38 38

 

Since the release of the Switch, the gross margin has steadily declined. In total, gross margin declined by 7 percent over the last 4 quarters. Part of this is the Nintendo Switch being more expensive to produce than other systems. Typically, the cost per unit declines over time as parts become cheaper. Since the Switch is a new product, its cost will be higher than the 3DS. Additionally, the decline could be evidence that Nintendo’s games are becoming more expensive to make as well as Gross Margin declined even after the quarter the Switch was introduced. I expect the gross margin will stay around 38 percent until Switch cost come down.

Predictions for 2018

With a new year already in full swing, I want to give some predictions I have for 2018

1. The US Economy Will Continue to Improve

2017 was a great year for the economy and was a big reason for the stellar Black Friday. Trump’s presence in the White House drove business confidence encouraging investment into the US. With the passage of the tax bill, the economy will further improve. The theory of Supply Side Economics (which is what I subscribe to) argues that supply creates its own demand. Thus, the government should just get out of the way. With Trump and the Republicans lowering taxes and peeling back regulations, the business sector has more room to grow. 2018 will see a rising stock market and businesses continuing to invest in more products and services. I expect this year will be bigger than 2017.

2. Nintendo Switch Will Be the Best Selling System of 2018

Not surprising, really. Nintendo had a stellar 2017 and system usually do better their second year than their first. The video game industry is momentum based, so a strong start means Switch will continue to sell well in 2018. Nintendo President Kimishima is expecting to ship 20 million over the next fiscal year (4/1/18 – 3/31/19). I foresee Nintendo releasing numerous big hitters. Much has been said about Pokemon (which I think will be out in 2018), but titles like Animal Crossing and 2D Mario will also help drive the install base. I could see the Switch selling 18-20 million worldwide this year if the games are there.

3. Software Sales will Increase but Hardware Sales will decline (in the US)

All three systems benefited from an improvement in the US economy, but I expect 2018 will be down for hardware.The PS4 is nearing the end of its life span. XBox isn’t doing anything and the 3DS is deader than a doornail. Nintendo Switch will light up the charts but it won’t be enough to offset the decline in the other systems. That said, software sales will continue to be strong thanks to both the Nintendo Switch and the strong US economy.

4.  Rumors of the Playstation 5 will begin to circulate

I don’t expect the Playstation 5 to come out until 2019, but I think we’ll start hearing rumors about it around this E3. I expect some analyst will throw their hat into the ring for when the system will come out and what it will be.

5. VR will continue to be a disappointment

VR is today what 3D was at the beginning of the decade. It’s a gimmick that seems like it’s going to be the wave of the future but will ultimately be phased out. VR didn’t do great in 2017 and I expect the same thing in 2018. The problem with VR is it takes you out of the real world. I don’t think the human mind is really good at dealing with a VR world. If you’ve ever played a VR game, there is a very real disconnect between what you are doing and what’s in the game. You can see things right in front of you but you can’t physically touch them. I also don’t think the casual consumer (who doesn’t log hundreds of hours into games) will be interested in going into a virtual world. VR has a fundamental problem that I don’t think will be corrected. While a topic for another time, I see Sony doing what Nintendo did with the 3DS.

6. Activision Blizzard will be burned on Microtransactions

In 2017, we saw companies going crazy with monetization and we saw EA get burned. I expect more companies will be burned in 2018 with Activision Blizzard being the biggest one. Activision’s problem is that whenever they find something that works, they drive it into the ground. They filed a patent for matchmaking encouraging microtransactions purchases and the current fiasco with Destiny 2. While EA took their lumps this year, I think Activision will suffer in 2018.

7. Publishers will copycat Player Unknown’s Battleground

The video game industry is notorious for playing copy cat. During the NES days, everyone tried to make a 2D platformer. During the XBox days, everyone tried to make a space marine shooter. When World of Warcraft was hot, everyone tried to make an MMO. Often, publishers and developers follow the herd. With the rise of Battle Royal style games, I expect more publishers will try to jump into the fray with their own titles. Don’t expect them to taker over though.

 

I hope you found this interesting. If you have any comments or if you disagree with my 2018 predicitions, please leave them below. You can also reach me on Twitter at @Spoogymonkey

EA: Wizard Behind the Curtain

When Dorthy and friends entered the wizard chamber, they are met with an giant, imposing green head. He appears powerful and all knowing, but in actuality, he is a old man behind a curtain. His presence was just a facade. The reverse is true with AAA publishers. They pled with consumers that AAA development is just too expense. If games don’t have microtransactions, they’ll go out of business and starve in the streets. You wouldn’t want that would you? But what if this is a facade? What if EA is portraying the struggling indie developer, but, in actuality, is a wealthy fat cat manipulating consumers for financial gain. Today, I’m going to pull back the curtain and show you the truth behind EA.

EA’s Financial Position

Below is a summary of EA’s income statement over the last three years. You can find all this information from the company’s SEC filings.

(in millions) 2017 2016 2015
Revenue 4,845 4,396 4,515
Cost of Revenue 1,298 1,354 1,429
Gross Profit 3,547 3,042 3,086
Operating Income 1,224 2,144 2,138
Income before taxes 1,210 877 925

 

Despite a small decline in 2016, sales and profits increased in 2017. Furthermore, cost of revenue is declining while revenue is increasing. The reason that is important because you recognize the cost of products when the product is sold (due to the matching principle). Typically, cost of revenue increases when revenue increases. However, we see it declining. To understand, let’s look at a break down in revenue.

(in millions) 2017 % of total 2016 % of total
Product 2,640 54 2,497 57 2,568 57
Digital 2,205 46 1,899 43 1,947 43
Net Revenue 4,845 4,369 4,515

As a percent of total revenue, digital sales made up a greater portion of revenue in 2017/ Moreover, despite revenue declining in 2016, digital revenue saw a smaller decline ($48 million) than products did ($71 million). This shift is the reason for the decline in cost of revenue. Essentially, EA gets more revenue for less work. And, to illustrate, here are the figures for cost of revenue for product and digital

Cost of Revenue (millions) 2017 % of related revenue 2016 % of related revenue
Product 893 33.8 938 37.6
Service 405 18.4 416 21.9

 

Services cost quite a bit less than products for EA. EA spends 34 cents for every dollar it makes for products, yet EA only spends 18 cents for every dollar it makes for services. Better yet, cost of revenue declined as a percent of revenue from 2016 to 2017. Moreover, this unravels EA narrative. Despite the claims of AAA development being so expensive, products still have a profit margin of 66 percent. The reason EA wants to focus on microtransactions has nothing to do with games being too expensive. It has everything to do with EA wanting to make more money.

Additionally, the decrease in cost relative to sales could be evidence of EA overcharging consumers. With products, a decrease in cost of revenue represents an increase in efficiency. But a decrease in cost of revenue as a percent of sales could just mean EA is simply charging more. For instance, how much more does it cost to make a star card in Star Wars Battlefront II. Looking at EA’s 10-K, cost of revenue consist of things such as credit card fees, server cost and operating web-based games on third-party platforms. There doesn’t seems to be much in the way of tangible cost. The market (if you want to call it that) for Microtransactions is still new, so consumers haven’t yet determined what is a fair price. With that in mind, I suspect EA is making you pay more for the same product.

All in all, EA is not telling you the whole truth. To analyst and investors, the story is that services are where the money is at. Perhaps this is why investors were hostile to consumer outrage over Star Wars Battlefront II. To consumers, the story is that EA needs microtransaction to remain afloat. Before I close, here are a few ratios to show that EA is far from being in financial trouble.

2017 2016
Current Ratio 2.15 1.80
Quick Ratio 2.00 1.70
Debt to Equity 0.90 1.08

 

If it wasn’t clear before, it should be clear now that EA is not at risk of shutting its doors. In fact, EA is doing better year over year.

Conclusion

I hope that I could shed some light on how EA is actually doing. I’ve said before on this site that I think it’s wrong to charge customers for extra after asking for $60. Clearly, companies like EA treat their consumers like ATMs rather than people. They’d rather you pay for extra than shrink their budgets or make better titles.

I’ve shown that the AAA publishers aren’t being honest with their customers. They play the poor struggling company, yet their financials show prosperity. But telling customers that microtransactions are extremely profitable is bad PR. So, like the wizard of Oz, they hide behind a curtain and pull some levers. Now we know that EA’s postering is just a facade. It’s more reason consumers shouldn’t be expected to put up with EA’s poor business practices.

 

Disney’s Identity Crisis

It’s official. Disney announced it will purchase Fox. From Washington Post

The merger pairs Disney,  the No. 1 studio at the box office and and company behind massive hits like “The Avengers” and “Star Wars” reboots, with the No. 3 studio, Fox, which has produced the “X-Men” and “Avatar” franchises as well as  a range of mid-budget crowd-pleasers and critically acclaimed films.

It also brings brands such as FX, National Geographic and “The Simpsons” into the same fold as ESPN and ABC — all part of Disney’s gamble that only a company of this size could effectively thwart a furious charge into the business of entertainment by well-financed technology giants like Netflix, Apple and Google.

The purchase turns Disney into an entertainment frankenstein. The company owns Mickey Mouse, Frozen, Marvel Super Heroes, Star Wars, Family Guy and the Simpsons. Do any of these properties have anything in common besides being legally owned by Disney? With this purchase, Disney is losing the identity that made it a household name in the first place.

Disney became a powerhouse because of its identity. Disney was a company that took viewers on fairy-tale like adventures with beautiful music and animation with a family friendly flare. These characteristics allowed Disney to turn orange groves into a kingdom that children all over the world wish to visit. It was the company’s unrivaled creativity and craft that made the company so revered. But by buying up properties at a feverous pace, Disney erodes the identity it has built up for itself.

Compare this to Nintendo. Nintendo made fantastical, colorful games with a splash of Japanese weirdness that are family friendly and fun to play. Nintendo perfects its craft in terms of both design and quality. Furthermore, the company maintained this by staying relatively close-knit and only adding a few subsidiaries. This is why games like Splatoon and ARMS feel very “Nintendo” despite being made years after Nintendo’s household names.

By trying to own a multitude of companies, Disney is losing what made it special and, in turn, will result in the long-term decline of the company. Again, Disney won the hearts and minds of millions through its unique identity. I don’t think this will happen in a few months or even a few years. But children growing up today won’t have the same relation to Disney as their parents did. The Disney they are growing up with is not the masterful craftsman who can bring stories to life but a mega-corporation that owns a lot of different brands. Over time, Disney will lose what makes them special. They will lose the magic that allowed the company to dominate in theme parks and merchandising

Walt Disney once said, “If you can dream it, you can do it.” I think this saying is for more memorable than Disney’s current motto “If you can buy it, you can do it.”

 

Mega Man: What Took So Long

 

After all the waiting and complaining, Capcom finally announced a brand new Mega Man game: Mega Man 11. The announcement has been overwhelmingly positive. So why did it take so long? I’m sure some folks just expected it was simply incompetence. Understandable, as Capcom has dropped the ball with its fair share of titles. However, the reason for the hiatus is due to the simple fact that Mega Man isn’t as successful as you think it is.

First, here’s a look at Capcom’s major franchises taken from their Investor Relations website. This includes the franchise sales, number of titles released, and the average sales for each game (taken as franchise sales divided by number of titles released)

Franchise sales (millions) No. of titles released Average Sales (millions)
Resident Evil 80 119 0.67
Street Fighter 40 84 0.48
Monster Hunter 40 38 1.05
Mega Man 32 136 0.23
Devil May Cry 16 23 0.70

Despite being the 4th series in terms of overall franchise sales, the average sales are far lower than Capcom’s other major series. This shouldn’t be too surprising when you consider the series has an overabundance of spinoff series. Series like Battle Network, Star Force and Legends failed to match the main series’s success.

To illustrate the series track record, here are Capcom’s 10 best selling titles

  1. Resident Evil 5 – 7.2 million
  2. Resident Evil 6 – 7.0 million
  3. Street Fighter 2 – 6.3 million
  4. Resident Evil 2 – 4.69 million
  5. Monster Hunter Freedom 3 – 4.9 million
  6. Monster Hunter X – 4.1 million
  7. Monster Hunter 4 Ultimate – 4.1 million
  8. Resident Evil 7 – 4.1 million
  9. Monster Hunter 4 – 4.1 million
  10. Street Fighter 2 Turbo – 4.1 million

“Wait, where’s Mega Man,” The best selling Mega Man game, Mega Man 2, sits at # 41 with 1.51 million units sold. The next best selling game is Mega Man Battle Network 4 with 1.35 million units sold. In fact, there are only 4 Mega Man titles that have sold over 1 million copies. That’s right, out of 136 titles, only 4 broke 1 million sold. In Capcom’s words “sales of more than one million units is the generally accepted standard for a major hit.” Is it any wonder then that the series has been dark for so long?

In response to the lack of titles, fan levied claims that Capcom hated the Mega Man series. However, I don’t that’s true. Capcom still released compilation games during the series hiatus. They still released merchandise. And the game was always featured on the company’s Investor Relation Website. I think the series always had a special place in Capcom’s heart. The problem was Mega Man wasn’t making the sales to justify its continuation.

With Mega Man 11, I think Capcom nailed the timing. It’s Mega Man’s 30th anniversary. Fans are eager for a new title. And the title is releasing on the heels of other successful throwback titles like Sonic Mania. Not to mention the Nintendo Switch would be a perfect home for the title as it has a constituency for classic games. Mega Man struggles to sell, but the star may be aligning with this game.

In closing, I urge fans not to sit out with this title. What made the Mega Man a neglected franchise it is was a lack of financial success, and the last million seller was released in 2003. If Capcom is going to continue the series, fans need to show they be willing to buy a new Mega Man title. The series lives or dies on Mega Man 11, but the title is poised to be a big hit. Plus it looks far better than the series washed up cousin, Mighty Number 9.

We’ll see what becomes of the Blue Bomber in 2018. Until then, enjoy the glimmer of hope for what has otherwise been a hit or miss series.

Economic Growth Drove Black Friday

Source: http://comparic.com/black-friday-black/

The Black Friday season has long been the busiest shopping day of the year, and 2017 was no different. In the world of video games, we saw numerous success stories. All three major consoles benefited greatly from Black Friday. A lot can be said about the Nintendo Switch’s demand or Sony’s aggressive doorbuster deal. However, this Black Friday was a result of the US Economy.

From CNN Money

American shoppers spent a record $5 billion in 24 hours. That marks a 16.9% increase in dollars spent online compared with Black Friday 2016, according to data from Adobe Digital Insights, which tracks 80% of online spending at America’s 100 largest retail websites.

Now, some of the increase in was due to a move from brick and mortar stores to online; however, foot traffic on Black Friday declined only about 1-2 percent. Foot-traffic declined due to stores being closed on Thanksgiving. Nevertheless, the improvement in online spending makes up for less foot traffic.

Cyber Monday (the Monday after Thanksgiving) also saw a major increase in spending

Adobe (Nasdaq:ADBE) today released its 2017 online shopping data for Cyber Monday and the holiday weekend overall. Cyber Monday is projected to hit a new record as the largest online sales day in history with $6.59 billion by the end of the day. This marks a 16.8 percent year-over-year (YoY) increase as of 10:00 p.m. ET. In comparison, Black Friday and Thanksgiving Day brought in $5.03 billion and $2.87 billion in revenue respectively. Top sellers on Cyber Monday included the Nintendo Switch, PJ Masks and Hatchimals & Colleggtibles figurines, Apple AirPods, streaming devices like Google Chromecast and Roku, and Super Mario Odyssey, the video game. The holiday shopping season so far (November 1 to 27) drove a total of $50 billion in online revenue, a 16.8 percent increase. Adobe predicts this will be the first-ever holiday season to break $100 billion in online sales.

What is causing this massive increase in consumer spending? It’s the Economy (stupid)

Here is the US GDP growth rate (by quarter) over the last two years

Here is the GDP growth rate for the last 5 years.

TrendingEconomics.com noted that the US economy grew 3 percent in the third quarter of 2017. They added that this is the highest it has been since 2014. Although 2014 saw growth of over 5 percent in a quarter, it preceded a decline the quarter prior. This overall improvement in the economy can be seen in the stock market which has soared throughout 2017. Heck, the stock market continued to rise even during Black Friday. Given the information I posted above, Q4 of 2017 will also be up. 

http://www.gamesindustry.biz/articles/2017-11-28-nintendos-insane-turnaround-driving-holiday-sales-analyst

The huge spending during Black Friday was definitely driven by the economy. Thus, the massive success of the video game systems too was due to the economy. Business Insider notes that Nintendo Switch was one of the most successful products on Black Friday despite not having a discount. Adobe Digital Insight, which tracks 80 percent of online sales, noted that Nintendo Switch was the best selling video game console throughout the buying season. It was even the best selling product on Thanksgiving, Black Friday and Cyber Monday. Again, Nintendo Switch sold without a price cut.

Sony, too, benefited as the brand had its strongest Black Friday in 22 years. Now, PS4 had some massive discounts ($199 for the 1TB model) which helped sales. Nevertheless, I don’t think Sony’s Black Friday would have been this good without the improving economy. PS4 has done well this year at least matching 2016 in terms of performance. I say an improving economy certainly contributed to this.

Even Microsoft saw the economic benefits as well. According to Forbes, XBone One has sold through most of its shipments. Analyst firm IHS Markit increased its sell-through estimate from 500,000 to 900,000. He states “At this level, Xbox One share of total Q4 2017 Xbox One console family sales will be close to 20 percent, similar to the performance of PS4 Pro at launch. If Microsoft outperforms and delivers sales in excess of this forecast it will be considered a major launch success.” While this may not seem like much, remember that XBone One X retails for $499. A premium product like XBox One X couldn’t succeed if

All three major consoles saw success during this year’s frantic buying season. I expect the economy is contributing to these success stories. When the NPD results show massive increases in software and hardware spending, you’ll know who to blame.

Publishers Beware: Why Games As A Service Is A Risky Endevor

Games as a Service is all the rage among AAA publishers and analyst. Rather than sell a strong product, these companies want you to keep playing and paying for things such as lootboxes. According to analysts, this method is the future and is the road to unlimited profits; however, they focus far too much on short-term profits. In truth, Games as a Service have a lot of long-term risk that are otherwise going unnoticed. Today, I am going to present to you the risk the publishers are ignoring.

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The Genius Accounting Behind Gamestop’s Power Pass Program

Gamestop is launching a new rental program called PowerPass. Here is the details from Engadget

The program will run you $60 for six months. You can drop in to your local GameStop to get a different game at any time, but you can only have one title out at a time. At the end of the six months, you can choose one game to keep for no extra cost. You’ll need to be a free or paid member of GameStop’s Power-Up Rewards program to sign up for the rental program.

Now, a lot has been said about this new program. Instead, I want to discuss why, from an accounting perspective, this is a genius idea.

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